The Bajaj RE60 isn't much to look at. The boxy car, with tiny wheels, is homely enough to rival some of the old Soviet Bloc's most unfortunate automotive creations. Yet its business logic is far more attractive. The car is a beautiful illustration of how to create big markets by aiming first for small footholds.
Bajaj is an Indian firm known for its scooters, motorcycles, and three-wheeled vehicles. Its three-wheelers are widely used throughout India as auto rickshaws, which you will not be seeing at the Detroit auto show any time soon. The company isn't shy about calling its products what they are, including boasting of features such as a "limp-home facility" that get the vehicle to the nearest gas station...slowly. But the firm has broader ambitions, eyeing India's enormous emerging middle class, which is projected to rocket from 5% to 40% of the country's population by 2025. Others have similar aims, of course. Tata, a vehicle maker more known for its trucks, recently spent heavily to create a revolutionary car called the Nano that sells for about $2,600. Alas, the Nano has run into production problems, and it's had a nasty tendency to spontaneously combust. Really.
Bajaj has taken a different tack. Whereas Tata aimed for a huge emerging middle class with a massive engineering project, Bajaj deliberately started small. The RE60 has a basic one-cylinder engine and leverages much of the company's current technology. Notably, that technology has already been well-proven on India's roads, which can be amazingly challenging. The company has also had a tight customer focus, laser-targeting auto-rickshaw drivers for the vehicle. The base model even has a fare meter included in its dashboard.
Is there sense in such a paltry effort? Yes, a ton. Bajaj is using the concept of foothold markets -- customer segments that are well-defined, easy to please, and able to introduce a product to much wider swathes of the population. Think of Gatorade getting its start among college football players, or Atari first introducing its "Pong" in pinball arcades. Footholds enable a company to bring a product to market rapidly and inexpensively, so that it can learn from real commercial experience -- not theories on a whiteboard -- about what customers want. Footholds also enable a firm to get traction with future customers while avoiding massive marketing spend.
So Bajaj is being intentionally modest. It refuses to call the RE60 a car. Rather than aim at the most upwardly-mobile sections of the middle class, it is targeting rickshaw drivers who might earn just $100 a month. Bajaj has sold 5 million auto rickshaws over the years, so the market is not tiny, but it is a sliver of India's full potential. As for the hundreds of millions of other potential customers, they may wait some time before buying their first car, and in the meantime they might be found riding in the back of an RE60, sampling the experience and hearing about it firsthand from pleased rickshaw drivers. That is smart engineering, marketing, and strategy.
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