Who will buy Xylo.

Mahindra and Mahindra

9 Automotive Sector

Rajesh Jejurikar was instrumental in the Scorpio success story and worked on a robust marketing plan
which took Mahindra & Mahindra (M&M) to leadership position in Utility Vehicle (UV) space. He
had had set high standards for the marketing team at M&M. After experiencing many good years
and fortunes with Scorpio, the business was now stagnating. As a leader in UV space, they had a
choice to defend their shares or snatch from competition, but Rajesh with his team wanted to grow
the category as they saw the potential for utility vehicles in India. On a hot and humid afternoon in
2006, he along with Vivek Nayer, the senior Vice President (marketing) at M&M, and other tea
members were looking at consumer and market data to decide on the marketing strategy tor Xyio.
And the frst question was "Who will buy Xylo"? Who should be the target audience for Kylo?

MAHINDRA AND MAHINDRA: BACKGROUND

The USD 16.7 billion Mahindra Group was an Indian multinational headquartered at Mumoa,
India, with operations in over 100 countries. It was one of the most reputed Indian businesses with
market leadership in utility vehicles and tractors, and was the largest tractor manuíacturer (by vol-
ume) in the world. They had presence in almost every segment of the automobile industry, ranging
from two-wheelers to UVs (utility vehicles), SUVs (sports utility vehicles), and CVs (commercial
vehicles). Mahindra & Mahindra was one of the 20 largest companies in India in 2009 and Forbes
ranked Mahindra among the top 200 most reputable companies in the world. M&M was the
flagship company of the Rs. 55 billion (USS 1.2 billion) Mahindta Group. Mahindra & Mahindra
started manufacturing utility vehicles in 1954 in collaboration with Willys Overland Corporation
and light commercial vehicles in 1965. In 1982, the International Harvester brand was discontinued
and the "Mahindra" brand was born as leaders in tractors market.
The market was changing and consumers were evolving to seek lifestyle and better-quality prod
ucts. M&M was hence looking to be a market leader in the automotive sector, especially in the
premium utility vehicle sector. They had already made a foray into this space with few otferings in
utility vehicle space.

AUTOMOBILE INDUSTRY IN INDIA: HiSTORY AND EvOLUTION

The automobiles industry in India was at 0.7 million vehicles per annum in year 2003, and had been
growing at CAGR of 8% in the period of 1999 to 2003. In 2004, cars had a growth rate of 26% and
a market share of 80%. Uility vehicles hada growth rate of 37% and a market share of 20%.2

his case was presented by Mahindra team at SPJIMR Marketing Impact Awards 2010.
ne Company authorized SPJIMR io use the case content and material for academic dissemination.
 for little
En volumes of 275,556 units in FY10, the Utility Vehicles (UVs) accounted for little
ment over
2006-09. The UV segme
13% of the total averaging at
9% over
market with
growth In line w i t h the passenao."s
Primarily
dominated by
SUVs priced in the Rs. 7-11 lacs
lacs range.
range. 7-11 O of
the market, of
ot the of market, of whi
segment, top three players in the UV segment accounted for
o v e r 85%

also catered
market also
to the people move
the peopleCh which
two were domestic
players. A sizeable part of the UV
market
demand
catereu
from the ora
Segment, which h
e e n one of the key growth
drivers striving on
wing
IT/ITES sector. Mahindra and Mabhindra dominated this segment and enjoyed a leadershi

position (exhibit 1)
leadership

MAHINDRA MIssION
M&M had a vision to continue the domination of utility vehicle (UV) market in india and be a

global niche player. The founders of Mahindra passionately believed that Indians were second to
none. They had a dream to make M&M known worldwide for the quality, durability, and reliability
of its active role in the
products and services, and at the same time, play an development of the
nation. They wanted to retain their domestic market leadership with over 50% market share in the
Indian utility vehicle segment by catering to all segments and also create their name in the global
market.

