Reinventing The Giant

He has the manner and tone of someone who already knows that the baby in question has an excellent shot at being a successful adult, but isn’t about to beat anyone over the head with it. "There may have been high expectations (of Indica). But remember, it’s a diesel car. To someone used to petrol engines, it can feel harsh or noisy," says the chairman of group holding company Tata Sons. At the same time, he seeks to emphasise that the changes TELCO has been undergoing would do much to address the issues raised by the survey’s negative results.

A response that not only accepted the possibility that TELCO may have made errors (in building up expectations to levels where it wasn’t quite able to deliver on them) but also offered the reassurance that it was serious about setting them right. It indicates how much things have changed at the House of Tata-and the environment in which it operates. Not too many years ago, corporate communication in a similar situation would have stretched from denial to dismissal and no farther.

But the stakes are too high for lofty responses. About 75 per cent of the total growth in the car market over the past year came from the higher end of the economy car segment. That’s Maruti Zen (still the leader in sales, but only just), the Hyundai Santro, the Daewoo Matiz, the Fiat Uno and the Indica. The Zen once ruled this sub-segment but as buyers cross the income threshold necessary to buy a Rs 3-5 lakh car and upgrade their aspirations from Maruti 800s, the new entrants have hammered this dominance down to near-parity (see chart).

The latest available figures make interesting reading. Compare sales in October ‘99 with those for October ‘98. From one-fifth of the car market, these four marques now account for nearly 40 per cent of all cars sold. Their growth rate is over six times that of any other category of cars. In value terms, at current sales levels, it’s already a market worth over Rs 10,000 crore of annual sales.

Indians may eventually graduate to larger cars, but over the next five years it is clear that whoever rules this key sub-segment could make a lot of money indeed.

For rival players, it’s crucial to have a product that consistently satisfies buyers. The most credible measure of this satisfaction has lately been the annual survey of new car buyers conducted by the internationally established automotive market research agency, J.D. Power & Associates. It polls new car buyers to generate three measures: a Customer Satisfaction Index (CSI), which is company-specific, and an Initial Quality Study (IQS) and Automotive Performance, Execution and Layout (apeal), both of which are specific to car models.

On all measures, TELCO and Indica ranked below industry averages. Consistently poor ratings will ultimately manifest themselves in lower sales-if TELCO were to sell, say, 20,000 fewer Indicas a year due to a shift in market preference, it could mean a drop of around Rs 800 crore in turnover. So, are the survey results calamitous for TELCO?

Not so, argues Rajiv Dube, TELCO’s general manager, commercial, passenger car division. His case: J.D. Power’s ‘99 survey, conducted in July, isn’t a perfect representation of what TELCO can offer its customers. He says: "There’s no denying that we have to address this issue. But consider that the CSI covers a 12- to 18-month period. Since it applies to sales prior to August ‘98, it’s relevant to Sumo and Safari sales. Even the IQS, a survey that is based on the first 90 days of ownership, applies to cars delivered in March through June of ‘99. The new chain of dealers for the Indica had only just been set up, in January ‘99."

He too concedes that high initial expectations played a role in lowering satisfaction levels. But the numbers can be misleading; 396 problems per 100 Indicas might appear a lot. "But at that level, it’s barely half a problem more per car than the Zen, at 324," argues Dube.

Of course this still doesn’t address the issue of what the market perceives-if buyers won’t see what TELCO would like them to see, it will be that much harder to convince them to put down the payment for Indicas.

The showroom and the sales and service staff constitute the face of the company to car buyers. That’s why TELCO is pulling out all stops to ensure the level and quality of interaction for customers is on par with any high-value retail shopping experience.

Dube explains the key elements in TELCO’s strategy to grow customer satisfaction out of this experience. "An incentive scheme in place for our dealer network will reward them along the parameters that maximise customer satisfaction with sales and service. We will, probably, be the first car maker in India with such a comprehensive scheme."

He adds that the company’s existing premium dealership brand, Concorde, would act as a model for the remaining network of dealers in TELCO’s passenger cars, including the Indica. Eventually, car buyers can expect uniform standards of appearance and service at all dealers in TELCO cars. And, as he says, "We will also be one of the first few manufacturers to have the entire dealer network integrated on software. That information, along with customer feedback, will help us address their needs more easily."

The decade has brought about considerable upheaval in the corporate sector, but the change TELCO is trying to bring about is tougher than most. It used to be essentially a vendor of commercial vehicles, which it could sell as a quasi-commodity to a market that generally cared not a whit for touchy-feely issues like showroom ambience or product fit and finish. Now it wants to market transport solutions. And the passenger car end of this market is unforgiving, competitive and sensitive to all sorts of issues TELCO rarely, if ever, had to worry about.

A successful transition in such terms involves managing change in both a company’s external (the market, media, image management) and internal (bringing your employees and the company’s systems in line with the change needed) environment.

In theory, a company has far more control over internal factors. But Ratan Tata himself rates the internal transformation of TELCO into a company that can consistently deliver high satisfaction levels to demanding retail customers as a harder task than managing the external environment-an indication of the depth and breadth of change he intends bringing about in the Tata group, including, of course, TELCO.

Contemporary corporate culture crows about its commitment to King Customer-usually after having assessed that it costs little to say so. But competition, especially of the kind that has opened up the Rs 3-5 lakh car segment, has the wonderfully bracing effect of making companies walk that talk.

That’s good news for buyers, because this is precisely what TELCO is trying to do. Whether or not this initiative to get closer to customers and their needs will succeed will only become evident over the next several months. But there are signs that car buyers may already be making up their minds.

Against a share of 7.8 per cent of the total passenger car market over the first eight months of 1999-2000, the Indica’s 10.2 per cent figure for October, the final month in that period, attests to rising acceptance. November figures (5,214 Indicas sold) represent a 9.9 per cent growth on October’s figures. Ultimately, such numbers could be all the proof the market ever needs.