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RESEARCH REPORTON
“CUSTOMER CARE PROGRAMS AT MARUTI”
A REPORT SUBMITTED TO U.P. TECHNICAL UNIVERSITY FOR THE PARTIAL FULFILLMENT OF
MBA DEGREE 2008-09
Submitted to:- Submitted by:-
DECLARATION
I, ” to declare that the Research report entitled
“Customer Care Programs at Maruti” being submitted
to the U.P.TECHNICAL UNIVERSITY for the partial
fulfillment of the requirement for the degree of Master of
Business Administration is my own endeavors and it has
not been submitted earlier to any institution/university for
any degree.
Place:
Date:
2
ACKNOWLEDGEMENT
One of the most pleasant aspects of writing an acknowledgement is the opportunity
to thank all those who have contributed to it. Unfortunately, the list of expression of
gratitude- no matter how extensive – is always incomplete and inadequate. This
acknowledgement is no exception.
First of all, I wish to express my sincere gratitude to for giving me opportunity to
do research under her profound guidance. Because of her inspiring guidance,
motivation, positive criticism, continuous encouragement and untiring supervision
this work could be brought to its present shape.
I would like to thank all of them who in one way or the other have helped me.
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PREFACE
The success of any business entity solely depends on how effectively does it
utilizes its optimum resources and how soon does it make arrangements for
the removal of the customer’s grievances. Moreover, the company should
always be ready to make necessary changes according to the requirement in
order to attract more customers so as to maintain a substantial growth in the
market. The topic given to me was:
“CUSTOMER CARE PROGRAMS AT MARUTI”
I have tried to put my best efforts to complete this task on the basis of skill
that I have achieved during my studies in the institute.
I have tried to put my maximum effort to get the accurate statistical data. If
there is any error or any mistake in collecting the data, please ignore it.
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TABLE OF CONTENTS
S. No. Topics
1. Executive Summary
2. Introduction
3. Background of Indian Auto Industry
4. Company Profile
5. PEST Analysis
6. SWOT Analysis
7. Porter’s 5 Forces Model- Analysis
8. Comparative Study of Customer Care Programs
9. Customer’s Expectation from a Loyalty Program
10. Loyalty Program for Maruti
11. Conclusion
12. Bibliography
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EXECUTIVE SUMMARY
Undoubtedly the customer has become the King. The modern customer is armed
with IT and has higher buying power. The ever-increasing expectations from
products and services are a major challenge for all the players in the market. The
softer issues have gained as much importance as product features in his brand
decisions. There is higher propensity towards choosing brand that is befitting the
self-image. The intangible offerings have gained as much importance as the tangible
product features. Thus, my project was aimed at studying the customer care
programs at MARUTI and its other competitors in the market. The project required
collection of detailed after sales customer services and programs in these companies.
For this, information was taken from various dealers of different companies followed
by in-depth interviews of executives at their respective Regional/Head offices. Based
on the information gathered from the various dealers of the companies, it could be
analyzed that there are certain common customer care practices prevalent in the
automobile industry and about the programs where some companies have a leading
edge over Maruti.
Loyalty programs are about developing sustainable, mutually beneficial relationships,
it doesn’t take much to keep the clients we want. All companies have to do is just
exceed customer’s expectations by a little and they will be far ahead of the
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competition. Thus it was followed by a survey of Customer’s Expectation from a
Loyalty program, which was taken through a common questionnaire framed on
certain guidelines, from the customer’s visiting the various dealers for further queries
of their products and some through random sampling. On the basis of the analysis
and interpretation of the results of the survey, a layout of the loyalty program was
designed which could communicate customer’s expectation from a loyalty program
and bridge the gap between the desired expectation of the people and the company.
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Introduction
Peter Drucker refers to it as “the Industry of Industries”. It is the backbone of
Petroleum, Steel and manufacturing sectors. It creates employments for thousands
and gives birth to many entrepreneurs. It satisfies one of the most basic needs of a
human being – mobility. It is none other than the Automobile Industry!
The global automotive industry is in a continuous state of flux with respect to
technology and ownership. The American producers, once the envy of the rest of the
industry are struggling while two of the Japanese firms and several European
manufacturers are flourishing. It is well known fact that Automobile industry is the
cornerstone of some of the most influential economies in the world like USA and
Japan. Indian Automobile industry is all set to play the same role in Indian Economy.
Indian Automobile today is one of the most modern, growing and vibrant automobile
markets on the global map. India is second biggest two-wheeler market in the world.
The four-wheeler market in India is also one of the fastest growing and most
promising. No wonder, it has become a center of attraction for most of the global
automobile players. As the global automotive industry matures and competition
intensifies within traditional markets, it has become necessary for established
companies to branch out to pursue emerging markets, and develop new niche
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segments. This has in turn spurred on changing relationship structures, with an
apparent realization by many within the industry that alliances of differing sorts may
be necessary to compete effectively, allowing fierce competition to rationally coexist
alongside cooperation that does not violate anti-trust legislation.
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Background of Indian Auto Industry
For forty years since India's independence from the British in 1947, the Indian car
market was dominated by two localized versions of ancient European designs -- the
Morris Oxford, known as the Ambassador, and an old Fiat. This lack of product
activity in the Indian market was mainly due to the Indian government's complex
regulatory system that effectively banned foreign-owned operations. Within this
system (referred to informally as the "license raj"), any Indian firm that wanted to
import technology or products needed a license/permit from the government. The
difficulty of getting these licenses stifled automobile and component imports,
creating a low volume high cost car industry that was inefficient, unprofitable, and
technologically obsolete. The two dominant products Ambassador and Fiat, although
customized to the poor road conditions in India, were based on a stale design concept
(with outdated features), and were also fuel inefficient.
In the 1980’the car industry was undergoing technological stagnation and was
characterized by low production volumes, high cost and low productivity. The
customer had very little choice and the market was selling just around 30,000 cars
per year. There was a clear need to provide a cost effective, reliable and quality car
to the customers. In the early 1980's, the Indian government made limited attempts at
reforming the automotive industry, and entered into a joint venture with Suzuki of
Japan. The joint venture, called Maruti Udyog Limited, launched a small but fuel-
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efficient model Maruti 800. Maruti Udyog Limited was incorporated in such a
scenario as a fully owned Government Company on February 24, 1981 with a
resolve to bring about expansion and technological modernization, of the automobile
sector. Thus MUL when started was entrusted with the task of achieving the
following policy objectives:
Modernization of Indian Automobile Industry.
Production of Vehicles in large volumes, which was necessary for economic
growth.
Production of fuel-efficient vehicles to conserve scarce resources.
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Choice of Product and Collaborator
To achieve the above objectives one of the foremost tasks before Maruti Udyog
Limited was to determine the most suitable product mix and to select the most
suitable foreign partner who would be willing to accept MUL’s requirements in
terms of product mix, technology transfer, and equality participation and had the
required technological expertise and experience in producing high quality, reliable
and fuel efficient vehicles. After extensive discussions with several major European
and Japanese car Manufacturers, MUL chose Suzuki Motor Corporation (SMC) of
Japan as it’s partner in Oct. 1982, by which acquired 26% share of the equity with an
option to increase it to 40%. Suzuki Motor Co (SMC) further increased its equity
holding to 50% in year 1992,Converting Maruti Udyog Ltd., into a Non-Government
Company with a total equity base of Rs.1322.92 million. Maruti dominates the auto
industry in India. There are 9 other major manufacturers. The market is divided in
various segments (Refer Appendix II). The following table shows how the Indian car
industry is divided in various segments
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Demand Drivers
The key factors that determine demand for cars are:
Household Income Levels
Product Availability and Access
Product Affordability
Availability of Finance
Infrastructure (Road) Development
The prospects of Auto industry are bright as rising income levels, low passenger car
ownership, declining interest rates, easier availability of financing options, ongoing
road development, reduction in excise duties and the availability of multiple models
in all price segments are all triggers for a high growth phase in the passenger car
industry in the coming years.
