Cielo – A Car In Trouble

THE MISTAKES Contd..

The Cielo had till then been promoted as a feature-rich, luxury family car. The free Cielo scheme did immense damage to the car's brand equity, particularly in north India, which accounted for around 80% of Cielo sales. The bonanza scheme somehow projected a picture that Daewoo had substantial non-moving Cielo stocks, thereby turning off the ‘status-conscious'buyers. Before this scheme, Cielo was selling about 2,500 cars a month, which fell to 100 by the time the scheme ended in early 1996.

In its desperation to maintain volumes, Daewoo then began offering hitherto unheard of incentives to dealers and financiers, who in turn passed them on to customers through lower interest rates. Daewoo and its financiers were even questioned by the Monopolies & Restrictive Trade Practices authorities to explain how its finance rate could be as low as 14.33%, while the prevailing car finance rate was 23%. The company explained it by claiming that it was offering discounts of up to 10% of the car value (Rs 0.6 million) to financiers, provided they reduced the cost to the customer by keeping the interest rate low. Daewoo later claimed that these inquiries were instigated by its competitors to tarnish its image.

Daewoo's positioning efforts for the Cielo were termed ‘unmemorable and poor'by analysts - largely due to the frequent changes in the positioning. Initially the car was positioned on the ‘technology with aesthetics'plank, which was later moved on to a ‘premium family car'positioning. Analysts remarked that the family-car positioning did not match with the premium image Cielo was trying to project in the beginning. This premium communication began to clash with subsequent value-for-money initiatives that followed. Such moves only ended up confusing the customer. S G Awasthi, managing director, Daewoo, defended the company's stand saying that there were no benchmarks in India when Cielo was launched and that market segmentation had not even begun to emerge. He said, “It was difficult to position the car clearly or to communicate it. So we did not position it against any product, but with the idea that Cielo will find its own niche.”

A Daewoo source commented, “Tell me one ad campaign that improved the car's sales by even 0.1%? Cielo began on a luxury plank and ended on a ‘Val-You'note.” Media reports remarked that Daewoo's not being able to properly position the car proved to be the biggest reason behind Cielo's failure. An analyst commented, “They must have tried almost every positioning.”

THE BIGGEST BLUNDER?

As all of Daewoo's efforts seemed to be failing, the company Daewoo decided to introduce a hefty price cut of Rs 0.15 million in January 1998. After this, the GLE model cost Rs 0.49 million in Delhi showrooms compared to the earlier price of Rs 0.62 million, while the GLX model cost Rs 0.57 million compared to the earlier Rs 0.68 million.

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