Mayank Pareek has a tough task ahead of him, and the auto veteran is aware of that. The appointment of Maruti Suzuki India’s former marketing and sales head as the president of Tata Motors’ passenger vehicle business was clearly a move by the latter to shore up its beleaguered domestic auto business. Armed with nearly 25 years of hardcore marketing experience, Pareek plans to strengthen Tata Motors’ presence in rural markets, in a way replicating Maruti’s hinterland drive, which started in 2008 and now contributes about 32% to the company’s car sales.
Among other things, you pushed for a rural focus to drive volumes at Maruti Suzuki. Do you see the need for a similar strategy at Tata Motors?
There are three aspects to this approach: what is the opportunity in the rural context, what do we know and what is the roadmap? We all know that India lives in the villages. Over the past few years, dramatic changes have taken place in the rural economy. One of these is improving road connectivity, which has led to more villages getting connected.
To give you some perspective on this, consider the fact that India has about 651,000 villages and around seven years ago, 50% of them were not even connected to all-weather routes. Now, at least 80% of them are connected with roads. Obviously, when villages get connected, the need to travel will rise. The economies get linked automatically. There is a tremendous inter-village trade that goes on, as villages are not totally dependent on our cities.
And then there are various government programmes, such as increasing the minimum support price by 40%, leading to an increase in rural wealth. In short, with the creation of better infrastructure, a need has been created and wealth has been generated. The question is how do you tap into this kind of demand? You might assume that the rural junta will travel to the cities or towns to buy new cars but that is not so.
The challenge is to actually convert the latent demand into an active demand. No auto company traditionally focuses on the rural market. Everyone is lagging behind and is now trying hard to catch up. That is not demand. In the present context, demand generation is done by going to rural areas, setting up a base and creating visibility. That’s what we are doing at Tata Motors — we are trying to extend our footprint into smaller markets in terms of dealers and service.
What is the potential that you see in rural areas for Tata Motors? How do you plan to tap into it?
I think about 45-50% of demand could come from rural markets for Tata Motors. Today, that figure is around 10%. The logic is that in India, 18 out of 1,000 people own a car and overall rural contribution is just about 3-4% of the 1,000. This is a huge under-penetrated and unsaturated market. Our first step in this context is to create and improve our network. We have taken it upon ourselves to increase our network three times over the next four to five years. We are available in 458 locations and aim to increase that to 1,500 spots over the next four to five years.
Maruti Suzuki has an over-30% rural contribution; are you weighing something similar at Tata Motors?
Maruti Suzuki discovered the rural market in the slowdown of 2008. At the time, I was travelling to a place called Dhanbad and a customer there told us that the slowdown was a city-bred phenomenon. That led us to believe that we must look at India and Bharat in different ways. From selling less than 5,000 vehicles per month in rural markets, Maruti Suzuki touched 35,000 vehicles a month recently – the company’s growth mirrors the rural market’s growth. In fact, this could help it cushion the decline in growth at the top. And if cities grow at similar levels, then that would be a double bonanza.
What are your plans for Tata Motors over the next few years?
We will create a lot of low-investment sales formats, as presence is more important than high investment in such markets. It is important to tap into the whole length and breadth of India instead of tapping into just the top 30-40 cities at hand. There are 3,854 tehsils in the country, some of them bigger than countries in Europe. Ideally, this should be a good market segment for a marketer.
If you sell even one car in every village per year, we are already talking about a big number. The whole rural marketing attempt is to leverage the size and diversity of India. We have begun work along these lines and have created a rural force. We will try out various formats, especially the sons-of-the-soil format, as trust quotient is very high with such formats. What we will do is employ locals who have a good local connect and access. Further, we plan to work with influencers: how else would you contact a rural customer? The road to village prosperity is the sarpanch, the smallest administrative lot in India. There will also be mobile service workshops. It’s all a work in progress. We will also segment the rural audience. We have to reassure rural customers that with Tata Motors, you are not alone.
What do you mean by segmentation?
We need to segment markets into different slices that we want to target. We are already working with 270 small traders — this could be mango-growers of Ratnagiri, orange-growers in Nagpur, granite polishers of Thrissur or chilli-growers in Guntur. We have started monitoring the crop calendar and tracking performance. What we do is identify target segments and go at them with focus marketing. Not many marketers, especially in the passenger car industry, understand this concept of segmentation. You have to slice markets into sub-segments. Never take no for an answer, find the smallest of the consumer group and leverage it.
Are rural customers different from their urban counterparts in the automotive world?
There are many myths around rural populations. Rural does not equal poor. It does not mean only farmers. There are lots of people supporting the rural economy, such as shop-owners, school administrators and bankers. A government teacher in Mumbai draws the same salary as one in a village in Satara district. Only 50% of the customers in rural areas are farmers, while the rest are those supporting the rural economy. Rural consumers want to buy the best — they don’t haggle for discounts and freebies. They are loyal and if you enter a particular segment in the rural economy, everyone else follows the leader. It is difficult to enter rural markets but once you are in, it’s a road to prosperity. Rural customers are much more profitable than city customers.
Do you see any challenges in such a situation? Is the management aligned with this approach?
Everything is falling into place and we are stitching together our strategy piece-by-piece. What we have is new products backed by a new network strategy as the roadmap. I am a practical marketer and believe in tracking consumers directly. India is composed of 650 districts and I have traveled wide and seen 500 of them. This is hardcore marketing, where you have to travel to the market. The first few customers will definitely take time — you have to convince them that this is a new way of doing things.
I am still in the first phase, where dealers still have to be convinced about all this; a lot of work needs to be done on that side. As for the organisation, it is already in line with this philosophy. For a while, things have not been good and they are still in that state of mind. But over the past four months, we have been outperforming the market. These may be quick wins but our game is long-term.
How long did it take for you to say yes to Cyrus Mistry’s offer to join Tata Motors?
Actually, it didn’t take very long — there was just one meeting with the chairman, after which I said yes. I wanted to do something big, new and challenging and, most importantly, turn the company around. This is a great company, even though the past few years have been particularly turbulent. This is the company that created the Indica, a market-changer in the automobile industry. The Nano might not have worked but it still is an iconic product.