Academic journal article IUP Journal of Brand Management

NEXA: Attempting the Premium Connect

Academic journal article IUP Journal of Brand Management

NEXA: Attempting the Premium Connect

Article excerpt

We have realized that the expectation in the segment is completely different. We need to pamper the customers in the segment.

- R S Kalsi, Executive Director (Marketing and Sales), Maruti Suzuki

Introduction

In the year 2012, the management of Maruti Suzuki, India's largest car maker, began strategizing to find ways to position itself as a serious manufacturer of premium vehicles. The situation for the company was grim, as many of its customers were migrating or upgrading to other Japanese and European cars. For years, the company had attempted to break into the premium space; but success had remained elusive.

In the year 2009, it had launched the Grand Vitara, a Sports Utility Vehicle (SUV) priced at ^16.67 lakh to ^17.97 lakh, followed in 2011 by the premium sedan Kizashi priced at ?15 lakh. The SUV failed to deliver due to lack of a diesel engine and Maruti's inexperience in managing the expectations of premium class customers.1 Despite its impressive looks and good features, Kizashi too failed miserably. Within 18 months of launch, its sales dropped to 10 units per month, forcing Maruti to stop importing it in 2014. The company had to offer discounts up to ^5 lakh to clear inventory.1 Ironically, Kizashi is a Japanese word for "sign of great things to come". Both the Grand Vitara and Kizashi were imported as Completely Built Unit (CBU) from Japan. The high import duties and wild fluctuations in the Yen created pricing issues, which made the value equation quite incomparable with the more indigenous production of competitors. The Maruti Suzuki badge, which had become synonymous with terms like 'value for money', 'people's car' and 'affordable cars', weighed heavily on the minds of customers choosing to buy a premium product. So, why would a customer spend ?15 lakh to buy a Maruti? It made more sense to buy a Honda, Skoda or a Toyota at this high price.

In the year 2015, the company took some corrective measures and launched a more affordable Kizashi look-alike in the Ciaz, priced between ^8 lakh and ^9.5 lakh. Ciaz competes with Hyundai Verna and Honda City. The Ciaz performed better as it impressed customers who liked the Kizashi but not its price tag.2

After having failed in its previous attempts to develop the premium badge, Maruti's management decided to create 'NEXA', an exclusive sales network to retail premium Maruti Suzuki vehicles. It was felt that the exclusivity and service focus offered by NEXA would give Maruti the much needed premium push.

Indian Automobile Industry

The Indian automobile industry is one of the largest in the world and comprises both domestic and multinational players. The financial year 2014-15 saw the production of 23.37 million vehicles, with a growth of 8.68% over the previous year. The automobile industry accounts for 7.1% of the country's Gross Domestic Product (GDP). While the two wheeler segment is the leader with a market share of 81% by numbers, the passenger car segment has a market share of 13%.3

According to the Automotive Mission Plan 2016-26, which has been prepared jointly by the Society of Indian Automobile Manufacturers (SIAM) and the Indian Government, the Indian automotive sector has the potential to generate up to $300 bn in annual revenue by 2026, create 65 million additional jobs and, contribute over 12% to India's GDP4

Maruti Suzuki India Ltd.

Maruti Suzuki India Limited (MSIL), which at its inception was known as Maruti Udyog Limited, is a subsidiary of Suzuki Motor Corporation of Japan. It is India's largest passenger car company with approximately 46.9% market share.5 Maruti Udyog Limited was incorporated in 1981 under the Indian Companies Act, 1956. The Government of India selected Suzuki Motor Corporation as the joint venture partner6, because of its expertise in bundling power and performance into a compact, lightweight engine that is both clean and fuel efficient. The venture rolled out the first affordable car, the Maruti 800 hatchback in 1983, at a price of ^52,500 approximately; perhaps the most economical in the Indian automobile industry. …

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