Customer Relationship Management and Business Relationships
Introduction
The car industry has seen a huge growth, especially from the overseas market, such as Hyundai, as low cost economies and the use of new technologies are rapidly changing the way in which this sector meet customer demands. This assignment looks at MG Rover and the concepts of customer loyalty, Customer relationship marketing and the market in which they operate.
Customer Relationship Management and Business Relationships
Customer relationship management has become an important focus in the marketing of the car industry. Customer acquisition and retention has become top management priorities in this sector. The introduction of e-commerce and the Internet has brought new channels for sales and another means of gathering customer information.
CRM however has always been important as a marketing concept and has emphasised the importance of building a long term relationship with customers, there has been a shift from transactional marketing to relationship marketing which focuses on issues such as customer and brand loyalty, along with the importance of customer lifetime value which is key to marketing planning and strategy. MG Rover realised the importance and value of creating customer satisfaction.
Facing numerous new makes and models, they were no longer unable to recognise or differentiate. Make, quality, functions, price and after-sales services had all become important factors to consider.
MG Rover developed a strategy for enhancing customer service and improving sales force performance, which utilises improved database and communication systems. Large companies such as Rover would receive large amounts of enquiries by phone, mail and e-mail. Much of the internal personnel's time was taken up sorting these enquiries. By enhancing the companies database the speed at which they acting on enquiries increased which benefited the customer, product, stock and also that marketing is better able to analyse promotional activity and customer response.
The use of one to one marketing and mass customisation are an extension of traditional target marketing and product differentiation and requires a culture that is dedicated to treating each customer as the complete focus of the company. MG Rover had developed a database and an interactive media site, training was given to dealerships on how to interact with each customer as a individual and a system was set up to support mass customisation, this was however not carefully managed and resulted in a breakdown in communication.
Consumers need to rationalise their consumption while manufacturers need emotional promotion to sell their cars, consumers cannot simply stop using the vehicle or simply swap out the product when they do not feel good. A vehicle is a high-end consumer product in which users demand the realisation of brand value as well as nice practical functions, including power, fuel-economic design, wide-range of accessories, personalised design and price.
MG Rover also reviewed their current sourcing strategy and used SRM (Supplier relationship management) to manage suppliers, particularly if they were locked into long-term relationships. MG Rover used five international ...
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Consumers need to rationalise their consumption while manufacturers need emotional promotion to sell their cars, consumers cannot simply stop using the vehicle or simply swap out the product when they do not feel good. A vehicle is a high-end consumer product in which users demand the realisation of brand value as well as nice practical functions, including power, fuel-economic design, wide-range of accessories, personalised design and price.
MG Rover also reviewed their current sourcing strategy and used SRM (Supplier relationship management) to manage suppliers, particularly if they were locked into long-term relationships. MG Rover used five international purchasing offices (IPO'S) including Istanbul, Seoul and Shanghai, before they began SRM they had to try and understand their own needs from suppliers in terms of quality, cost, logistics, design and development and management. MG Rover realised that they needed to present a positive image of the company even though management problems were beginning to arise, in order to look attractive to the supplier and to become a preferred customer. They needed to build up trust and understanding of different cultures in order to understand the global differences and how other countries operate. People within the organisation however had some internal resistance to the change, which was resolved by clear communications and highlighting the need for this change.
MG Rover
The bankruptcy administrators of MG Rover announced April 15th 2005 that its Birmingham plant would be shutting its gates, after Shanghai Automotive Industry Corp. said it had no interest in pursuing a joint venture
MG Rover's troubles have been known since the 1990s, when its ownership first moved outside Britain. In 1994, BMW bought it from British Aerospace but in five years failed to turn MG Rover around. The German carmaker sold the loss-making unit in 2000 for the symbolic sum of £10 to Phoenix Venture Holdings, a British investment firm that pledged to maintain jobs in Birmingham. As part of the deal, BMW gave the new owners an interest-free 50-year loan worth the equivalent of £813 million to help them keep the business alive, along with £139 million in other payments.
When BMW sold the business in 2000, the German carmaker kept the Mini brand, which it re-launched in 2001 with great success. Losing the Mini deprived MG Rover of a volume producing business that might have given it a level of sales that would have let it succeed as a small mass manufacturer, Newton says. In addition, BMW also sold the Land Rover business to Ford.
These moves left Phoenix Holdings with just the MG which had a loyal following in Britain but was always a niche-market car and the Rover models, which was considered frumpy and in need of updating. Although Phoenix Holdings tried to freshen up its offerings, for example, by bringing out a range of MG-branded cars based on Rover models, the underlying designs were outdated, and Phoenix lacked the resources to invest in new models. People didn't like the cars. The basic math is that people stopped buying Rovers because they're extremely out of date.