UTILITY VEHICLE SEGMENT

A utility vehicle designed to carry out a specific task with more efhcacy than a general-purpose
is
vehicle. Sports utility vehicles (SUV) were like a station wagon but built on a light-truck chassis
and equipped with four-wheel drive or all-wheel drive
amongst other off-road hardware. Their
primary purpose was to
display superior off-road and towing capabilities, teamed with higher
seating capacity. MUVs were larger vehicles which could tackle a wide of applications.
They typically allowed easy conversion between multiple combinations of range
capacity.* passenger and luggage
Utility vehicle segment was further divided into
"pick ups", "soft tops" and "hard tops"
goods transport. Soft-top buyers generally used the (exhibit
The 2).
buyers of pick-ups used it tor
commercial purpose. Soft tops were rarely bought for the vehicle for
ther divided into 1ow-end hard tops" and personal usage. Hard tops could be fur-
"high-end
commercial purposes. High-end hard tops or sports
hard tops". Low-end
hard tops were used for
respect to luxury and driving comtort. The
utility vehicles could be compared to cars witn
and a SUV was his second vehicle that
buyers of these vehicles
were typically
they used as luxury car buyes
leisure activities. personal transport vehicle and for weekend
India, M&M was the specialist
In in
kinds of utility vehicles i.e. soft-tops,
utility vehicles. They manufactured
and marketed au
Mahindra commanded hard-tops, and sports
utility vehicles. In 2003, Mahindra
a market share of 36% in the
presence in the individual as well as institutional utility vehicle market, and had
signihcal"
Government and large public and private sector segments, like the police force, armed force
06. Scorpio launch and marketing companies. Market share rose to 40% in
push given to it led to this 200
the utility space. increase in M&M market share
 Who will buy Xylo- Mahindra and Mahindra Automotive Sector 9.3

MAHINDRA CONTEXT
Mahindra, hitherto a leader in the UV segment, was fast witnessing stagnating market share. There
was an increase in share in 2005 but it was stagnant at 40% all through 2007. Global players were
entering the auto market and aggressively launching various products. There were more than 40
automobile brands and more than 14,38,000 cars and utility vehicles on road which led to brand
proliferation and loss of differentiating brand proposition. Mahindra had a wide product portfo-
lio but lacked products that catered to the modern urban consumer needs. The markets where
Mahindra was strong were stagnating. The urban markets were seeing all the growth and action but
the Mahindra range did not offer a product for those mnarkets.
market for Mahindra and overall UV sector
With stagnant shares seeing the decline, there
need to grow the category. M&M were leaders, and hence, onus of growing the category primarily
was a

rested with them. This involved the need to

expand the portfolio with differentiated brand proposi
tion. However, the chalenge of cannibalization, ROI (return on investment) erosion, and proftabil-
ity could further affect the business. Rajesh, Vivek, and other team members prepared the proposal
to look at new consumer segments and build a synergetic yet differentiated portfolio with an offering
for every segment. This, when presented to the management body, was accepted without much
qualms as it promised a growth trajectory for the company in utility vehicle space.

PORTFOLIO AND MARKET RELATIONSHIP

From the time it produced the Willy's Jeep, M&M was very clear in terms of its portfolio and
market relationship. Willy's Jeep was meant for rough terrain and interiors of rural India where
the approach roads were not available, and for the armed forces who needed a vehicle that was
sturdy and could handle difficult terrain. The deep understanding of market needs was reflected in
their entire portfolio. Exhibit 3 gives the competitor framework and USP of its other four offerings
(2006-7) in both hard tops and soft tops.
The portfolio, though well balanced, was not addressing the changing consumer needs. It was not
diverse enough and did not have offerings for high-end growing segments. Therefore, the company
not only had the challenge of growing the market share from stagnant 40% but also was apprehen-
sive of cannibalization in case of portfolio expansion. The team, however, knew that M&M was
known for technologically superior product launches based on robust consumer research and had a
marketing acumen to build differentiated portfolio.

CONSUMER CONTEXT
The Indian economy was moving into higher growth (8.50+) trajectory. In addition to steady eco-
nomic growth, the passenger vehicle industry was benehtting from India's demographic dividend,
which was reflected in its young population (50% of population was under the age of 25), steadily
improving dependency ratio, growing urbanization, and trend towards smaller, nuclear families.
hese trends, in turn, resulted in higher savings and increased ability to purchase vehicles. In India,
the per capita GDP doubled to US$ 3,270 between 2000 and 2009, while car prices (adjusting
1or the decline in duties) remained almost at the same level as they were five years back, thereby

fiiirir
9.4 Case 9 in India,
avail
ailability of
financed

being
of c a r s
With over
65-70%
growth. the he basic psyche of
cars. driving
increasingflexibility
to factors
in term
c u s t o m e r s ,

own
of (VFM) in
rates was
one
demanding termsof
at competitive with for Money
financing options
ting a
market
for
Value
design. M&M Con- co

While these changes still looking and

robust

the Indian buyer did not change. The

were
modern style and
what they were looking
with

low unit cost, operating

economics packaged
to find
the gap
areas

what people
wante
ted, what
know
was prepared
n s u m e r s

to cloud
ducted aa 100-day study among segments word
ducted across
The
aa large car with
n s u m e r s

researchers met the category.

