- ABC’ have not grown at the rate of the market indicating they are losing share.
- ABC’ do not know who is winning that share and a full competitive analysis will need to be done.
- Human Resource is a major factor in managing the growth of this business. There is a shortage of trained technologists in the entire industry. To continue to grow at a strong double digit level the need for highly trained technologists will be critical.
- As an affiliated dealer for Michelin, ABC benefit from the brand recognition, however, all sales and marketing costs must be fully borne out of the revenues of the business. This “could” limit more expensive types of marketing.
- Professional sales, marketing, and market research have never been done. A consistent market driven approach to new product development and sales could provide a significant growth in revenue.
- ABC Service Center has just installed a VPN (Virtual Private Network) system. This will allow much greater options in marketing and customer service via the internet in a market of highly educated computer literate customers.
- ABC will complete a new agreement with N.A.P.A. one of the largest automotive parts distributors in the nation in the next quarter. This agreement allows for consignment inventory of parts to be held at ABC but owned by N.A.P.A. This frees up working capital and more importantly, improves efficiency by eliminating down time waiting for parts.
- ACME Holding Company has the opportunity to partner with Jack ABC in a fourth business. This symbiotic relationship will allow the new entity to access high quality general replacement engines at a reduced cost for customers, and will provide an incremental revenue stream for the installation of purpose built race engines for that growing market segment.
- The snow removal business is relatively new for ABC and is only three years old. While this business is seasonal and variable due to weather, it is growing rapidly and is highly profitable. Despite the fact that this business has not been actively promoted, there is now a significant base of accounts and the ABC have established themselves in this market space with a solid reputation. This business provides the most significant opportunity for revenue growth thru professional management.
- New competition. There is always a threat of new competition in a lucrative market. However, Michelin is not likely to build a company store in this community due to the fact that they have three company owned stores within a 15 mile radius. Goodrich has a location on the same block, however, that store has been there longer than ABC. ABC Service Center has successfully grown despite this competition. There is no reason to believe another competitor will attempt to enter this space. The Chamber of Commerce is considering a resolution that will limit future activity in this market space as well.
-
Variability in weather conditions impact the snow business. With current contracts and capacity the annual snow business revenues are estimated to range from a minimum of $350,000 to $1.5mm annually. To accommodate this variability, the P&L must be managed to account for worst possible scenarios.
- New technology in the auto industry could produce vehicles that can only be repaired at the dealership. I have investigated this and found there is a federal law that prohibits auto manufactures from using this tactic. However, as new technology is developed, it is likely there will be a need for additional capital investment in new diagnostic equipment and training for technicians. This threat would impact all service providers equally.
Strategic Market Plan
I: Consumer Analysis: ABC Service Center Inc. is well positioned for growth in a highly attractive market. The demographics of this target market are fundamentally strong. With the market growing at 20% annually and a high dependence on personal automobiles as a primary source of transportation, one can only assume the demand for the services of ABC Service Center Inc. will continue to grow. Historically, the automotive service business is well insulated from economic downturns as consumers tend to hold on to older vehicles longer and require more service during these times. In addition, the median household income of $72,000 annually in the area combined with a high level of two parent working families indicate there will be a high reliance on dependable transportation in the future. This lifestyle will also create a need for customer focused and innovative ways to make automotive service as painless as possible. Convenience and high quality will be the critical success factors to the consumers in this market space. The ability to deliver new and innovative ways to service and maintain consumer’s vehicles will reduce the pressure on price within this demographic. Today, no one in this market space is working to develop non traditional business models to service the evolving demands of this market. The first to do so will benefit from the first mover advantage. These future services could include:
- Pick up and delivery services from home of office.
- Online scheduling and status update services.
- Limited services provided at home or at work.
- Online billing and payment options.
In this new business paradigm, customers of our services may never need to be inconvenienced by scheduled automotive service needs and may never need to come to our location to access our products and services.
The same principle is true of the commercial business. While commercial accounts can contract separately for all the services ABC provides, it is the ability to integrate all the services into a one stop shop that adds value. The synergies of being both the largest player in the market as well as an independent will allow us to provide combined services for corporate clients in ways the large national providers can’t. For example, ABC could offer a suite of services to large corporate clients to include:
- Snow and ice removal with guaranteed service to minimize risk management exposure.
