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 Table of Contents

Entry of Hyundai Santro:

Hyundai entered the Indian Automobile market with the launch of its entry-
level segment car, Santro in 1998. They entered a market where the
company’s name was virtually unknown and where most people did not even
know how to pronounce ‘Hyundai’. They had to launch a new product which

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was the first of its kind in its segment. There came the need to build strong
brand equity for both the Company and the car Santro.

Indians, during the late 1990s, were familiar with European and Japanese car
brands. But they were mostly unaware of South Korean brands. The
previous South Korean brand which became famous was Cielo, but very
soon, it became notorious for inferior product quality. These factors further
complicated Hyundai’s entry. Adding to that, they wanted to launch a model
which was completely new (a tall-boy design) and which the consumers had
never experienced before. The cars that were in vogue then were either
with low-roof and low-base like M800 or were Sedans like Esteem. They had
to overcome the critics of the tall-boy model.

Initial brand building:

The company roped in Hindi actor Shah Rukh Khan as its brand ambassador.
The company aired a teaser advertisement which showed a Korean named
Kim, supposedly the head of Hyundai, approaching Shah Rukh Khan to
endorse their car, with Khan skeptically looking at him. It was then followed
by a series of print ads which portrayed Khan asking the public’s opinion on
whether to endorse the product or not. These advertisements introduced the
brand to the public and increased the brand’s awareness among people even
before Santro was launched.

Before understanding how the company went on to build the Santro brand, it
would be worthwhile to look into the various segments of the Indian car
market.

Segmentation:

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The cars in the Indian Automobile market can be classified into roughly 4
classes depending on the price and the target segment that they cater to.

Class A:

This is the entry level segment, dominated by Maruti 800, then and now.
The target segment of this class consists mostly of first-time buyers, small-
families and people who look for fuel-efficient cars.

Class B:

This is the next higher level segment, targeting the first-time buyers who
look for special features like power & pick-up, space etc. Apart from
targeting the small-family customers, Class B also targets Class A users who
want to upgrade. Most of the compact hatch-back cars in India fall under this
segment.

Class C:

Class C cars are of sedan types: large-size, non-hatch-back and bucket-

seated. The target segment of this class consists of customers who want to
upgrade from Class B and first-time buyers who look for more safety and
luxury features and would not mind to pay more for the same. Cars like
Maruti Esteem, Ford Ikon etc fall in this category.

Class D:

These are highly priced, luxurious and spacious big Sedans. Mostly the
target segment would be the people who pay a premium for the brand value
and expect that possessing the brand adds esteem to them and increases
their status in the society. Examples include high end models like Toyota
Camry, Hyundai Sonata etc.

Targeting:

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Santro had carefully chosen its target segment. It chose to target people in
the age group of 30-35. Small upper-middle class families with kids form the
major part of its target segment. It wanted to attract first-time buyers who
felt the need to upgrade from their two-wheelers to cars and also those who
were already using entry-level brands like M800.

Positioning:

Santro positioned itself as a complete family car. With its tall boy design,
which was the first in the Indian market, it offered a spacious car in the small
car segment. This was the unique value proposition offered by Santro.
Soon, the company found the sales of Santro picked up drastically. In
marketing terms, any positioning statement can be generically stated as “To
(target group), our (brand) is (the concept) that (what the point-of-
difference) does”. Referring to the Santro’s case, we can comfortably say
that, “To a well-settled family with kids who value comfort of travel and
money, Santro offers a compact, powerful, fuel-efficient and spacious car”.

Repositioning

The company, in Oct 2002, repositioned itself as a car appealing to the youth
with the slogan “The sunshine car”. It changed its target group from 30-
35 years to 25-30 years. It roped in another brand ambassador for the car,
the Hindi actress Preity Zinta. Again, similar to the initial launch when the
company launched its campaigns with the teaser ads, now too it followed a
series of teaser advertisements. Preity Zinta was chosen to partner Shah
Rukh because the company felt that the ambassador should be the one with
whom the target group (the middle class youth) can easily connect to. The

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company wanted someone who was sweet and warm which represented the
Santro’s fresh new positioning and attitude. When Xing got introduced in
2003, the company launched a teaser ad campaign which portrayed Kim
saying the contract of Shah Rukh Khan for Santro Zip plus ended, only to
later say that the contract for Santro Xing had just begun.

When building the Santro brand, Hyundai chose its points-of-parity and the
points-of-difference so that it would be accepted by the target segment and
at the same time would give a differentiating factor which would attract the
customers towards the brand.