Managers and
wanted
tor. about
their feelings
c u s t o m e r s

of utility space and that

Functionally,
Functionall
they thought wanted?" The
team analyzed
reflected
their
personality.

to understand
"what people a car that tnat was neither too
of wning an image
distinctive looks & experience pleasure fun with comfort.
luxurious, and which was
car
their vehicle to
be spacious,
"their space-a
wanted
looking for
Ly nor too sophisticated. They were
uaay-duddy arnd Aylo was born. This
from life! product,
able and help them get
more new

approach of
building a
and spaCious. Vivek
started a
customer-centric
contemporary,
M&M
as a sedan but was young, multitaceted car with the
M U V which felt as luxurious truly
was a
wanted to launch Xylo as a
platform and pro-
Marketing
Nayer, Senior Vice-President,
of an SUV. As the technology
of sedan and the aggressiveness strategy decisions
premium stature a
busy looking at marketing
Vivek with his team
were

duction was being planned,

and profile the customer for Xylo.

CONSUMER SEGMENTATION
Scorpio. Bolero was an
M&M had two prime offerings-Bolero and
In the passenger segment, n e w unexplored
SUV. The challenge w a s to identify a
level UV and Scorpio was the premium
entry
customized n e w ottering. M&M
conducted opportunity analysis and
with the
space and come up
their preference for various brands. The segments
studied various consumer segments atter mapping
"benefits sought" or "what customers look for in their cars".
Exhibit 4 gives
were defined based on
segments.
various c o n s u m e r
theopportunity map and outlines
Basic Segment: People who were upgrading trom two-wheeler to four wheelers and were seeking
benefits of good mileage and high value for money. Both cost of acquisition and maintenance
were

important to these customers.

Value-Seeking Segment: The first-time car buyers or even those who had experienced the basie
four-wheeler and were looking for more teatures and upgrades. They sought value for money with
low maintenance cost.

Comfort Seeking Segment: People who wanted greater comtort, features, and
For them aesthetics and comfort were more important than low
upgraded modeis
acquisition cost, and hence, they
were ready to pay premium
a for better comfort
quality. and
Individualist: These were young, sucCessful customers with greater
longing to higher socio-economic segments. 1hey looked at their
ability to pay and were bE
cars as an extension of themselves
and hence, wanted their cars to have a
personality that resonates with their This
price-sensitive segment. own. was a le
Status Seeking: Customers for whom thelr car was a
reflection their
own status and
Thece Were premium sophisticatea custoners wno wanted knovwn brands social standi
and d quality experience.
 Automotive Sector 9.5
Mahindra and Mahindra
Who will buy Xylo
-

and consumer pronle

identined the various segments using in-depth consumer research
M&M in passenger car segment
Vivek asked his team to classify
the various car/UV models available
data. s c o r e s and pur-

based o n price.
These were then to consumer egments based on preference
mapped
chase intention. lhe opportunity map the team understand various competition offerings,
helped
and hence, the potential in various segments.

CHOOSING THE XYLO CuSTOMER: TARGETING DECISION

consumers
The opportunity map emphasized that though price points very far away,
were not

had distinct needs, and hence, it was critical to build differentiated brands for various segments.
The map clearly showed that though Scorpio from M&M was focused on status-seeking con
sumer, Bolero
was
spreading thin from basic segments to other high-end segments with its many
variants. This strategy was hitting the brand profitability and ROI as its credibility to deliver on
their desired needs of high-nd egments was low. Though, the company wanted to position
Bolero as an entry level sUV, the map revealed that it was spread thin and was not present in
cumbersome as the
VEM segment. This made the task of brand differentiation and focus m o r e
danger of cannibalization was high.
Rajesh wanted the marketing team to profile the TG for all portfolio brands. The analysis and
strategy documents showed that Bolero was targeted at value-seeking segment. The Bolero custom
er could be defined as one who was youthful, "rooted", value seeker, and progressive. Scorpio was
a premium SUV targeted at a status-conscious male who was successful, sophisticated, aggressive,
and expected the best from life.
M&M decided to focus on comfort seeking consumer segment for Xylo. It was targeted ar
males who were young, aspirational, and wanted comtort and space in their cars. He was a
to party harder. He was socially active, cool, trendy,
young achiever who worked hard but used
and indulgent. Based on the target audience and their profile, M&M defined the value proposi-
tion for each of its offerings (Exhibit 5). Xylo was positioned as cool, trendy, and spacious car.
Rajesh and his team knew that prime competition in that space came from Toyota. While
Toyota's low-end Innova E was priced at Rs. 7.60 lakh, the low-end version of Mahindra MPV,
Aylo E2, was priced at Rs. 6.24 and came with greater comforts, including power steering.
power windows, and central locking. Toyota's high-end Innova G4 was priced Rs. 9.29 lakh
while Mahindra's high-end variant Xylo E8 costed Rs. 7.69 lakh and offered additional com-
forts including digital drive assist system and fatbed tront seats. Rajesh Jejurikar said, "COverall,
the brand name, Xylo, implies luxury, high fashion, and technology and was aimed to create a

futuristic connect.
The three new platform products were also cruclal for M&M to synergize its productioon
Strategy. Although Xylo had a new vehicle architecture and component structure, it had similar
Engine and transmission parts Ilike Scorpio. Aylo and dcorpio assembly lines were not rigid and
ould increase or decrease the production or o o p e n d i n g on the demand. How

ever, Vivek anted to replicate the success of

wani orpio with Xylo. The target was decided and
E, Vivek wanted to
repia But now was a time to find
Value proposition was also identified. out where these customers
Were and reach
reach them with a resonating uasive
and persua communication strategy.7
and
M&l
&M is betting big on Xylo, which packed in a number of bells and whistled like the Alat
flat.
9.6 Case 9

