Maruti Suzuki: Where Brand Strength is an Anathema
Introduction
The goal of any business is to make profit and provide returns to its shareholders. In this attempt, the business works towards increasing its customer base and revenue thus promoting repeat purchases. Brand plays a role in consumer’s buying decision-making process. “Awareness, attitudes, and usage (AAU) metrics relate closely to what has been called the Hierarchy of Effects, an assumption that customers progress through sequential stages from lack of awareness, through initial purchase of a product, to brand loyalty.”[1] Companies endeavour to increase the brand awareness through many techniques known to the marketers. Greater the brand awareness higher is the sales potential.
The American Marketing Association (AMA) defines a brand as a “name, term, sign, symbol or design, or a combination of them intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of other sellers”. It then quickly becomes clear that branding is not only about getting your customers choose your product over the competitors but it is also to convince them that your brand is different from others and the only one to satisfy their need.
A strong brand is the goal of many firms. It is a powerful tool in the competitive market to win over the customers. Firms spend much time and money in building the brand. After all, it is the foundation on which all the marketing communications are built on.
Maruti Suzuki India Ltd.
Maruti Suzuki India Ltd., was incorporated in the year 1981 as joint venture with 74% of the company was owned by the Indian government, and 26% by Suzuki of Japan[2]. It is a Large Cap company operating in Automobile sector with a market cap of Rs 119368.45 Cr. The firm’s major earnings are from Passenger Cars & Light Duty Utility Vehicles (which contributed Rs 43612.00 Cr to Sales Value – 89.22% of Total Sales), Spare Parts & Components (which contributed Rs 4208.80 Cr to Sales Value – 8.61% of Total Sales) for the year ending 31-Mar-2014.[3]This year for the quarter ended 31 31-Mar-2015, the company has reported a Standalone sales of Rs. 13272.55 Cr., up 8.23% from last quarter Sales of Rs. 12263.14 Cr. and up 12.31% from last year same quarter Sales of Rs. 11818.13 Cr. The company has reported a net profit after tax of Rs. 1284.24 Cr. in latest quarter.[4]The market share of the company is up by 4.1 percent in April-November 2014 to 44.8 percent.[5]
A company with such enviable record should be proud and happily placed. The company has built the brand ‘Maruti’ very effectively and there would be hardly anybody in India who does not know the brand. Yet this is an anathema to the company. One may wonder why?
While the company has a strong hold on the mid and small car segment, it has failed to make it presence felt in the premium segment (Rs.10 lakhs and above). Maruti made several attempts to enter into this segment with its Grand Vitara, Baleno, and Kizashi but of no avail.
The Problem
The company is aware of this problem of cracking the premium segment. They are battling with it for more nearly two decades but without much success. The problem is the power of the brand itself. The brand was built so powerfully around the themes such as “the most affordable car”/ “the common man’s car,” that it is not lending itself to the ‘premium’ segment. The brand perception among the customers is that it stands for ‘affordability’ and not for the ‘premium’ segment. What is adding fuel to the fire is that in addition to its inability to move upwards to the premium segment, other premium brand such as Honda are making inroads into the mid and small car segments.
Maruti’s Premium Strategy
In order to enter the premium segment, it tried with new products; it tried with pricing strategy; it also attempted several positioning strategies; all these have not been satisfactory. The other tool of the marketing mix is place – the company is now trying out with this. On July 8, 2015, the firm announced opening of pre-launch bookings for its upcoming new model S-Cross. It is priced around Rs 10 lakhs and will be launched in early August. What is different is that it will not be available in the normal distribution channel – Maruti’s car dealers. Altogether a new channel has been set up – Nexa showrooms – and the S-Cross will be sold and delivered by this distribution channel. Nexa is being set up to handle only the premium products and the company plans to set up 100 such showrooms in 30 cities by the end of the fiscal. The hope behind this strategy is that if it can drop ‘Maruti’ – which the company feels is creating the perception – and use only ‘Suzuki’, it stands a better chance of winning. This new channel strategy will have the advantage of selling S-Cross away from the other cheap brands. Only time will tell if Maruti will succeed in entering the premium segment.
Conclusion
Companies strive to build brands, brand value and brand equity. Yet that may in some case be an disadvantage. It is also very difficult to change the brand perception; changing perception is more difficult than creating a new one. Hence, an organisation should give good though before embarking on building its brand.
Bibliography
Farris, P. W., Bendle, N. T., Pfeifer, P. E., & Reibstein, D. J. (2010). Marketing Metrics: The Definitive Guide to Measuring Marketing Perforamance. New Jersey: Pearson Education Inc.
Wikipedia. (2015). Maruti Suzuki. Retrieved july 10, 2015, from Wikipedia: https://en.wikipedia.org/wiki/Maruti_Su
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The End
[1] Farris, Paul W.; Neil T. Bendle; Phillip E. Pfeifer; David J. Reibstein (2010). Marketing Metrics: The Definitive Guide to Measuring Marketing Performance. Upper Saddle River, New Jersey: Pearson Education, Inc. ISBN 0137058292.
[3] http://economictimes.indiatimes.com/maruti-suzuki-india-ltd/stocks/companyid-11890.cms retrieved on July 10, 2015.
[4] http://economictimes.indiatimes.com/maruti-suzuki-india-ltd/stocks/companyid-11890.cms retrieved on July 10, 2015.