Points of parity:

The points of parity are chosen to establish a category membership, i.e. to

say to the consumers that a particular brand belongs to a particular
category. The main intention is to get a visibility factor and to acquire a
position in the customer’s consideration set. The category which Santro
wanted to enter (the class B segment) was dominated by Maruti’s Zen.
Other players in that segment were Matiz and then newly launched Indica.
Santro had the following points of parity to establish its category
membership.

1. The price – in the comparable range with the other Class B players

2. Power – 1.1 L engine

3. Hatch back and compact size.

Points of difference:

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Once the brand gets into the consideration set of the customer, it becomes
the preferred band of the customer when it offers the features which the
customer would like to have but could not find in the other brands in the
consideration set. These features are called the points-of-difference. There
are three levels at which the points of difference operate. We shall look into
how Santro fares in each of these three levels.

1. Brand attributes: what the brand possesses

Santro has a tall-boy design, high power engine, with special features
like power-steering, power-windows etc.

2. Brand benefits: what the brand can offer to the consumers

More luxury and space at a relatively comparable cost

3. Brand values: what value that it adds to the consumers

Comfort and ease of driving.

Product Life Cycle:

Introduction:

The introduction phase of Santro was from 1998 to 1999. This was the time
when Santro entered the Indian market and was gaining acceptance from
the public. Since the company and also the brand were relatively unknown
during that time, a lot of effort went on in increasing the brand awareness
among the people. It straightaway took into competition with the then
dominating Maruti Zen in the segment. In the introduction phase, the
company got a first mover advantage in the tall-boy model of the compact
car segment. It enjoyed this sole position for the next two years when there
was no other brand offering the similar feature.

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Growth:

This is a period of increasing sales growth and a rapid market acceptance.

For Santro, the sales were steadily improving and by Feb. 2000, Santro was
able to surpass the sales figures of Zen which was the market leader then.
Maruti, after realizing the hit that it took, came with the Wagon R model in
2000. Wagon R model was a 1993 Japanese model, but Maruti-Suzuki was
slow to react by introducing it only after two years of the launch of Santro in
Indian market.

Santro had its growth period from 1999 to 2005, during which Santro came
up with various models of the car and introduced many new features. Santro
was rechristened and launched as a new sportier model Santro Zip Drive in
May 2000. This move was mainly to attract the youth segment of the
customers and to freshen up its brand. The brand launched Shah Rukh Khan
endorsed advertisements which demonstrated the power and
maneuverability of the car. Santro came up with two new models of LS and
GS with a new exterior design in July 2001.

In March 2002, the company came up with the new model of Santro Zip Plus
which was the first world-wide launch by the company in the Indian market.
Zip plus came with an engine which had more power than the previous
models. The company launched an automatic transmission (AT) model in
September 2002 catering to the increased number of women customers and
people who preferred hassle-free gearless driving. During the time when the
AT version of the competitors were priced at almost Rs. 1 lakh over the base
model, Santro priced the AT version just Rs 35,000 more than its top-end
variant.

In May 2003, the company came up with the new model Xing which retained
the Zip Plus engine but had a major revamp in the exterior design. This was

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a part of company’s strategy to introduce a new Santro variant to give the
car a new, fresh look before product fatigue sets in amongst potential buyers
of the car.

Maturity:

This is a period of slowdown in sales growth when the product has achieved
acceptance by most potential buyers. We can say that Santro entered into
this phase post 2005. The company introduced the LPG version of Santro
Xing in October 2007. Now, the company concentrates its activities looking
into strategies like market modification and product modification.

Market modification:

In May 2008, the company launched a new marketing initiative, titled 'Ghar
Ghar Ki Pehchaan' for tapping the rural market. The company created and
launched special schemes for Government employees in rural areas and
members of Gram Panchayats on the purchase of Santro. The company
plans to increase awareness among villagers in rural India, as a sizeable
number of people in villages are potential car-buyers both in their capacity
and in their needs.

Product Modification:

Product modification strategy is characterized by quality, feature and style

improvements. The company is regularly following these activities, some of
them include the introduction of performance features like ABS (anti-lock
braking system), fog-lamps, rear-window wipers, rear power-windows and
style features like body-colored bumpers, remote-controlled locking systems
in its various versions of Santro.