QUESTIONS
Analyze the
segments identified by Mahindra for
segmentation? utility vehicles? What was the basis of this
a n you
identify any other variable for segmentation which M&M could have used?
3. What were
the considerations in
4 f the choosing "comfort" segment for Ayio:
company plans to launch another brand, which
segment they should be at? looking
APPENDIX
EXHIBIT 1
UTILITY VEHICLE SEGMENT:
MARKET SHARES%
FYO6 FY07 FY08 FY09 FY 10 FY 11 FY12
M&M 43.2% 40.8% 42.7% 47.1% 55.2% 55.8% 52.6%
Toyota 18.9% 19.8% 19.7 % 17% 19.7% 19.6% 20.3%
Tata Motors 19.5% 21.8% 20.3% 18.5% 13% 12.9% 13.4%
Others 18.4% 17.7% 17.7% 17.4% 12.1% 11.7% 13.7%
Source: SIAM Data; *
Till February 2011

EXHIBIT 2
PRODUCT PORTFOLIO

Utility
Vechicles

Hard Topps Soft Tops

Multi Utility Sports

Utility Commander

Maxx Bolero Scorpio

Source: Company documents

 Who will buy Xylo -

Mahindra and Mahindra Automotive Sector 9.7

EXHIBIT

M&M BRAND PORTFOLIO AND

COMPETITIVE MAPPING
Brand
Commander
Positioning Competitive Framework
Reliability, Trust Commercial vehicles
MaXX
Offers more Passenger vehicles and mini vans
Bolero Looks and Features
Scorpio MUV/Entry level SUV
Car plus/Lifestyle Premium car/SUV
Source: Company documents

EXHIBIT 4

oPPORTUNITY MAPPING WITH CONSUMER SEGMENTS

Price Range Basic Value for Comfort Individualistic Status
Money
1-2.5L Maruti 800,
Omni, Tata
Nano
2.5-4L Alto, Estilo, Wagon R il0, Honda
Spark, Indica, Small Car,
Santro, A-star
4-6L MaXX, Ikon, Indigo Accent, Aveo,Gypsy Ritz, Swift,
Bolero DI Dzire, Bolero Getz, i20
SLX/SLE,
Punto
6-8L Logan, Indigo Amby, Tavera, Fusion, Bolero | Jazz, Fabia,
Dicor Rhino Stinger/Vlx Verna, SX4,
| Linea, Fiesta,
8-10L Innova, Tata Getaway, City, Octavia,
Aria Xenon Optra,
Scorpio
>10L D segment &
above cars,
High end
SUV's

Source: Company documents

EXHIBIT 5
VARIOUS BRANDS IN M&M
SUMMARY OF TG AND VALUE PROPOSITIONS OF
PORTFOLIO

Source of business Value Proposition

Brand Consumer Segm1ent
Status Seeker High end SUVs/ Power, Thrill, Adventure,
Scorpio C-segment cars
Attitude and Status

Low end UVs/B-C Fun/Adventure,

Bolero Value Seeker
Diesel cars Youthful, Affordable,
Dependable
Luxurious space &
Comfort Seeker High end MPVs/
Xylo C-segment cars
comtort, Cool & Trendy

Source: Company documents

EXHIBIT6
M&M VEHICLES POST
UTILITY VEHICLES GROWTH RATES-M&M AND NON
LAUNCH OF XYLO ON 2009

50% 50%

40%
29%
30%
20%

20% 14%

10% 2%
2% 16%
12% 5%
0%
-7%

-10% 2005-06 2006-07 2007-08 2008-09 2009-10

(Apr-Nov))

Non M&M UVs M&M Brands (Bolero+Scorpio+Xylo)

Source: Company documents

Indian automobile industry registered a 68% increase in sales at 10.05 lakh units in Dec 2009. Passenger
car segment uoitnessed a growoth of 40.27% at l15,268 units and the upioard trend was also seen its Sports
Urility Vchicles or the SUVs marker ICRA report 2010 highlighted that the domestic demand for passenger
Dehicles grew at 21.2% during the 2009-10. Xylo was avarded MUV of the year 2009 award by CNBC
NDTV and Zigwheels