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Company Profile
Maruti collaborated with Suzuki of Japan to produce cars in 1983. At this time, the
Indian car market had stagnated at a volume of 30,000 to 40,000 cars for the decade
ending 1983. The company reached a total production of one million vehicles in
March 1994, becoming the first Indian Company to cross this milestone. It crossed
the two million mark in 1997. In 2001, it launched new businesses – ‘True value’,
‘Maruti finance’, ‘Maruti Insurance’ and ‘N2N’. In 2003, the company listed on BSE
& NSE after its public issue. Maruti consolidated its competitive position by
launching various models other than Maruti 800. In 1984, Maruti introduced a utility
vehicle, Omni that could seat up to eight people. The low value added tax on Omni
made it the cheapest personal transportation vehicle in India. The Omni was
inexpensive to run and was popular with taxi operators and large families. In 1985,
another utility vehicle Gypsy, designed for tough road conditions, was launched. In
1990, Maruti introduced a 3-box car, Maruti 1000. In 1993, it introduced a more up-
market model, the Zen. A 1300 cc engine, up-market model, Esteem, followed this,
which was the replica of Maruti 1000 (which was replaced) with more power and a
new exterior. The Maruti 800, the Omni, the Zen and the Esteem became market
leaders in their respective segments. In 1994, Maruti became the first Indian
company to reach a cumulative production of one million vehicles. It took only
another three years for Maruti to cross the two million mark in 1997. In 1997-98,
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Maruti’s overall market share was 83.1%. With the emergence of global player in the
Indian Automotive industry Maruti has seen a Loosing market share
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COMPANY’S VISION
Maruti Udyog Limited’s Vision for the future is to be:
“The Leader in the Indian Automobile Industry, Creating Customer delight and
Shareholders wealth; A pride of India”.
Maruti Udyog Ltd. is the largest car manufacturer and also has a 50% market share
in the passenger car segment. It has reached this position through sound planning and
effective implementation of its strategies to achieve the desired goals. Maruti Udyog
Ltd. is customer centric organization. It plans to offer a "360-degree customer
experience," continuing to launch new products and reduce costs to offer more
competitive products. With the ever increasing competition with the opening of the
economy and falling market share of MUL, the company is now focusing on
consolidating its position and has set three main objectives:
To continue to expand the size of the Indian small car market by
strengthening and expanding it’s dealer network and making automobile
financing available at competitive rates.
To strengthen its leadership position in the small car segment of the Indian
market.
To continue to benchmark itself against improving global manufacturing,
marketing and other practices and standards, strive to increase customer
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satisfaction through quality products and new initiatives, and promote the
financial strength of its sales network
The company has also expanded through forward integration into related service
sectors of Insurance, Finance and Corporate lease and fleet Management services. It
has also entered the pre-owned car market through True Value. All these expansions
are expected to increase the shareholders wealth over a long run.
Corporate Strategy
The company’s strategy revolves around its Core Values of :
Customer Obsession
Fast, Flexible and First Mover
Innovation and Creativity
Networking and Partnership
Openness and Learning
The Overall strategy of MUL may be divided into four broad categories:
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Business Strategy of MUL
The broad business strategies of Maruti Udyog Ltd are as follows:
Maintain and Enhance Product Range
Increase Reach and Penetration
Secure Repeat purchases by Offering a 360 Degree Customer Experience
Continue to benchmark manufacturing with global manufacturers
Continue to reduce cost to offer more competitive products
Achieve Cost Reduction through Higher Productivity
Lowering the Cost of Ownership
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Maruti Udyog Ltd.
MissionThe Leader in The Indian Automobile
Industry, Creating Customer Delight and Shareholder's Wealth; A pride of India
Finance
Human Resource Operations
Customer
Customers and Marketing
Maruti has been rated top in customer satisfaction by JD power for five years in a
row. Maruti currently tops in four out of the five CSI (Customer Satisfaction Index)
factors of JD Power Survey that determine the service satisfaction of the customers.
It also reveals that 26 per cent of Maruti owners rate the service provided beyond
their level of expectation, as compared to just 18 per cent for the industry. The
company has also topped the Customer Sales Index (CSI) and the Sales Satisfaction
Index (SSI), with the cut-throat competition in automobile sector it was an
achievement to score 124 in CSI against the industry average of 118. The company is
customer driven and customer feedback is valued to a great extent.
The companies Key Marketing Objectives are:
Increase Reach and Penetration
Secure Repeat purchases by Providing “360 Degree Customer Experience”.
Customer Relationship Management:
The focus of Maruti is to achieve customer delight with its Customer Relationship
Management. Maruti Udyog Ltd, the Company has to identify the Target Base to
Add value through CRM. For Maruti the Target Base are the Two-wheeler owners;
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Customers taken away from the competition and Services sector. The next step is to
evaluate the current databases and identify those who are potential customers of the
company and start building a relationship. Maruti also worked Oil companies to
identify the two-wheeler owners who are potential of owning a four-wheeler. The
people is also an important factor in CRM, Maruti has incorporated Customer
Obsession as a part of its Core Values and trains its employees to manifest the same.
The company also has an interactive website www.Marutiudyog.com which helps
Maruti to be in touch with its customers directly.
Positioning and Branding:
Maruti has a different positioning for each of its product. Inspite of Umbrella
Branding very few ad campaigns have been launched in view of image building or
promoting Corporate Brand. The 2599 Campaign, Service Station in Ladakh, and the
Maruti’s Fuel Efficient Car Campaign used a rational appeal. The company also uses
Emotional Appeal to lure its customers. The hottest little car campaign, Esteems “fall
in Love Again” Campaign is examples of use of emotions in the Ads.
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Pricing:
Even after 20 years of being in the Market no competitor has managed to sell a car
cheaper than Maruti 800. Maruti sets its prices on the basis of Competitor Analysis.
Its prices are often lower than what others have to offer. The cost reduction and high
levels of efficiency in Maruti helps it to keep the product cost low thereby giving a
tough competition to its competitors.
Performance Measurement:
The performance of Maruti can be measure through various parameters. Various
external audits and surveys help Maruti evaluate its performance. Other performance
measure can be Market share, growth in the Sales, Response to Sales promotion etc.
The feedback of the customer is the most important tool to measure performance of
an organization. The recommended Customer Perspective for Maruti Udyog ltd will
be as follows:
Customer Perspective
Key Success Factor Performance Measure
Customer Acquisition Customer Feedback
Sales
Customer Development Customer Feedback
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Profits and Returns
Customer Equity Customer Feedback
Repeat Purchases
Customer Retention Database Analysis
Repeat Purchases
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Value Chain Integration
Maruti has been the market leader in the passenger car segment for the past several
years and has been reaping the benefits of being the single player in Indian Passenger
Car Industry. This situation also led to having good margins in the product sale and
full capacity utilization of the plant facilities. The market size also had been
increasing continuously with two digit percentage growths. However, with the
Competition coming in, and with the passenger car market itself not increasing in
size, Maruti’s market share, and margins and hence the profits from manufacturing
activity alone are under severe pressure. This is the typical scenario globally also
wherein mature markets like USA and Japan the manufacturing business, on a stand-
alone business, is undergoing severe pressures on bottom lines. In this kind of a
background, in order to maintain its supremacy in the passenger car market and to
increase its revenues and profits, Maruti decided to venture into new service oriented
businesses, which could be developed as natural spin off from its core business of
manufacturing. It would also strengthen its brand image as a provider of complete
mobility solution for its customers. To develop this idea, Maruti engaged M/s A.T.
