According to C. K. Prahlad and Venkatram Ramaswamy, “The competence that customers bring is a function of the knowledge and skills they possess, their willingness to learn and experiment, and their ability to engage in active dialogue.” This case examines the necessity of these functions in order to bring delight in the minds of the customer and give them an experience as a whole. The case outlines few failures which results due to poor planning in the strategy of a new product launch. The case also casts light on the distance which is generated between the sales force and the company. These distances occur due to various factors like resistance to change by the sales force, pressure from higher management on strategic compliance, and inefficient communication strategies between the two. The case helps in understanding the fragile bridge which connects the higher management of the company to the sales team on field.
TopOrganization Background
The automobile market has been growing at a fast pace for the past 10 years. After liberalization many new multinational companies started coming into India. The domestic companies were able to shield themselves by superior knowledge of customer priorities and concerns and due to greater reach into the various cities. However, now the scenario had changed and not only did the multinational companies produce tailor-made products, but they have also gained access to the market by joint ventures.
With competition increasing day by day, the economic slowdown was the new problem. People are no longer willing to invest in luxury items. Even with good financing schemes, people were keeping the idea of buying a vehicle in low priority. With people not ready to invest, the insecurity had forced many fresh orders to be cancelled. The security forfeited is nothing in comparison to the damage done if the vehicle is already in assembly, especially if it is to be produced in rare colors.
Suppliers of automobile companies used to purchase raw material in bulk on credit terms & transfer the cost benefits in order to remain preferred suppliers to automobile companies. The volume of transactions gave marginal profits, but still secured business. Now the manufacturers had reduced their orders since the setups were low. This led to inventory pileup and ate up whatever was left of the profit.
The manufacturer was not at ease either. They had to keep producing the minimum at breakeven volumes. Employees were forced to take leaves and high finished goods inventory was left. Whereas the manufacturers were shutting down the production for days, the sales wing was in deep pressure to deliver targets despite customer pockets getting smaller.
The dealer was in the most uncomfortable chair in the system. In the whole buying process, after taking the booking amount, the dealer takes money from financial institutions in order to buy the vehicle from the factory. According to one of the dealers:
The booking amount which we take is much less than what is the money we take at risk from banks. The vehicle itself takes around at an average 12-14 days to reach and all this time and till we get the money from customer we bear the cost of the costly cars. If we don’t sell a vehicle in the same month, including those that are displayed, then the profit margin reduces to nil. The sales team also now delivers in an incentive mindset which is an added cost to every sale (Appendix 2).
The dealer also had to invest in local advertising campaigns, as well as vehicle test drives. With all this they still had to maintain the standards of the company.
TopSetting The Stage
The company had made a huge effort in bringing out the product. QFD (Quality Function Deployment) was deployed throughout the whole process. Customers in various cities were reached and the needs were identified, which were then summed up in designs and models. These were made with about 80 colors and 5 variants. The executive boards selected 6 colors and 3 variants. The offering created a new perspective niche in the market. The companies already existing models have gone through regular upgrades and were nearing the end of growth stage. A new model was in drastic need for business to go on. The company having being targeting the cities stressed features of looks, design, and style with handsome performance and efficiency. The vehicle was able to carry around 8-9 people comfortably and can go for outdoor outings and rough rides of adventure. In the same time the company pitched the vehicle to be a family vehicle. With both the customer segments needs met, the vehicle created a new niche of product offering, which was highly marketed to create general awareness and curiosity in consumers.
The whole vehicle was marketed based on its product offering. The advertisement campaign consisted of two parts. One was pre-launch advertisement and other was post-launch advertisement. The pre-launch advertisement was designed as to generate curiosity and was aired a couple of weeks ahead of launch.
A team of young operations people were trained for two weeks in the head office and sent to area offices around the country to help gather data and help in knowledge sharing about the product. The regional sales teams were made and people were assigned tasks. The whole teams of cross-functional departments were coordinated by head office by regular mailings and video conferencing.