Published on: January 11, 2011by Michael Sansolo
Despite the darkness of today’s economic times and the endless pressure to sell everything inexpensively, there is a single phrase every company should remember every single day:
Cheap and value mean very different things.
Just in case you need a reminder, think about your car for a second. There may be all kinds of things you like or dislike about it, but I bet there is one way I could ensure that you’d never buy that model again. Imagine how you would feel if it had a reputation for bursting into flames. I’m betting you’d be looking for a new set of wheels pretty quickly.
Incredibly, spontaneous combustion is happening with some frequency to one particular car model and it provides a great lesson in true value. The car, called the Tata Nano, is produced in India and is widely considered the least expensive automobile on the planet. When it was introduced in 2009 it was seen as possibly revolutionizing transportation for low-income people around the planet.
But there’s that nagging problem: the cars occasionally burst into flames.
Actually, it doesn’t happen every day. However there are six documented cases out of thousands sold, but the image of a car engulfed in flames is hard to ignore. Especially when in one case an unfortunate family, just leaving a Tata motors’ new car showroom, barely escaped from their suddenly burning auto. The bottom line is that even with a sticker price of about $2,200, few people are willing to buy cars that just might incinerate themselves and their drivers.
Incredibly, the Nano’s problems don’t stop there. According to reports from India, poor marketing is also hampering sales of the Nano. (The slogan: “we blow up,” just doesn’t work I guess. Maybe they should try “Hot, Hot, Hot.”) There’s also increased competition from slightly more expensive cars (around $7,000) that push their superior quality and reliability. And middle class Indians see the Tata Nano as too cheap and therefore not a symbol of any status.
Say it again: Cheap and value mean very different things.
We understand that shoppers are stressed these days are every study that comes out repeats the same wisdom that consumers are hunting for value more than ever. Coupon use is up, deal buying is up and every report shows increased emphasis by shoppers on cashing in on deals. But the story of the Tata Nano has to give us pause.
First off, we have to remind ourselves as always that safety can trump all else. In the food industry it’s a lesson that we seem to understand. Food safety isn’t a luxury or a secondary concern. Food products simply must be safe or consumers aren’t going near them, so cost cutting in any area that endangers safety should be avoided in every way possible.
But let’s also learn a lesson from the companies competing with the Tata Nano, because they seem to be winning without racing to the bottom. Rather, they are finding a way to highlight the improved value of their products in a way that convinces the Indian car buyer to spend nearly four times more money.
It’s harder than ever to find a niche these days. It’s harder than ever to convince shoppers that the best value isn’t always the cheapest. Yet, there are companies who continue to find a way to do it by framing the value equation for the shopper in a way that helps them understand total cost.
If you don’t think it can be done, I understand there is a huge inventory of cars that aren’t selling over in Mumbai. You can probably pick one up for a song.
Michael Sansolo can be reached via email at email@example.com . His new book, “THE BIG PICTURE: Essential Business Lessons From The Movies,” co-authored with Kevin Coupe, is available by clicking here .
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