Kearney as consultants (Phase I). Preliminary analysis A.T. Kearney, with support
from Maruti, indicated that Maruti captures a limited portion of the vehicle life cycle
spend towards only sale of car, with a potential to capture another almost equivalent
portion. It found that global auto majors successfully tap this potential in different
ways in various markets. A number of business options were generated and
27
examined, leading to selection of four potential businesses for Maruti to venture into
viz.
Auto Finance
Insurance Distribution
Corporate Leasing and Fleet Management
Pre-owned Cars Business
28
NEW INITIATIVES AT MARUTI UDYOG LIMITED
1. Maruti Insurance
In an effort to become a complete car company, Maruti has entered the car insurance
business as well. Maruti Insurance is the brand name under which Maruti has tied up
with Insurance Companies to provide better Insurance Services to its Customers.
Maruti has tied up with 4 Insurance companies i.e. Bajaj Allianz, National Insurance
Company, Royal Sundaram and New India Assurance Co. Ltd. to provide Insurance
Services.
Benefits of Maruti Insurance
Near Cash-Less accident repairs: All Maruti dealers will provide the customer
with near cash-less repairs in their claim settlement. This means that the customer
would not have to pay to the dealer for the repair charges to the extent it is payable
by Insurance Co.
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Seamless services across nation: The customer can get all the services like buying
new policy, effecting renewals, endorsements and claims at any Maruti authorized
dealer outlet across the dealer network spread all over India.
Faster & Fair Claim settlement: With Maruti Insurance there are no hassles like
Insurance Co. is not giving fair claim settlement. Whatever is payable by standards is
admissible by Insurance Co.
Easy settlement of claims with no follow-ups: There would not be any need of the
customer's personal involvement with the surveyor or Insurance Company, nor would
the customer have to worry about salvage disposal in the process of settlement of
claims. All this will be taken care of by the dealer.
Repairs at Authorized Dealer workshops: After an accident, the damaged vehicles
are repaired at the Authorized Dealer workshops that are equipped with the best
facilities and infrastructure. This would lead to quality repairs with Maruti Genuine
spare parts and trained mechanics with Maruti Insurance the customer need not
compromise on the quality of repairs and thus health of the car, by going to smaller
roadside workshops.
Dealer Assisted towing facility: Towing assistance would be provided, for getting
the vehicle to the dealer workshop, in case of accidents where the vehicle has been
rendered immobile.
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Easy transfer of No claim bonus: No matter which Insurance Company the
customers' vehicle was previously insured with, his no claim bonus earned on
previous policy would be easily transferred to Maruti Insurance policy that a
customer is buying at the time of renewal.
Instant Policy issuance: No longer would the customer need to wait for the policy
document, which sometimes takes months to get delivered from the Insurance
company. With MI, the policy is issued through Internet and it is instantaneous.
Faster refunds and cancellations & Policy Verification: Maruti Insurance is
completely driven by IT systems and thus it is possible to have a faster response time
for cancellations and refunds compared to other Insurance companies. At the time of
payment of claims also, the policy and premium credit verification is instant. This
adds to both Dealer and Customer comfort.
2. N2N Fleet Management Solutions
This business provides complete fleet solutions to corporate and institutions.
Maruti’s new N2N Fleet Management Solutions for companies takes care of the A-
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Z of your automobile problems. Our services include end-to-end backups/solutions
across the vehicle’s life: Leasing, Maintenance, Convenience services and
Remarketing. When you lease a fleet from us, you get vehicles in prime running
condition plus an attractive lease EMI. We also take responsibility for the reliability
and performance of your entire fleet throughout the lease period. Our state-of-the art
maintenance services ensure that your vehicles are in excellent shape and give a
great ride each time you are on the go.
Besides Fleet Solutions for company owned cars, Maruti also offers this service for
employee-owned cars.
N2N Benefits
A wide range of cars to choose from. Maruti 800 to Baleno Altura.
Low Investment. Value-based residual EMI
Tax benefits. Lease rentals can be shown as revenue expenditure.
N2N maintenance. Saves time and money
N2N remarketing. Ensures speedy and efficient resale of the old fleet.
3. Maruti Finance
Maruti has partnered with the leading Finance companies in India to provide highly
attractive Finance deals to its customers through its dealers. Maruti Finance is the
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program under which these deals are being offered exclusively to customers of
Maruti vehicles. The service is being extended across the country in a phased
manner. Maruti has tied up with 6 finance companies to form a consortium. This
consortium comprises Citicorp Maruti, Maruti Countrywide, ICICI Bank, HDFC
Bank, Kotak Mahindra and Sundaram Finance.
Best Interest Rates
Maruti Finance offers the best rates of interest. The installment schemes are
designed to suit your convenience and other requirements.
Value Added Services
Extended warranty
Maruti Finance gives you the privilege of extended warranty that goes up to
four years. This means four years of hassle-free maintenance. You can get up
to 30% discount on extended warranty under Maruti Finance.
Loans for Insurance and Accessories
Loans for insurance and accessories are built into the EMI's, keeping the whole
deal simple and hassle free.
Maruti Countrywide
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Maruti Countrywide was set-up when GE Capital, HDFC and Maruti Udyog
Limited formed a captive finance company in 1995. A professionally managed
company we share the ideals and work culture of the parent companies.
Citicorp Maruti Finance
Citicorp Maruti Finance Limited was formed when Maruti joined hands with
Citibank in May 1998 Located in 52 cities we are the first company that
provides services to finance the purchase of secondhand cars nationally.
SBI- Maruti
The country's largest bank and the largest carmaker have joined hands to make
affordable car finance available to more and more people across the country.
4. Maruti True Value
Maruti has taken its first steps in the pre-owned car business under the brand name of
Maruti True Value. Using their technological expertise, network support and the
experience they have gained in the last 18 years, the company ensures the customers
gets great value and completes the transaction zero hassles. While buying, selling or
exchanging a pre-owned car, going to the right place is all-important, customers can
take chances with the local roadside mechanic or depend forever on friends and
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colleagues or gamble with classified advertisements or fix up a deal with the small-
time used car dealer. Or, they could simply choose to enjoy all the advantages of
dealing directly with India's most trusted car company. In our endeavor to provide
customer Quality, Reliability, Transparency and Convenience, Therefore they ensure
that whenever customers come to Maruti True Value to buy, sell or exchange a pre-
owned car, you get nothing but the full value for your dealings, with your eyes
closed
5. Anytime Maruti
Maruti Suzuki has also set up state-of-the-art call centers (operational in Delhi,
Gurgaon, Mumbai, Chennai, Bangalore and Hyderabad) Branded Anytime Maruti,
this 24 hour help-line clarifies all doubts and queries regarding Suzuki any time of
the day or night.
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PEST Analysis
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POLITICAL
Foreign exchange rate Fluctuation
Initiatives of De-regularization
Stringent environmental
regulations.
New and liberal automobile
policies.
Reduction of tariffs on imports.
Banking liberalization that has
fueled financing-driven purchases.
ECONOMIC
8% average GDP.
Shift of manufacturing to low
cost countries.
Decline in interest rates for car
finance.
84% car market of A and B
segment.
Reduction of GOI role in
production.
Increase in disposable incomes
and standards of living of
middle class Indian families.
Poor road infrastructure
SOCIAL TECHNOLOGY
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Living styles are changing
Shift towards Nuclear family.
Income level of Consumer.
Unexploited rural sectors
Pre owned market larger than new
car market.
Latest technology of
Competitors.
Better infrastructure.
Fuel technology (Petrol, Diesel,
CNG, Hybrid Vehicles).
