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HUNTER BUSINESS GROUP – TEAM TBA

Rohit Kumar

Indian Institute of Technology Bombay

Group 1

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Players Star Oil

HBG/ Team TBA

Enter HBG….

THE stage

Star Oil was facing increasing competition

Struggling to run the TBA business effectively

Fearful that the closing the TBA business would erode customer loyalty

THE CONFLICT

TBA(Tire Battery and Accessory) business is unprofitable but drives loyalty that translates into increased gas sales

3Background of the industry

Gasoline service station evolved 1950’s with advent of US interstate system

“under the hood checks” were a way to differentiate and strengthen customers bond, customers would pay a premium branded TBA products

1960’s/70’s star, shell, amco dominated the market- high margin of industry attracted high volume/ low price stores: Kmart/Walmart and specialty stores jiffy Lube, NTB

70% decline in 1970’s, which continued till 1980’s; 72,000 services stations closed; post 1990 80% repairs were equally spread between private garages, special repair shops, car dealers, gasoline service stations

4Background of company- Star Oil

At time of this case 2,200 gasoline service station were throughout US

1991-92 stars was losing money; revenue 20% fall in 24 months; variable cost basis estimate $8 million loss

Star management saw value in preserving star brand

TBA unattractive financially but it was clear that TBA product line built customer relationship

Background of company- Hunter

Founded by Vic Hunter, 1981 after gaining a wealth of direct marketing and sales management experience

Hunter believed strategic use of direct marketing technologies could revolutionize the face of business marketing

Goal: facilitate “the transformation of change” “highly personal” respects and recognizes unique needs of customers; step beyond traditional approaches to marketing and sales- increase brand penetration and customer satisfaction while cutting sales and marketing expenses

Experience with TBA- Amoco

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Primary and

Secondary Issues

Conflicting management agreement on TBA’s

position in the overall corporate mission of star

oil

Deterioration of both TBA as viable product line and gasoline service station

niche

Business agreements and program goals with star

oil and HBG

Maximizing brand equity in industry and brand loyalty from customers to deliver the most profitable service to the market

7HBG actions plans

Direct marketing approach integrating field sales, phone calls and mail delivering a consistent message

Developed electronic dealer database to capture sales and activity

Vendor partnership and private labeling based on quality and volume discount opportunity

Identify and develop gold accounts (% purchases of all TBA products)

8Results of Action Plan

Improved dealer satisfaction

85% better service

5X gold account achieved

24% increase in active accounts

Exceeded initial revenue gold of $20million

Reduced operating expenses by 50%

9Strengths Expertized in highly personalized direct

marketing to increase brand penetration and customer satisfaction

Cut sales and marketing expenses Committed vendors to provide high quality

customized TBA products & to develop new ones

Integrated information systems (ERP and TBA team dealer master database) to support business processes and

Accurately track dealer information & develop dealer specific plan

Threats Increased competition from high volume –

low price service models, specialty service chains and independent dealers

Duality of leadership of management of star oil and Team TBA

Volatility of Gas industry

Opportunities TBA products played a strategic role in

boosting star gasoline sales brand equity Customer loyalty – 4 times more gasoline

purchase for customers who had their cars serviced at gas stations selling star branded TBA products

Weaknesses Unprofitable nature of TBA businesses in

early 90s Dealer’s perception on value of star brand

varied with type of products they purchased

Early 1994, the number of active accounts and total sales volume began to level off

SWOT Analysis

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Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov0

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Chart Title

Series1Linear (Series1)

Month

Num

ber

of G

OLD

Acc

ount

s

Analyzing the Scenarios

11Scenario: HBG want to maintain its bottom line and expect teamTBA to fulfil the promised operational cost cutting by 50%Options

Available1. Keep fixed cost Constant

2. Lower marketing and sales cost to $1.34 mn3. Not abandoning any territories, or shutdown

any facilities/scale back operation4. Eliminate field sales (cost cut $1.4 mn)

1. Maintain the fixed component of operating expenses at 40-45% of revenue

2. Fixed costs frozen at $1.28 million.3. Sales and marketing Costs kept at $1.56 mn

4. Job cuts

1. Reduce both fixed and sales + marketing cost by 20%

2. Increase number of Gold Accounts3. Boost sales volume and eliminate C &

D type of dealers

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Microsoft Excel Worksheet

13Recommendation1. Limiting fixed cost will limit our scope to action. It will

decrease the flexibility to react to unwanted challenges from the competitor.

2. So, the should go for the third option.

• Reduce cost• Focus on most profitable customer, i.e.; A & AA. Terminate

C&D or move C to D. • Develop more of GOLD accounts in upcoming year by focusing

on profitable customer. • Sales maximization should be the motive • Consistent communication with the distributors.• They should keep working with supplier in order to decrease

cost of good sold by implementing economy of scales with their partner/supplier.

• Customized offer with standard products, increase penetration of the others products, they imply the customer in the relationship and they measuring the result.

14Other questions Answered

1. Would reducing the number of contacts hasten the decline in revenues?

Answer: It is possible because of the following reasons:(a) Reducing contacts may cause decline in revenue.(b)Reduction in dealer base

2. Was it possible for team TBA to improve effectiveness by increasing Gold accounts with revised criteria?

Fixed cost = Rent, salary for internal office support, DBMS, Miscellaneous cost at headquarterDirect marketing & Sales cost = email ($2.5), phone($16), field visit (200$)

15Other questions Answered3. Will we be able to persuade these dealers to stock and sell a composite mix of

TBA products?

Answer: Yes, because using the brand name. Survey report suggests satisfaction among the clients. Perception that contact has increased by the company

4. Were GOLD accounts asking too much from the dealers?

• The gold account was a good incentive to encourage sales reps to improve market penetration and visibility of the brands through a large range of products.

• However you can’t force customers to buy what they don’t need or want, it improves your numbers but on the long run, destroy your image

• Area specific sales (Ex- Seven-eleven Japan)

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Thank You