Thursday, January 17, 2013

Brand Update : Vespa slashes prices but is it enough ?

According to newsreports, Vespa has slashed the prices of its newly launched scooter by around Rs 6700. Vespa was launched as a premium scooter which is according to the company is  ageless, iconic and timeless. The arrogance that Vespa globally is considered an icon was reflected in the pricing. Vespa launched its 125 cc scooter with a price of Rs 66,600 which was way above the average category price range of  Rs 40,000-50,000.
One would expect that with high price will come all the high-end features but Vespa decided that the premium is for the brand and nothing else.So what was offered to the Indian market was an ordinary scooter with excellent looks, funky colors and a brand.
Despite the high price and ordinary features, Indian consumers gave a warm response to the offer. Newsreports suggest that Vespa was able to sell around 30,000 odd scooters after the launch.

Then came the price cut. Vespa has cited operational efficiency as a reason for the price decrease. The price cut amounts to around 10% and still the scooter is the most expensive in the market . 
Although I don't disbelieve the clam of operational efficiency for the price-cut, I think there is an inherent confusion in the brand regarding its approach to the Indian market. There are also rumours of a mass-market launch from Vespa  aimed at volume. If that is the case, then how will the brand justify the premium for the current offering which is not feature packed.
India is a market where the utilitarian point of view of consumers are very high. Even if consumers splurge crores of money in luxury , the mental accounting regarding the value proposition is very strong. In this information age, it is surprising that Vespa overlooked the value proposition. 
The current price rationalization is not enough to excite the consumers because the value proposition of competitive offerings are more compelling. Ofcourse there is a niche segment who look for exclusivity but going by the noises made by the brand, it looks at volume rather than niche.
Having said that, the current launch can also be viewed as a test dose ( an expensive one) for gauging consumer response to a Vespa offering . The brand can take solace that consumers have viewed the brand in a positive light and has showed genuine interest in  what is being offered. The positioning based on the brand's iconic global status has also well received. May be the brand will reduce its arrogance and offer a better value proposition in future.

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