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SWOT Analysis
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STRENGTHS
Extensive product port folio
Quality products
Formidable distribution and after-sales
network.
Integrated manufacturing facility
Strong vendor base and higher rate of
localization
Skilled labor and experienced
management
Capital commitment to vendors
First mover advantage
Largest market share
Economies of Scale achieved due to large
volume.
No product competitors in A segment
yet.
Leading CSI index 5 yrs in a row
WEAKNESSES
Suzuki (SMC) Extensive control on
Maruti Udyog (MUL)
Substantial dependence on Suzuki
No major successful product in
diesel category.
Delays in launch of new models.
Weak R&D (only for vendors).
No strong competition in D
segment category.
Lack of product design capability
No product in D segment.
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OPPORTUNITIES
Market development through exports
Strengthen R&D base.
Promotion of “True value” Schemes
(Increase outlets).
Vertical integration (Going down
streaming).
Restructure capital structure (Long term
loans for R&D).
Diversification down the value chain.
THREATS
Market share declining due to
increase in competition.
Global competition (Highly
competitive environment)
Competitors new technologies
Decrease in market share due to
shift to bigger cars (Lack of model
in C&D segment)
Increase in cost of raw materials.
New and liberal automobile
policies.
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Porter’s 5 Forces Model Analysis of Maruti
Porter's "Five Forces of Competition " model views the profitability of an industry as
determined by the five sources of competitive pressure. These five forces of
competition include three sources of "horizontal" competition - competition from
substitutes, the threat of competition from entrants, and competition from established
producers - and two sources of "vertical" competition - the bargaining power of
suppliers and buyers. The following summary is a view of the Maruti Udyog Ltd.
from these five angles leading to the expected changes in the coming years in the
underlying structure of the Indian passenger car industry.
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Threat from Suppliers:
Suppliers are the business partners that provide you with parts or solution in a car,
which the company makes. Suppliers come in to picture as the company outsources
the part or a problem to the supplier and he is required to provide with equipment,
which will be used in the car. Now it is basically a partnership in which both the
parties benefit from the business fit and competencies of each other. But it can be
sometimes that the part is critical and there are very few suppliers, which provide
that part. So in that case the supplier has more power as compared to the company
43
and can dictate terms in terms of product and price. Thus company has to depend on
that supplier for its critical component. The basic rule to avoid such situation is to
always have more than one supplier for all the critical components The various
important suppliers of Maruti are; Sona Koyo Steering Systems, Denso, Delphi,
Mico-Bosch etc.
Diminishing Supplier Power:
One of the key trends observed in the global auto industry is the significant increase
in outsourcing of car parts. In India, the development of the auto ancillary industry
has also brought in this phenomenon. However, the large number of competitors for
supplying each part implies that in the coming years, supplier power will diminish to
a large extent except for suppliers who have almost monopolistic powers like Mico-
Bosch. The success of lean production at the industry level depends not only on the
efforts of the assemblers, but also on the suppliers and on institutional and cultural
factors. The bargaining power of suppliers of some components is high, because of
capacity constraints. This makes them accept only large orders, and therefore makes
it difficult for assemblers to implement JIT. Also, there is an increasing shift towards
reduction in vendor base for a car company, which means that the chosen suppliers
also have to make substantial financial investments to enhance the quality of their
products. Moreover, the lowering of tariffs will expose the Indian automobile
ancillary industry to fierce competition from better-quality imports. All these factors
44
will lead to a situation where the automobile manufacturer will have substantial
bargaining power with the suppliers in terms of quality and pricing of the product.
Supplier power in the automobile industry will diminish greatly in the coming years
due to the large number of competing suppliers, threat of cheaper and better-quality
imports, and an increasing trend towards reduction of a car company's vendor base.
Also Maruti has been continuously reducing the no of mail suppliers, which shows
that it has strength over majority of its suppliers. Currently the main suppliers of
Maruti are approximately 230, which Maruti further plans to reduce to 180
Threats of New Entrants
The current auto scene of Indian auto is very vibrant and all the major auto
companies are in India and many more are going to enter. So Maruti has a threat of
entry from all the automakers as they launch new models, which will start competing
with the car models of Maruti. GM, which is the biggest automaker in the world, has
plans to bring new 5 models in the Indian car market. Moreover many companies
like Porsche, Volkswagen, BMW are also planning to make intrudes into the Indian
automobile industry so the competition is going to increase as they come with newer
and superior models. New entrants can set themselves apart by offering new safety
and comfort features that are not currently offered in the Indian market. They can
also leverage their low production run (lean) capabilities to stay profitable despite
the low production volumes.
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Capital Requirements:
All the car companies are taking advantage of India’s low cost manufacturing. Many
of the companies have plans to make India as their global hub for manufacturing and
R&D hub. So the capital requirement is not a problem as all the companies see
investment in India as their long-term investment and they are investing in new
plants or modification of old plants to take the production quantity or quality up. The
company has recovered Maruti being an early entrant in to the Indian car market has
a lot to gain from it as the cost of manufacturing is the lowest because of all the
initial investment. The company enjoys high margin as compared to the automakers,
which have just now entered the Indian market.
Economies of Scale:
The more you produce, the more cheaper it gets because the fixed cost element gets
divided into more no. of units. Thus more you produce, the cheaper it will get to
produce the next unit. MUL's relatively large production volumes offer scale
economies in production and distribution, which pose formidable barriers to entry.
Maruti with its production volumes of over 250,000 enjoys scale economies in
production, distribution, and service that are hard to challenge. It has also
established a solid supplier-base. All the new carmakers will basically start form low
46
production capacity and will increase with time so it will take time for them to reach
the scale at which they can enjoy the economies of scale.
Absolute Cost Advantages:
Apart from economies of scale, Maruti has a cost advantage over entrants simply
because they entered earlier. Absolute cost advantages often result from the
acquisition of low-cost sources of raw materials and resources. It will also result
from the learning curve of the company as it has been there in the market for long
and has upper management which has scene the market evolve and know the inns
and outs of car market. Maruti's presence in the car industry since 1984 gives it
considerable cost advantages over the new entrants. Not only are its plants highly
depreciated and its cars highly indigenous as compared to its competitors, it has a
wide distribution and services network, which will require mammoth resources to
replicate. The Indian assemblers, typified by Maruti, have built a formidable
distribution and after-sales network. They also have an established supplier base,
which gives them cost and delivery time advantages, especially in light of import
tariffs and currency exchange rate fluctuations/ devaluations. Although liberalization
of the Indian economy has reduced the impact of government policy as an entry
barrier, the car industry still enjoys high entry barriers due to huge capital costs
involved in setting up efficient plants and numerous cost advantages enjoyed by
Maruti
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Product Differentiation:
The product offerings of Maruti are well tested and tried by the people, and they
have differentiated them selves as durable low repair cars, giving value for money.
The Maruti has a wide distribution and repair network which acts as a differentiated
offering to the customer. Maruti 800, which has no competition right now. So if GM
comes up with a entry, segment car which it plans to do soon, will put Maruti in state
of stiff competition as sales will decline because of customers will have 2 options of
buying an entry level car.
Threats of Substitute
The lack of adequate public transportation system coupled with the fact that the
electric or hybrid cars are still in the developmental stage means that the Indian car
industry faces minimal competition from substitutes. For Maruti, public transport is a
major substitute. For E.g. Delhi metro is a threat to sale of cars, but it has been
observed in mature markets like US and UK, if the public transport is good then
people instead of buying entry level cars shift to the next segment, as it is perceived
to be superior than entry level cars. The rational behind this buying behavior is, since
the car is not going to be extensively used why buy a basic functional car, why not
buy a good car.
