Case Statement:
Your client is an auto-chain retailer. Earlier they had 10 stores. They have now expanded to newer stores in newer cities but have seen a decline in profitability. Can you help them figure out why this is happening and provide recommendations?
C: Okay, as I understand, our client is in the retail part of the service chain. What are the newer geographies he has expanded to? How are they different from the previous geographies?
I: The newer geographies are tier 2 and tier 3 cities. Previously, the client had presence in the major cities in the country.
C: The profitability has decreased. Can you let me know how has it decreased? Is it the revenues that have gone down? Or have our costs increased?
I: The cost has definitely grown given we have opened new stores. However, the revenues have not really grown in tandem.
C: So, as I see it, I should be focusing my attention on the reduction in revenues. Is that fine?
I: Yes, that should be the way to go.
C: Thank you. Now I would like to know about the products our client sells.
I: Good question. Currently, our client offers two kinds of services: 1. Off the shelf auto parts. 2. Auto services themselves.
C: What kind of vehicles does the client service?
I: The client services majorly two kinds of vehicles. Cars/Scooters/SUVs/MUVs (smaller vehicles) and larger vehicles such as buses/trucks.
C: Now that we have established the business, I would like to know is there any particular service that sees the unhealthy revenue growth?
I: Yes, the auto-parts seem to be doing well. It is the Auto-service segment that sees no revenue growth.
C: Understood. Is there a particular vehicle type that the client sees the low revenue income in?
I: Yes, it is the truck/buses segment that show the low revenue.
C: Thank you, that helps. Can you let me know the reason for the lower revenues? Is it that customers are low or have the market prices gone down?
I: The market prices have remained the same. However, the customers haven’t been as much as the client expected.
C: Understood. I would now like to enquire why the inflow of customers is low. For this I would like to drill down into Customer Demographics, our Company, our Competitors and Regulations.
I: There have been no changes in the Customer Demographics, Competitors and neither have there been any changes in regulations.
C: Okay, so I will focus on the aspects of our own company. Now I will look into Products, Price and Promotions to get a deeper understanding of the issue.
I: Sure. The client’s promotions did not reduce or change drastically. What do you mean by looking at Products?
C: By products, I mean looking at certain aspects of the Automobile Servicing such as Quality and Customer Interaction issues relating to customer retention.
I: Okay. No, the client does not see any changes there.
C: Then the issue should lie in the pricing area. Is the client pricing differently than the market?
I: Yes, the client prices automobile servicing for trucks/buses higher than the market. Can you tell me why the truck drivers do not tend to take our servicing in newer cities?
C: Yes, they directly may be looking for secondhand trucks at such costs or simply getting single services by local mechanics.
I: That is right. Can you let me know the recommendations now?
C: Yes. In terms of long-term recommendation, I would advise a membership program so that customers may be retained to provide as well as drive in some revenue with membership fees. For a short-term recommendation, I would advise reducing cost to the market value so that we can start getting in customers.
I: Thank you, we can close the case now.
Background Information:
Client: Auto-chain retailer
Competitor: No major changes
Consumer: Automobile Users
Time Frame: A few months
Case recommendations:
The case here required one to digress through the client’s products as sometimes, just one product segment can be the issue. This when identified makes the case relatively simpler to solve.