- Fleet services with expedited repair.
- 24 hour towing
- Discount services to employees as an additional Human Resource benefit at no cost to the account.
- Integrated billing with local customer service representation.
- Limited on site services for employees.
The ability to integrate these services changes the business relationship to more of a valued partner relationship vs. a pure vendor relationship. It is this type of business relationship that adds value to both parties and reduces competitive threat and pressure on price.
II. Competitor Analysis: Today there are a variety of competitors who participate to various degrees in the same market space as ABC Service Center. There are large national companies such as Goodrich and Mainscape who provide automotive and snow removal respectively. There are also the national limited line service providers such as Jiffy Lube and Midas who focus on high volume, lower price, and limited services in the individual consumer market space. However, none of these providers have the capacity to offer the breath and depth of services at the ABC disposal. They are not locally owned and operated which limit their ability to respond to local market demands, nor can they effectively provide the ability to solve the complete problem (repair and convenience) for customers.
III. Opportunity Analysis: In essence, it is our desire to over time develop and deliver a new paradigm in automotive service repair. The ability to focus on the entire customer need, to fix the whole problem is what will provide ABC Service Center Inc.’s competitive advantage. This will be done by following the same basic philosophy for both our commercial and private accounts. Dealing with an issue with your car is considered by most to be a major inconvenience. ABC Service Center will remove as many of the inconveniences as possible by providing flexible pick up and delivery or come to you service, fix it right the first time with a guarantee that is backed up by local ownership, and the commitment to always provide service with an eye on the bigger picture. This means we will do a complete diagnostic every time to identify potential issues before they leave you stranded. Our philosophy is if you provide this level of service backed up by high quality work, and convenient ways to pick up / deliver / schedule / and pay for your services, ABC will achieve levels of customer satisfaction that are the highest in the industry. All current market research shows this is the most effective way to drive long-term profitability.
Tactical Sales and Marketing Mix Strategies
Historically the ABC have employed only the most basic of marketing strategies. The ABC have purchased multiple ads in both the SBC Ameritech Yellow Pages and Yellow Book Yellow Pages. The strategy has been to communicate as much about their products and services as possible in these ads, however, the exposure is limited to the viewer ship of this media. Multiple ads have been placed in the same book under separate headings that cover each of the products and services provided by ABC Service Center. The ABC subscribe to a Money Mailer service that provides a large package of coupons to its membership every other month. This service also provides the coupons on a monthly basis to all new residents who register within the Buckley zip code. Lastly, ABC Service Center participates and sponsor several local activities such as local car shows and the Gladstown Freedom Festival. All this provides additional exposure and promotes a sense of civic responsibility and support. The costs for these programs are as follows:
- SBC Ameritech Yellow Pages $4,500 a month X 12 months = $54,000 annually
- Yellow Book Yellow Pages $2000 a month X 12 months = $24,000 annually
- Money Mailer = $22,000 annually
- Other events as available and decided on. = $10,000 annually
The ABC do not currently track ROI on these investments so no data is available to determine the effectiveness of their current advertising and promotions programs. In addition to these passive advertising programs, the ABC have a part time inside sales rep that is responsible for calling private customers with the results of the diagnostics performed on their car. It is this person’s responsibility to communicate the problem with the vehicle, the costs for the repair, and to close the sale. The ABC have just added a full time outside sales rep for commercial accounts. While this position is relatively new, they believe this position is effective and the incremental revenue he generates makes this a profitable position. Neither of the two sales reps coordinates activities nor have they been professionally trained or provided with sales and marketing brochures.
Our immediate goal should be to be to increase revenue in line with market growth or we are losing share. Once this goal is achieved, we should then focus on growing share to the point we reach a capacity constraint at which time an evaluation will need to be completed to determine the ROI of additional expansion at this location. Our initial focus will be on high return low cost promotions. We will focus on direct sales, print ads, and the internet as the most immediate vehicles to communicate our message. In the short term we will focus on the following activities to achieve our goals:
- Evaluate the skills and abilities of the current sales staff and make changes as needed.
- Develop a simple and effective sales and marketing brochure which effectively communicates the value proposition of ABC Service Center Inc.