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Developmental Stage of Electric Cars:
All the major car manufacturers in the world are currently developing electric cars or
hybrid cars to reduce pollution in the coming years. However, these technologies
will require considerable length of time to become commercially feasible in
developing nations. For eg: Toyota Prius is the one of the best selling model of
Hybrid cars currently in market.
Rivalry between Established Competitors
Highly Concentrated Industry:
The Indian car industry is highly concentrated with Maruti itself accounting for
about 60% of all sales. The lack of competition in the economy segment to Maruti
800 has given the company considerable power. Its dominance in this segment gives
it the power to cross-subsidize its models in the other segments. However, this
scenario is changing over the last few years, Since none of the foreign companies can
match the price of Maruti 800 for a similar car, they are preferring to operate in a
segment which values attributes other than just price. With the higher end of the
market likely to generate high margins, these companies plan to slowly move down
the scale to a smaller car in course of time to take MUL head-on on price. This
explains to some extent the fact that all new entrants are avoiding the sub-compact
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car segment. Secondly, the used or second-hand car market in India is likely to
become more organized in future. The car dealers will themselves deal with used
cars. This could put a question mark on the prevalent assumption that a large number
of current two-wheeler users in India will graduate to a Maruti 800 in future with
higher incomes. The scenario in the economy segment could be similar to that in the
premium segment currently with intense price competition. The competition
between firms in the car industry is expected to intensify considerably as newer
companies will start reducing Maruti's dominance of the market. The expected
significant over-capacity in the industry, increasing working capital needs, and high
exit barriers coupled with low differentiation between models especially in the
economy segment will put downward pressure on prices and profitability of
companies. Many of these new firms will not enjoy the scale economies and
relationships with suppliers that Maruti does, so they have decided not to challenge
Maruti at its price of under Rs.2,00,000 in the smaller car segment. Most are
planning to produce between 20,000 and 50,000 higher-end vehicles. The stiffest
competition is building up in the mid-sized car range (1,300 cc and above), where
several of these multi national and Indian companies are planning to go head-to-
head. Some of the entry barriers faced by automobile companies in India are
relatively high levels of import duties, a nascent ancillary industry, and product
modifications required for relatively poor road conditions and high levels of heat and
dust. Companies with a developed vendor base might try to create entry barriers by
putting pressure on their suppliers not to work with new entrants. New entrants will
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have to deal with uncertainty of demand, different and evolving customer needs, a
relatively poor supplier base, a market crowded with competition and industry wide
capacity shortages.
Higher Switching Costs
Since car prices are high compared to incomes, the life of automobiles tends to be
longer than in developed countries. This means a high cost of switching for the
consumer, and this represents a significant entry barrier. However as the used car
market develops, this factor might not be so significant.
Bargaining Power of Buyers
In the mass consumer markets prices are not negotiable and are market sensitive.
Similarly in the case of Maruti the prices are not negotiable from consumer point of
view but from the pressure from the competitors. So for Maruti, the consumer has a
power of choice and can choose from the products of Maruti and its competitors, any
one which is giving the customer better value for money. So to have loyal buyers
Maruti will have to provide a value proposition for its products which has to be
superior
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Buyer’s Price Sensitivity
Car buyers in India are extremely price-sensitive especially in the economy
segment. Although it is too early to judge the three new small cars and Maruti's
response to it, we can expect the price competition to intensify since buyers would
be more willing to switch while intense competition among the companies would
require them to generate volumes. The power relationship between automobile
companies, dealers and customers is going to change substantially as the industry
moves from supply constrained sellers' market to a demand driven buyers' market.
Thus dealers and customers are going to acquire greater power.
Relative Bargaining Power
Gone are the days when the Indian car buyer had to buy one of the 30,000
Ambassadors or Fiats, which were produced. The penetration of satellite television
has globalized the Indian customer. The Indian consumer is no longer satisfied with
outdated Models but expects the latest global launches. For Eg the global launce of
Hyundai Tucson (SUV) and a new offering from Maruti Swift.
From a small shed for a dealership, the shift is towards huge dealerships that not only
offer complete range of services for the car but also make sure that the customer has
a replacement vehicle so that they may not become immobile. Many companies have
mobile squads to take care of the car if it breaks down on the road. The entry of
global players has re-defined the dealer-customer relationship in India. Maruti has
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been in the forefront of this revolution and has been ranked as no one company in
customer satisfaction for the last 5 years by JD Power.
Availability of Easy Financing
The entry of numerous car companies has brought along with it a massive increase in
the availability of cheap finance for the Indian consumer. This has led to fierce
competition among the car companies and has even led to free gifts being doled out
to buyers to lure them to purchase a particular car. Maruti finance and insurance are
an endeavor to provide to customer a one-stop shop in which the company provides
not only a car but a solution.
Used Car Market
The used car market is still in the nascent stage in India as compared to the
developed nations like United States, which has a thriving, used car market.
Secondly, the used or second-hand car market in India is likely to become more
organized in future. The car dealers will themselves deal with used cars. It is
expected that a used Accent or Astra will be priced close to a new Maruti 800. This
could put a question mark on the prevalent assumption that a large number of current
two-wheeler users in India will graduate to a Maruti 800 in future with higher
incomes. The scenario in the economy segment could be similar to that in the
premium segment currently with intense price competition. A thriving used car
market reduces the ownership period of cars and helps in increasing demand for new
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cars. Recently, Mercedes Benz in India was offering discounts of 30-35% for
sparingly used E220s as it had decided to phase out this model. Maruti true value
show rooms are an endeavor in this side by Maruti and are only one of its kind
giving it a first movers advantage. Since Maruti has a big customer base Maruti will
be able to make this business model a success, as it is not a money making model it
is a service to its customers but still money has to be made so as to sustain the
business model which Maruti does.
The entry of the global car manufacturers has transferred the balance of power into
the hands of the buyer. The Indian car buyer is not only extremely price conscious,
but also wants the highest value and service. Huge dealerships, member clubs,
mobile squads, and replacement vehicles are just some of the sops being offered to
the customer. The availability of cheap financing and maturing of the used car
market will also increase the choices for the consumers. With many new models
waiting to be launched, the Indian car buyer will only have more power to choose
and dictate terms to the dealer. The new multinational companies are trying to
revolutionize the concepts of car delivery and after-sales service in India, and are
coming out with several innovative retailing ideas to win customers. Customers are
demanding more voice in the options they want and the cars they buy. This in turn
will force dealers to be more customer-oriented. The emerging system of `customer
pull’ translates to empowering the customer and creating a genuine symbiosis
between the customer, the dealer, and the automaker.
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Conclusion
Although it is possible to predict with some confidence the qualitative impact of
individual structural changes, there are difficulties, first, in predicting the
quantitative impact of structural changes, and second, in predicting the aggregate
effect of simultaneous structural changes that have conflicting effects on
profitability. The Indian car industry is still in a nascent stage. The economy car
segment accounts for the majority of the cars sold. The market is growing at about
25% for the last three years. In the highly price sensitive market, reduction of prices
because of lower duties and taxes and progressive indigenization, and rising middle
class incomes are likely to further increase industry growth rate. Penetration in rural
and semi urban areas is extremely low and could provide fresh markets. Its products
enjoy good reputation – in fact, Indian automotive industry observers credit Maruti
for the rapid improvement in quality and supplier capability in this industry. Maruti
being the largest carmaker of India is all set to enjoy this advantage, which makes
the profit margins higher.
However, as the economy picks up steam again and the Indian market matures, the
car industry will also climb up the learning curve. The industry has virtually no
competition from substitutes at least for the next decade. High entry barriers due to
high capital costs are also a positive indicator for the existing car manufacturers.