The concepts can be understood from the following figure:

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Repositioning again:

Understanding the need of the customers, especially the youth segment, the
company started working towards the development and launch of the all new
brand i10. In a step towards launching i10 as a car which targets the youth,
the company wanted to create a space in its stable. So, slowly Santro got
repositioned again as the family car catering to the small family. The slogan
“The sunshine car” was stopped. Starting from late 2006, the ads with the
“Santrowale” concept, some with and some without Shah Rukh Khan aimed
at positioning Santro as a family-car creating a space in the youth segment
for the to-be-launched i10. In 2007, when i10 was launched, Shah Rukh
became its brand ambassador. Santro’s ads now do not feature Shah Rukh
Khan. Currently, it strives on its “Santrowale” concept.

In 2006, Maruti-Suzuki came up with Zen Estilo (the Japanese MR Wagon)

catering to the youth with stylish features. Santro was left to compete with
both regular family-cars like WagonR and Indica and also with the new Zen
Estilo. With the launch of i10, the stylish small, tall-boy car from the stable

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of Hyundai, Zen Estilo’s competition was taken head on. Santro is now
positioned to compete in its specialized compact family-car segment.

Pricing Strategies:

Consumer Psychology:

Consumers are generally “price takers” in the car market. But Customers
actively process price information interpreting prices in terms of their
knowledge from prior purchasing experiences, formal communications,
informal communication, online resources and other factors. Purchase
decision hence is driven by how consumers perceive prices and what they
consider the actual price to be and not the marketer’s stated price.

Reference Price:

While examining products, consumers do not remember the exact price of

substitutes. They often employ reference prices comparing the observed
price to an internal reference price they remember. Santro has created a
special position in the small car segment over the past 9 years and as a
result of which the reference price of the customers will always be marginally
higher than the competitors which enable Hyundai to charge a premium for
the brand.

Price-Quality Inference:

Many consumers use price as an indicator of quality when there is no other

alternative information about the true quality. All the technological features

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offered by the automotive industry may not be comprehendible for a layman,
in such a scenario only price acts as a signal of quality. High priced products
are generally perceived to possess high quality. Santro’s relative premium
pricing is to protect its brand value from diluting. In order to maintain the
quality perception of the customers, Santro is priced marginally higher when
compared to its competitors.

Tata Indica was introduced as the first indigenous Indian car at the lowest
price in the 1000cc segment. However this low price was interpreted as lack
of quality. Tata Indica was not popular as a household car and it became
popular as a taxi to replace HM’s Ambassador.

Price Cues:

Research has shown that consumers see prices from “left to right” rather
than rounding. This kind of price encoding is very effective when there is a
mental price break at the higher rounded price. Santro’s premium GLS model
with Automatic Transmission is priced at 3.99 lacs (Ex-showroom)

Product variants:

Santro currently comes out with 12 variants without taking into account the
different colors within each variant. The prices of all these 12 variants range
from 2.65 - 3.99 lacs. The main advantage of having product variants is to
expand the market available for Santro. With a broad range the basic models
can compete with the A3 class with Maruti 800, Maruti OMNI, the high end
model(GLS -AT) with automatic transmission competes with SWIFT, WagonR
and the mid ranged(GL & GLS) cars compete with Alto, Indica.

This strategy is followed by all the car manufacturers. This strategy allows
the firms to get a share of different segments with the same model. The

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customer also pays only for the features that he/she desires and this works
as a win-win strategy for the consumer and the producer.

Pricing Objective:

Unlike other foreign players who entered the Indian market with old products
that had been phased out elsewhere in the world years earlier, Hyundai took
the opposite approach. Santro was introduced with a unique design allowing
large headroom facilitating easy entry and exit. Hyundai loaded its car with
the most advanced technology, even if that made the car slightly more
expensive than the competition. When the Indian Supreme Court announced
in 1999 that it would force to start uphold strict “Euro 2” norms, Hyundai
immediately announced “Euro 2” standard cars at a marginal price raise of
4%.

Hyundai has always followed a Product-Quality Leadership striving to

provide the highest level of quality at affordable prices. Time and again,
Santro has been coming out with technological innovations like eRLX, power
windows, ABS, remote controlled locking systems. Even today Hyundai
Santro follows the same pricing objective through its superior technological
offering. All its cars adhere to Euro 3 norms and it has recently launched
Santro Eco which runs on petrol and LPG.

