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Hunter Business Group: TeamTBA
Transcript of Hunter Business Group: TeamTBA
HBG/TeamTBA The Conflict
TBA is unprofitable, BUT drives loyalty that translates into increased gas sales The Stage
Star Oil was facing increasing competition
Struggling to run the TBA business properly
Fearful that closing the TBA business would erode customer loyalty Enter: HBG... Hunter Business Group: TeamTBA Jeremy Pollock
Brian West The Tire Battery and Accessory (TBA) aspect of the business was struggling Background of Industry
Gasoline service station evolved 1950’s with advent of US interstate system
“Under the hood checks” were a way to differentiate and strengthen customer bonds, customers would pay a premium branded TBA products
1960’s/70’s Star, Shell, Amoco dominated market—high margins of industry attracted high volume/ low price stores: Kmart/ Walmart and specialty stores Jiffy Lube, NTB
70% decline in 1970’s, which continued into 1980’s: 72,000 service stations closed; post 1990 80% of repairs were equally spread between private garages, specialty repairs shops, car dealers, gasoline service stations Background of Company - Star Oil:
At time of this case, 2,200 gasoline service stations throughout US
1991-92 Star was losing money; revenues 20% fall in 12 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 lines built customer relationships 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 tranditional approaches to marketing and sales- increase brand penetration and customer satisfaction while cutting sales and marketing expenses
Experience with TBA-- Amoco Primary & Secondary Issues
Deterioration of both TBA as viable product line and the gasoline service station niche
Conflicting Management Agreement on TBA’s position in the overall corporate mission of Star Oil
Maximizing Brand Equity in Industry and Brand Loyalty from customers to deliver the most profitable services to the market.
Business Agreement & Program Goals with Star Oil and HBG Strengths
HBG’s expertise in highly personalized direct marketing to increase brand penetration and customer satisfaction, and to cut sales and marketing expense
Committed vendors to provide high quality customized TBA products and to develop new ones
Integrated information systems (Enterprise Resource Planning and TBATeam dealer master database)
to support the business process and
to accurattely track dealers information and develop dealer specific plan Weaknesses
Unprofitable nature of the TBA business in early 1990s
Dealers’ 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 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
Tires & batteries – the main revenue contributor of Team TBA’s revenue were sold by only small percentage of accounts. Threats
Increased competition from high volume / low price service models, specialty service chains, and independent dealers
Duality of leadership of the management of Star Oil and TeamTBA
Volatility of Gas Industry Recap, three choices:
1) Cut only variable costs
2) Cut some fixed costs, less cuts in variable costs
3) Reduce costs equally across the board We believe #3 is the most-balanced option, and most in-line with HBG's creative approach
Terminate contacts with C and D level dealers in order to re-focus on best dealers
Further develop Gold Accounts with goal of 20% of dealers qualifying by end of year 2
Success stories as case Studies to drive TBA value and best practices
Sales model of maximization of revenue still best alternative for TeamTBA - consistency of message to dealers and opportunity to maximize vendor partnerships Notes
Crux of the case: TBA creates 4x more sales in gas
Case doesn't quantify how much business this drives: 5% overall? 50%?
Is this unique to Star Oil, or an industy standard?
Knowing this information could potentially have suggested an option #4 - perhaps divesting of the TBA business entirely. Questions? SWOT Analysis Questions
Would reducing the number of contacts hasten the decline of revenues?
Was it possible for TeamTBA to improve its effectiveness by developing Gold accounts?
Was the team capable of getting these dealers to buy more TBA products?
Was this asking too much of the dealers?
Would (directing sales people to maximize contribution margin first) be counter-productive? HBG Action Plan & Results - Actions
Direct Marketing approach integrating Field Sales, Phone Calls and Mail delivering a consistent message
Developed electronic Dealer Database to capture sales & activities
Vendor Partnerships and Private Labeling based on quality and volume discount opportunities
Identify & Develop Gold Accounts (% purchases of all TBA products) HBG Action Plan & Results - Results
Improved Dealer Satisfaction
85% better service
24% increase in Active Accounts
5X Gold Accounts achieved
Exceded Initial Revenue Goal of $20 million
Reduced Operating Expenses by 50%