However, the intense competition between firms and increasing bargaining power of
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the buyers indicate towards intensifying competition and depressing profitability. It
will also lead to an increasing need of working capital for these companies who will
be faced with longer credit periods and higher inventory holdings. The diminishing
power of the supplier industry will help the industry in improving the quality of car
components and getting longer payment periods. The key to success in the Indian car
market will be offering good-quality cars that offer value for money, run innovative
marketing campaigns to attract potential buyers, and offer excellent after-sales
service.
The number of persons per car is 200, which is very large compared to other
emerging markets like Korea and Brazil, which have about 12 persons per car. There
is therefore a very huge untapped market. Some of the strengths of the industry are
low labor costs, supportive government policies and trained manpower. Major
weaknesses are a small and fragmented ancillary industry, poor infrastructure, low
level of diffusion of lean manufacturing, improvements needed in quality and
productivity, and lack of product development capabilities. The opportunities that the
industry offers are a large untapped market, and a possible production base for
exports. Companies, which have a range of vehicles in all the segments of the market
like Maruti, will be at a significant advantage due to their ability to cross-subsidize
models. But, one thing is clear - The great Indian car wars have just started and
whichever company wins, the final winner will be THE INDIAN CUSTOMER
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COMPARATIVE STUDY OFCOMPARATIVE STUDY OF
CUSTOMER CARE PROGRAMSCUSTOMER CARE PROGRAMS
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INTRODUCTION
Historically customer service has been seen from a narrow perspective where the
primary role of the customer service is concerned with providing quality products
and services. The challenge now is to keep pace with the ever-changing
expectations of individual customers amid new channels and new technologies.
Since customers are more aware and have more options, their expectations are
different. Now they go to producers, who don't just deliver what they promise but
also make them feel special. So your job doesn’t end with just selling the product.
In fact, now, more than ever, it has become imperative that organizations
understand their customers better, and use this understanding to build superior
products and provide prompt services around changing customer needs. And to
build abiding relationships, that extend beyond the product to the organization as
well.
Today, ongoing change rules the market place. Terms like market
segmentation, consumer expectations and behavior, distribution channels and
service are being redefined, all the time. The only permanent factor is the customer,
and abiding relationships with the customers alone can buffer the shock of change.
So only the organizations that nurture customer relationships can survive product
obsolescence, overcome the onslaught of superior competitors and still manage to
maintain bottom-lines.
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After sale service is the clichéd description of the function. The customer
today is looking beyond just fixing the problems. The service experience, ambience
and the expertise are sought after. 24-hour breakdown service is not uncommon. The
potential entrant needs to look at this function in larger perspective. It should be
“customer care” rather than mere After Sale Service. Raison de entrée of this
function should be customer delight. Fixing the automobile should merely be the
way to achieve it. This approach would mean higher investments in workshops.
More importantly a fresh approach to the intangible softer issues of the customer
relationship is recommended It is concerned with building of financial bonds, social
bonds (which offer personalized service delivery) and structural bonds (which
emphasize provision of quality services that are valuable the clients and not readily
available with competitors which helps the customers to resist the temptation from
the competitors) with customers and the other markets or groups to ensure long term
relationships of mutual advantage.
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RESEARCH METHODOLOGY
Objective of the Study
Maruti Udyog Limited is the leading player in the small car segment in the country.
Of the late with the entry of many multinational players it has been facing intense
competition and shrinking margins. Historically customer service has been seen
from a narrow perspective where the primary role of the customer service is
concerned with getting the right products at the right place at right time and the
focus is much on distributors and logistics view points.
The new vision of customer service places it in a much broader context as a multi –
dimensional issue with an impact on relationships with specific target groups across
a broad range of company activities. After all, after sales service is as important as
selling a car. It helps establish a longer relationship with the customer. Hence this
project was undertaken with a view
To study the Customer Care Programs of Maruti and its competitors at
its various dealers in NCR region.
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Research Design
Nature of the study
The aim of my project is to have a comparative study of Customer Care Programs of
Maruti and its competitors at the various dealers across NCR region. This would help
us in knowing the customer care practices across the competitors, and thus we would
be able to analyze that where does Maruti stands amidst it competitors in terms of
customer care practices, and how can we create a competitive edge over its
competitors, ultimately providing better services to its customers. In order to
accomplish this purpose we will use Descriptive study, which comes under
Conclusive research, based on the details provided by the various dealers across the
city.
Data Collection
Primary Sources: Data was collected through in depth interviews carried on with
Sales Executives and Relationship Managers at different dealers and Regional
offices of Maruti and its competitors comprising of Tata, Hyundai, and Ford, across
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the NCR region. No structured questionnaire was used for collecting information on
Customer Care Programs, as data to be collected was not standardized.
Data was collected through secondary sources like:
- Study of competitor’s processes.
- Various Websites and Auto Magazines.
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HYPOTHESIS
The major competitors of MARUTI are HYUNDAI, TATA, and FORD, thus only
these three companies were taken for conducting a comparative study of Customer
Care Programs at their respective dealers and Regional/ Head Offices across the
NCR region.
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Customer Programs at TATA
Membership clubs – INDICA CLUB & INDIGO CLUB.
To add a whole lot of fun and excitement to customer’s life, TATA has
launched the exclusive Indica and Indigo Clubs. They believe that our
relationship with customers has just begun. And one forum to keep our
relationship going from strength to strength is the Indica Club. To become an
Indica club member all customers have to do is fill in the membership form and
submit it to TATA. What’s more, membership to this club is ABSOLUTELY
FREE! Which means customers doesn’t have to spend any money or time.
What customer’s get in return is a whole load of exciting offers and discounts-
all for free! And right at their home. All they need to do is, sit back and enjoy
all the amazing offers they will be sending to customers regularly.
Here how the excitement starts – Customers will receive an Indica Club card
with their name endorsed on it – plus, a surprise welcome gift to the club. And
after that, exciting offers, invitations to mega events and film festivals etc.
etc… all through the year – all for free.
The Indica Club flagged off its first round of activities in May 2000 with some
amazing offers from Braun, Mahindra Holidays, Westside, The Economist, The
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Planet Kids, Reader’s Digest, exclusively for Indica Club members and their
families! Followed by Tanishq, Zodiac, Kenwood Music System, and the list
continue. And the response was overwhelming. They have even launched an
exciting Movie Fest with AXN, where Indica Club members can attend the
screening of 28 action packed films absolutely free! More and more Indica
owners are enrolling for membership to the club everyday.
After the sale, THANK YOU cards to its customers for patronizing their
products.
At the time of sale, photograph of the customer with their car, this is mailed
later to the customer.
Customer Feedback Forms – which are mailed by the customers directly to
TATA Motors for reviewing sales and service performance and satisfaction of
the customers.
Anniversary and Birthday Cards to its customers.
After the service, the dealer personally enquires you through tele calling about
the satisfaction level.
CRM was one of the major initiatives embarked on five years back but only
began putting in an IT system in 2003. In an effort to ensure a consistent and
high level of service to end-customers, Tata Motors decided to put in
standardized practices across its entire distribution channel of some 500
dealers in 1,500 locations in India. The Siebel system that Tata Motors
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implemented encompasses all dealer transactions. Invoice creation, job card
opening, campaign and order management are all done with Siebel .If a white
car is sold from a dealer in any of those 1,500 locations, the product line head
would know, so they have visibility of pipeline and retail sales, even down to
the sales executive. The company finds this useful, for example, in a
marketing campaign with a target of 10,000 vehicles, and where these
numbers cascade down to the dealers and subsequently to the sales executives.
Into a very nascent stage regarding the development of CRM related activities.
More into satisfying customers through quality products and services rather
than building onto relationships.
No loyalty program at the moment, but expected to launch within next 3-4
months.
Largely focusing onto Customer Care activities than CRM.