- We will maintain the current advertising programs as they are currently under contract and work to develop a mechanism to evaluate their ROI as quickly as possible. This can be done free of charge through my contacts at Anderson University School of Business. I am an advisor on the Falls School of Business Marketing Advisory Board and have the ability to assign projects such as this each semester to senior marketing students for their projects. I will have this done in the fall.
- We will immediately expand the use of our current discount program to the major companies in the area and offer them as an additional benefit to all their employees. Responsibility for this will be assigned to the outside sales rep who will work under my direct supervision. Accounts such as USA Funds, (Fannie Mae), Roche Diagnostics, Eli Lilly, and Rolls Royce have a significant number of their employees who live in our metropolitan service area. This will increase exposure to our services to consumers who fit our demographic at minimal additional cost.
- We will offer our employee discount program to all our current commercial accounts as well. While the use of this program sells services at a discounted rate, the business gained will be largely incremental revenue. Responsibility for presenting this program to these accounts will be outside sales rep and will take place as part of a monthly call cycle we will establish.
- We will develop a customer satisfaction survey as quickly as possible. This survey will be used to not only identify our strengths, weaknesses and unmet customer needs, but it will also be used to determine the best way to use the internet to promote our products and services. With the new VPN (Virtual Private Network) and broadband capability, we have the ability to use the internet for:
- Prospecting
- Customer service: Reminders, coupons, specials offers etc.
- FAQ web page with seasonal reminders
- Customer Service (scheduling, status updates, pick up and delivery notices)
- Billing and payment.
- Follow up
The first step to utilizing the internet as an effective marketing tool is to confirm this is an accepted form of communication in our market space and begin to develop a database of internet addresses on our customers. Second, we will contract with a third party such as SBC Ameritech to provide web hosting services. Lastly we will work to develop a website that meets the yet to be identified needs of our customers. The use of the internet for both prospecting and customer service will be an invaluable tool. While the ROI cannot be calculated at this time, the low entry costs and broad utility of this media makes it a prudent option to pursue. Costs for this service are very small starting at $100 a month for DSL and $30 a month for merchants’ web hosting which allows for online billing and payment options.
- We will modify the use of the Yellow Pages ads to reflect one significant ad with pointers under different categories within the Yellow Pages pointing customers to our primary ad. This will accomplish the same objective of providing information at a much lower cost.
- We will continue to use the Money Mailer program as it has demonstrated its effectiveness thru the return of the coupons included in the package. This program also allows us initial access to all new residents as part of this program. By offering a free oil change coupon as a loss leader strategy to entice potential customers to visit us, once customers are in the door, we can use our in house sales staff, outstanding service, and web follow up services as cost effective ways to sustain the business relationship.
- We will continue to support the community events as these provide low cost access to customers and direct exposure of our personnel and products to the public. For example, we display our classic cars, hotrods, and race cars at events such as these. These events attract large crowds to see the novel vehicles and communicate the image that if we can build these high performance vehicles, we have the ability to service their needs effectively.
- Once we have implemented all these activities and developed a mechanism to measure the effectiveness of each and their respective returns, we will then consider any alternative media that presents itself. For example, we have discussed cable television advertising as it allows us to be very effective in targeting our message by placing commercials on certain channels whose viewers match our target demographic. This media package starts at about $35,000 annually and would be considered based on the results of our initial efforts and future business goals.
Sales and Marketing Budget
The estimated budget for these activities is as follows:
- Training and evaluating staff. No additional costs as I am a certified sales trainer.
- Development of brochures. $15,000 annually
- Discount card program is no incremental costs. We will use it more effectively and more extensively. Revenue is incremental.
- SBC Yellow Pages will be reduced to about $40,000 annually by reducing the redundancy of the ads.
- Yellow Book will be evaluated and maintained or eliminated based on ROI. $24,000 annually.
- Money Mailer: $22,000 annually
- Web services $1,500 annually for DSL and web hosting services. Web design costs are not identified at this time.
- Local community events will remain as currently budgeted. $10,000 annually.
Total A&P Budget estimate: $112,500 annually
Summary
It is my opinion that ABC Service Center Inc currently spends enough money to achieve the sales and revenue goals I expect. Unfortunately, they simply don’t deploy the resources and manage them effectively at this time. I am confident with improved focus and management in this area; we can improve sales to the level projected in our proforma budgets and maintain A&P spend at the current rate of 3% of sales.