Case: Marketing and Service

Carol Sullivan-Diaz, a young health care manager, finds herself responsible for running her family’s car dealership when her father, Walt Sullivan, unexpectedly passes away. As Carol analyzes the state of the dealership she is growing increasingly concerned about the poor performance of the business, both with regard to the sales (“front end”) and service (“back end”) departments. Carol wonders whether a turnaround is possible. Auto World has been financially deteriorating for the past 18 months. The business has been losing money as a result of several factors, including, on the sales side, a decline in new car sales caused in part by rising interest rates, squeezed margins due to promotional activities, and rising fuel prices. Service revenues are below average compared to other similarly sized dealerships although a small surplus is still being made. Auto World’s decline, however, is partly based on internal factors that can be changed, particularly on the service side of the business. To succeed in the auto business marketing has to be concentrated on both the sales and service aspects of the business. The challenge is that marketing vehicles differs from marketing services for those same vehicles, and services pose distinct marketing challenges. Marketing a vehicle consists of both marketing the core product (the vehicle that responds to the customers’ primary need and involves transfer of ownership) and the supplementary service elements that, as Lovelock explains, “are mutually reinforcing value-added enhancements that help customers to use the core product more effectively.” Historically Walt Sullivan approached vehicle sales by emphasizing promotions, discounts, and deals, which helped maintain sales volume. These are effective marketing tools that help drive vehicle sales, yet they do not address the services available to the buyer after purchase. According to a continuum first suggested by Lynn Shostack, purchasing a car is low on