All customer support activities are handled by Customer Care Department
only.
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Customer Programs at HYUNDAI
Thank You! Cards to its customers for patronizing their products.
Free Service Camps
Free On Road Service – During Warranty for 2 yrs.
Anniversary and Birthday Cards to its customers
Buy back of used cars through associates.
Extended Warranty Programs.
Privileged Members – more than one Hyundai Car owners offered,
- Special Discounts.
- Loyalty Benefits.
More stress on relationship building through financial bonds, special discounts,
etc.
Different clubs according to product category offering varied special promotional
and entertainment schemes (soon to be introduced across the country).
- Terracan.
- Sonata & Elantra
- Accent, Getz & Santro
Constant interaction with its new customers, enquiring and ensuring, product and
service satisfaction. After the sale of car, customer is contacted within 72 hrs to
enquire about sales satisfaction and performance of the product.
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After 1 month, Customer Feedback form is sent to the customer, which is mailed
directly to the company informing his satisfaction levels with the product and
services offered to him right from the time of enquiry till the time of delivery of
his car.
Service Reminder System
30 days – Mails.
15 days – Telephone calls.
Transparency in Labour service charges across various cities, which are
distinguished as Group-1 (Mumbai), Group-2 (Ahmedabad, Delhi, Gurgaon,
Bangalore, Pune etc.) and Group –3 (Agra, Kanpur, Jammu etc.). According to
officials at Hyundai, having such a transparent service charge system across the
nation ensures satisfaction in the minds of the customer. He is more confident of
getting his car serviced at authorized dealers, since he is well aware of the service
charges for various activities which are directly enforced by the company, thus
the fear of being overcharged by a particular dealer is not there, as the charges
prevalent are same across a particular city. Thus all this leads to more and better
customer interaction, paving a way for good customer relationships.
Also have a dedicated CRM department, largely focusing onto Customer care
activities.
For Test Drive the vehicle is sent to the customer’s premises according to his
convenience, freeing him from the hassles of coming to the dealership.
No Loyalty Program yet, but expected to launch in next quarter.
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The present focus is on capturing market share through establishing financial
bonds with its customers rather than putting more insight into value added
services.
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Customer Programs at FORD
DCRC – Dealership Customer Relationship Center.
Customer’s meet every quarter
o New customers are invited.
o Tips on car driving, maintenance, etc.
Proactive approach towards customer’s needs.
Customer Relationship Executives meeting customers at their premises,
according to their convenience,
o To obtain feedback.
o To fix problem if any.
o To ensure more satisfaction.
First company to start the activity of visiting customer’s premises, till date
covered 124 corporate houses like Dabur, Glaxo, HCL etc.
Effective interaction with customers through mailers and SMS.
Every month some event is organized.
o Summer camp, Free A/C check up.
o Monsoon camp, check up of cars wipers, other parts etc. seasonal
problems.
24 hrs. Help line for customer’s queries.
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Ford assured – Buy/Selling of used cars.
Separate Customer Care Department for Grievances handling.
After delivery of car, customer is called after 3 days to enquire about the
satisfaction of the product and the services.
Pick up and Drop facility for car servicing from customer’s premises.
Anniversary & Birthday cards to the customers.
Acknowledgement of customer queries, complaints etc. within 24 hrs.
Service reminder system.
15 days – Mail
7 days – telephone.
CVP- Customer View Point, feedback from customers about products and
services, suggestions for improvement etc.
CVP Audit – Awards to customers for their valuable suggestions.
Exchange loyalty bonus on purchase of new cars ranging from Rs.10,000-15,000.
Extended Warranty Programs.
For Test Drive the vehicle is sent to the customer’s premises according to his
convenience, freeing him from the hassles of coming to the dealership.
Ford India Limited has launched a unique web-based customer relationship
initiative offering its customers direct connectivity to the company. Aptly named
'My Ford', the initiative offers Ford India customers a personalized and secure
web page through www.myford.india.ford.com that will manage all aspects of
their vehicle ownership experience.
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A very high level of hospitality in attending its customers. Customers served with
tea or coffee during their interaction with the Executive irrespective of the deal
being finalized or not.
Blue Oval Club Membership Program
Also known as FORD CarGainz Program – Privilege Points program, every
customer who opts for an extended warranty scheme for Ford vehicle is liable to
become the member of this club and can avail the benefits. This program ensures
that you get rewarded for maintaining your car well. Every time you get your car
serviced or purchase Ford Gear (accessories) at authorized Ford Dealerships, you
earn points that can be redeemed for a range of premium Ford services, Ford
Gear and Ford spares.
These are the points you can earn:
Bonus Points: Every time you avail of the prescribed Periodic Maintenance
Service, you earn Bonus Points.
Service Points: When you service your Ford vehicle at an authorized Ford
Dealership, you earn 1 service point for every Rs.100 you spend on Spares /
Labour / Ford Gear.
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Loyalty Points: You can earn these points for continued ownership and availing
of the prescribed Periodic Maintenance Services at authorized Ford Dealerships.
These points can be redeemed only on trade in for a new Ford vehicle.
Car Ownership Loyalty Points Earned Cumulative Points
End of Year 1 2000 2000
End of Year 2 2000 4000
End of Year 3 2000 6000
End of Year 4 2000 8000
One can redeem these points once you complete 6 months of membership and
accrue a minimum of 500 points. The validity of the program is 5 years from
the date of first sale of the Ford Vehicle, points accrued will be valid for one year
beyond this period.
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Customer Programs at MARUTI
More focus on regular customer interaction through various events organized
over a regular period of time like Road Shows, Summer Camps, and Free Check
up camps, Maruti Suzuki Auto Cross etc.
Birthday and Anniversary cards to its customers.
At the time delivery of vehicle, customer is presented with a Bouquet of flowers,
a coconut and a box of sweets.
Dealers offering Free Replacement A/c car at no extra cost, whenever they repair
your accidental car.
Regular customer interaction after the sale of product till 1 month ensuring and
enquiring about the satisfaction levels of product and services.
A very high level of hospitality in attending its customers. Customers served with
tea or coffee during their interaction with the Executive irrespective of the deal
being finalized or not.
MARUTI released ‘THANK YOU’ ads in the print and electronic media for
patronizing their products. It goes to show that unless you show your customer
that you care for them, they are not going to care for you.
Anybody who owns MARUTI can register as part of an extended family of
Maruti owners and know the names of other owners living nearby.
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Loyalty Bonus of ranging from Rs.5000- Rs.10,000, during exchange of an old
car.
Extended Warranty Schemes.
Maruti also has a Maruti On Road Service, round the clock for its customers
during the warranty period.
Confidential customer feedback forms which are mailed to Maruti stating about
the satisfaction level of services and the product.
Maruti partnered with Wipro for "Real Time" Dealer Management System, first
of its-kind Information Network System implementation in India in 2003. This
system provided benefits to their dealerships and to customers. Dealerships have
access to updated information from Maruti and a real time view of their
operational processes that helps them manage their businesses better. The DMS
issues alerts to dealerships whenever they are falling short of performance norms
in various areas such as level of customer complaints handling and sales. More
importantly, it enables the Dealer CEOs to proactively monitor their various Key
Performance Indicators to effectively manage their businesses. This would
include inventory, sales, inquiries and debts. The system assists dealerships in
customer retention and help build lasting relationships. As far as customers are
concerned, they are benefited from the 'single face of Maruti' irrespective of the
dealership. This should help raise customer service levels and enhance the
quality of management at dealerships. The DMS is a centralized solution with all
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Dealerships logging onto a Central Data Center where the Application is hosted.
The system, apart from dealer integration with a central database, also serve as a
knowledge repository from where dealerships can access information on
customer schemes, product features and price lists.
