Case: Marketing and Service

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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 intangible elements and high on physical elements, which makes the marketing different for the service aspect of the business, which is higher on intangible elements. Marketing a vehicle involves creating the most attractive offer for the customer as compared to competitors. Motor vehicles are high in search attributes and are easy to evaluate so the potential buyer has typically done some research and has in mind the make and often model of the vehicle he or she desires. Once the buyer has decided on Ford as the manufacturer, where the buyer makes the purchase will most often come down to price. In this sense, Walt Sullivan’s approach to car sales is on point and should continue to be pursued, with a tighter control on spending to improve margins. The core product (the vehicle) is a physical good, while the separately charged supplementary services have a physical outcome, in terms of service to the vehicle, but are based on interaction and intangibles. The intangibles make marketing services for a vehicle more difficult. The services provided by Auto World for vehicle owners are considered labor and expertise rental. The customer hires service personnel to perform work on the vehicle that he or she most often cannot perform. The buyer is seeking the service because he or she lacks, in most cases, the expertise, tools, or skills to get the job done. As Lovelock points out, “it is the intangible elements – including the labor and expertise of service employees – that dominate the creation of value in service performances.” Marketing strategies for sales and service have to evolve from the similarities and differences between the two areas. Walt Sullivan was able to successfully build one of the best known auto dealerships in the metropolitan area. He purchased the current site of the business six years ago and retained the service and repair bays, but tore down and rebuilt the showroom, located in front of the service and repair areas. The...
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