1
HUNTER BUSINESS GROUP – TEAM TBA
Rohit Kumar
Indian Institute of Technology Bombay
Group 1
2
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
6
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
10
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov0
20
40
60
80
100
120
140
160
180
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
12
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)
16
Thank You
Top Related