Maruti has always been interested in Maximizing the Market Share by

introducing low cost cars over the years. Price has been the main
differentiating feature for the cars produced from MUL. However recently
with its success of SWIFT and SX-4, the company has started to concentrate
on performance and style as the differentiating features. Its recent addition
‘A-Star’ with premium price reiterates its intent. MUL is moving towards a
Product-Quality Leadership.

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Forecasting Demand:

Every firm decides prices based on demand expectations. Demand acts as

the ceiling for price. It’s very important to estimate demand to determine
future production and for expansion planning.

Price Sensitivity:

The price sensitivity of the product depends on

Substitutes:

When there are large numbers of substitute products then the market is
price sensitive and small changes to price change will lead to large changes
in the volume. Indian small car segment has 5 major players providing lot of
options to the customers. At one level, price becomes the crucial
differentiating factor among the top three players Maruti, Hyundai and Tata.

Price Elasticity:

Small cars tend to have a price elasticity of demand greater than 1 in the
short run and even more in the long run. Price cuts generally result in
greater sales and the auto firms practice price cuts as a tool to improve sales
and gain market share.

Brand Value:

The final price of the product must take into account the brand’s quality.
Today Hyundai Santro has a huge brand value and is known for its
technologically superior product offering. This perception along with its
superior technology is one of the chief reasons why the price of Santro is
marginally higher than its competitors Maruti Alto and Tata Indica.

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Impact of other Marketing Activities:

Advertising

The final price of the product must take into account the brand’s quality and
advertising relative to competition. There is positive relationship between
high prices and high advertising expenditure. Santro used SRK for its initial
advertising campaign and then SRK and Preity Zinta in the subsequent new
models. No other competitor in the small car segment used any celebrity as
a brand ambassador. This also helped Hyundai to charge a premium on
Santro when compared to its competitors.

Promotional Offers:

Auto companies use several pricing techniques to stimulate early purchase.

Cash Rebates:

Auto companies offer cash rebates to encourage the purchase of products

within a specified time period. These help clear inventories without cutting
the stated list price. The cash rebates are generally offered during the
festive seasons to boost sales. Cash rebates are also offered to boost sales
during recession period to clear the inventory. On 4th Dec all major auto
companies announced price cuts to woo customers and are in a frantic bid to
clear their 2008 stocks, the table below shows the discounts that has been
offered

Disco Exchange
Model unt Offer
Tata
Indica 30000
Chevy
Spark 58000
Santro GL 33794 7500

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 Santro
GLS 26000 7500
Source: Indian Express (5-12-08)

Low Interest Financing:

In India 60% of the cars bought in the last decade was through finance. Most
of the dealers have a direct tie-up with leading banks. Auto makers have
used no-interest financing to try to attract more customers. Most banks have
a longer pay back period to make the EMI look smaller.

Warranties and Service Contracts:

Since automobiles especially cars carry a heavy maintenance cost,

customers look out for low cost warranty and service contract. Hyundai has
an extensive service network across India and also offers Emergency road
services in most of the cities in the country. Similar initiatives are carried by
all the auto manufacturers. MUL is known for its extensive service stations
that cover the breadth and width of the country.

Exchange Offers:

All the auto manufacturers take the old cars at a higher price than they can
normally sell it outside. Exchange offers help the consumers to get a fair
value for their cars and also reduce the hassles involved in finding a suitable
buyer. Hyundai has an efficient exchange offer which encourage many
second hand car holders to shift to a new car.

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References:

Book:

Marketing Management, 13th edition by Philip Kotler, Kevin Keller, Abraham

Koshy and Mithileshwar Jha

Websites:

http://www.motoring.co.za/index.php?fSectionId=754&fArticleId=2401493

http://www.indiacar.net/news/n4337.htm

http://www.indiacar.net/news/n1542.htm

http://www.domain-
b.com/companies/companies_h/hyundai_motor_india/20020920_santro.html

http://www.indiacar.net/news/n522.htm

http://www.hinduonnet.com/thehindu/2002/03/19/stories/200203190183160
0.htm

http://www.blonnet.com/2003/05/20/stories/2003052002030200.htm

http://www.thehindubusinessline.com/2005/06/09/stories/200506090274020
0.htm

http://www.indiacar.net/news/n1577.htm

http://www.financialexpress.com/old/fe/daily/20000203/fco03090.html

http://www.automobileindia.com/automobile-industry/automobile-prices.html

http://www.thehindubusinessline.com/catalyst/2003/06/05/stories/20030605
00150400.htm

http://www.youtube.com