Add to that the high cost of producing cars in Britain and the intense competition from foreign manufacturers, and the auto maker had little long-term hope. It had a brand that's too small for mass appeal, but it's not elite. It's in a relatively expensive location, and it's competing against companies like Toyota.
One potentially valuable property is the MG brand and its TF series of two-door convertibles. The sports car has had a loyal British following, and analysts say another company could buy the brand and produce it as a niche model. The MG brand is still highly regarded by people who know about sports cars, and there's a huge opportunity.
This focus on consumer requirements is lacking amongst domestic vehicle manufacturers such as MG Rover. Despite slogans like "customer-centred and market-oriented", the fact remains that they do not consider marketing and sales issues prior to production. This inevitably creates a gap between production and sales.
There was regret at the loss of a national symbol but that was misplaced sentiment. Nobody loved Rover, not even its management, in a world of international capital movements, instantaneous data transmission and powerful brand values; the ethnic nature of the shareholders was a poor way to define the national characteristics of a product.
Rover has been dying a slow death since the 1970's. Bad management mainly to blame which has been a cancer on British manufacturing Industry for years, not helped by successive Government policies in the 1980's and early 1990's.
Market Research
Rover has previously used a mystery shopper research programme which involved visits by bogus potential car buyers to dealers, in order to rate the up keep and appearance of show rooms, technical knowledge and attitude of personnel, as a result of these anonymous visits they were able to improve the standards of its dealers, the attitude of their staff and ultimately the quality of its service and customer satisfaction.
They also held customer clinics offering people the opportunity to examine their product range and comment on desired features. They realise that they must know what physical features target consumers want because the prime basis for decisions about the product features should be the needs and wants of the target market. This should be continually assessed as the product requires alterations.
Car launches which have previously been focused on performance, sex appeal and sporty imagery have changed and evolved as research has shown that the average driver is more concerned with safety and reliability. MG rover shifted from this image to a more theft and safety conscious promotional campaigns. These emotive issues are dominant customer needs in many segments of the car industry. The mainstream car buying segments have changed significantly in what they want during the last ten years.
In a recent survey on customer satisfaction MG Rover came 28 out of a list of 32 car manufacturers (Appendix 2), which was another indication on what was to come.
Macro environment
In the UK the privatisation of the public utilities created new terms and conditions for their suppliers and sub- contractors. The state sales of Rover created commercially lean companies that suddenly had new impetus to become major competitors in the industry. In the European Union deregulation has created opportunities across borders and also new threats. Car manufacturers were previously able to restrict certain models to specific countries. Rigorous controls on dealers, forbidding them to sell cars provided by rival manufacturers on the same site. Nearly all of these controls have since been lifted.
Marketing Strategies
MG Rover had to change their market strategies to maintain their market share. They did this by lowering their prices, introducing new models (Appendix 1) and creating brand-building campaigns using their British Heritage to compete with the new Japanese models and other foreign competition.
Conclusion
Instead of focusing on saving full-scale production, the company should seek to develop new niche products of superior quality that can meet the increasingly materialistic British customer needs, and compete with the likes of BMW, Lexus and Jaguar. It is inevitable that jobs will be lost, it's a modern day trend in all-British manufacturing industries, and if it weren't for the elections looming, I doubt they would have made it this far. It is now all a question of politics. MG Rover is in trouble due to not meeting their consumer needs. If Rover wanted to thrive they needed to make 'inspirational' cars. There problems are a legacy of the bad days of 60's and 70's when they produced poorly designed models primarily to satisfy the home market and have not changed or replaced for years. Although they used consumer relationship techniques and tried to build brand and consumer loyalty, bad management and inefficient research resulted in their collapse.
Bibliography and Reading sources
Fardet D. et al Managing Business Relationships (2002) Wiley, London,
Gummessaem E. Total Relationship Marketing (2002) Butterworth- Heinemann, Oxford, UK.
www.newsvote.bbc.co,uk
www.ft.co.uk
Lecture notes
Contents Page
. Introduction, Customer Relationship Management and Business Relations.
2. CRM and Business Relations continued
3. CRM and Business Relations continued and MG Rover
4. MG Rover continued
5. MG Rover continued and Market Research
6. Market Research continues and Macro environment
7. Marketing strategies and Conclusion
8. Bibliography
9. Appendix 1 and 2
MG Rover
BUSM 2052
Managing Customer Relationships
01003882