A toll free number providing 24 hr. customers care facilities, with call centers
located in Gurgaon and Chennai. Highly customer responsive, getting back to
customers within 24 hrs of reporting a complaint.
360-degree view of their customer because they have centralized database. Sales
divisions and customer service centers all have their own databases, with
effective means for creating a complete customer-information composite. Data
from all customer touch-points is combined into a centralized customer database.
Increased Customer interaction through True Value Car Mela at every weekend
at most of the dealers.
Service Reminder system through mailers and tele calling.
Insurance renewal reminder system.
MUL sent out invitation to celebrities inviting them to test drive ‘BALENO’ at
their convenience and at a place of their choice. They identified their audience,
interacted by sending out mailers and then customized the experience of test-
driving.
MARUTI Udyog has made a renewed foray into company-owned service stations
and has drawn up plans for enhancing its reach in this segment nationwide. A
network of service stations, under the brand name Maruti Service Masters
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(MSM), is set to come up across the country in the next few months. These
service stations are one-stop shops to meet all vehicle needs of Maruti car owners.
An important reason why MUL is looking at an additional service channel is
because of the enormous potential that still exists in spite of the company's
existing network. Maruti dealers were constantly upgrading their workshop
facilities and were adding more workshops as they had realized the importance of
service in retaining customer loyalty. After all, after sales service is as important
as selling a car. It helps establish a longer relationship with the customer. Of the
total 3.2 million Maruti vehicles on the country's roads, only about 54 per cent is
currently serviced by MUL dealer workshops and Maruti authorized service
stations. The move has been undertaken by MUL, through its joint venture
company, J J Impex, which controls the first MSM outlet in Okhla. J J Impex, is a
joint venture of MUL and Sumitomo Corporation of Japan, with Maruti
Countrywide Finance holding a minority share.
Recently Maruti has launched its Mobile Service Shops, which is a vehicle fitted
with tools and equipment to wash and vacuum-clean vehicles, service them and
also conduct minor repairs. It will make it more convenient for Maruti customers
to get their cars serviced at their own convenience.
Maruti Driving School (MDS) has been established with the goal to provide the
best motor driving training in the country. The purpose is to impart not just better
driving skills but also better awareness towards overall road safety. Backed by
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India’s no. 1 car manufacturer – Maruti Suzuki – MDS is dedicated to making
Indian roads safer by helping learners become smart and responsible motorists.
Maruti Udyog ranks highest in automotive sales satisfaction, according to the J.D.
Power Asia Pacific 2004 India sales Satisfaction Index (SSI) study. The study,
now in its fifth year, examines satisfaction of new-vehicle buyers with the sales
and delivery experience at two to six months of ownership. Maruti is the only
brand in the Indian automotive industry to have consistently improved its ranking
in the SSI over the past five years, Maruti dealers are the most consistent in
meeting customer expectations, even with Maruti's challenge of being one of the
highest-volume sellers in the industry. As a result, nearly one-third of all Maruti
customers are highly satisfied with their sales experience (JD Power Asia Pacific
Study 2004).
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Analysis of the Comparative Study
Maruti provides a 360-degree experience to its customers, with its foray into
the Value Chain Integration. The customers who are associated with Maruti or
would be associating with Maruti are far off from the hassles that they
generally would have to face like Selling/Buying of Used Cars, Insurance,
Finance, etc.
Although dealers of other competitors also provide customers with Selling of
their used cars, Finance options, Insurance, but none of the offer is
authenticated from the company rather all these are dealers offerings, thus the
satisfaction level of customers is comparatively high when an offering is
directly from the company. This provides Maruti a competitive edge over its
competitors.
All these new initiatives at Maruti provide enhanced customer touch points,
which would help us in building the customer repository thus, helping us in
back-end CRM operations.
Most firms lack a 360-degree view of their customer because they have no
centralized database. Billing departments, sales divisions and customer service
centers might all have their own databases, with no effective means for
creating a complete customer-information composite. To effectively
implement a sound customer loyalty strategy, data from all customer touch-
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points must be combined into a centralized customer database, whereas
Maruti follows this practice of having centralized database from the entire
customer touch points.
Anybody who owns MARUTI can register as part of an extended family of
Maruti owners and know the names of other owners living nearby. This is a
unique program, which is not offered by any of its competitors.
Maruti has lost the opportunity of being a pioneer to launch a loyalty program
in the Indian automobile industry, as a part of its customer retention strategy.
Ford has already capitalized on this opportunity and has become the first
company in the Indian car industry to launch a Loyalty program by the name
of Car Gainz
Maruti also has a very transparent Labour and Service charge schemes across
the country, but it is not disclosed to the customers through the Internet or
other channels.
Most of the customer care activities that are being performed by the
competitors (Hyundai, Tata, and Ford) are a part of regular practice at all of
the Maruti Dealerships.
Maruti is also the first company to start Mobile Service Vans, which could
provide its customer’s entire servicing experience that too according to their
convenience.
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CUSTOMER’S EXPECTATIONCUSTOMER’S EXPECTATION
FROM A LOYALTY PROGRAMFROM A LOYALTY PROGRAM
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INTRODUCTION TO LOYALTY INDUSTRY
Who said, “Money Can’t Buy You Love”? A useful metaphor, though, to help
understand the true concept behind customer loyalty. Loyalty programs are about
developing sustainable, mutually beneficial relationships. Price incentives can
generate a short-term sales uplift but will not engender long-term loyalty. Customer
loyalty has long been recognized as essential, whereas (electronic) customer loyalty
systems are still relatively young.
Businesses in the new millennium are more competitive than it’s ever been. There
will be even more channels to market, even more opportunities for customers to
purchase, even more offers and inducements, and even more opportunities for
customers to switch. As customer’s expectations continue to rise, and businesses
repeatedly fail to meet them, the focus has moved away from acquisition to retention.
Some customers are inherently loyal and predictable and some are more profitable
than others – the ‘best’ need to be identified and kept, and the ‘worst’ left to bounce
from one new competitor offer to the next. In this new age of customer flexibility a
pure incentive scheme will not substitute a valued product. The customer will
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demand the best. Building and maintaining loyalty in this on-line/ off-line world will
be even harder because the competition is just one click away.
The cost of making a new customer is nearly 5 times that of retaining an existing
one. No wonder then, that in today’s world of decreasing margins, increasing
competition and ever changing business environment, corporate success depends on
an organization’s ability to build and maintain loyal and valued customer
relationships.
The four main business drivers for Loyalty programs are:
· Gaining customers
· Increasing customer loyalty
· Changing customer behavior
· Getting information about customers
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RESEARCH METHODOLOGY
Objective of study
The ever-increasing expectations from products and services are a major challenge
for all the players in the market. The softer issues have gained as much importance
as product features in his brand decisions. In the present market scenario, the
transition from “products” to “brands” is complete. The intangible offerings have
gained as much importance as the tangible product features. Monitoring customer
satisfaction periodically is also very critical Resources and efforts put behind these
activities should be considered as investment on the brand for ultimate success.
Customer Loyalty Program is a visible declaration that you are dedicated to keeping
your customers, and physically demonstrates that you value their business, but what
is more important is to know that what does your customer values the most in your
offerings and apart from this what more he expects out of the company’s programs.
Hence this project was taken with a view
To find out the Customer’s Expectation from a Loyalty Program.
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Research Design
Nature of Study
The aim of my project is to have knowledge about the customer’s behaviour towards
the company’s customer care program and find out what a customer actually expects
out of a loyalty program. This would help us in knowing the consumer’s attitude
towards our offerings and accordingly we can bridge gap between the company’s
offerings and what customer actually expects out of the company.
The project undertaken was primarily explorative in nature, thus Explorative
research was used to isolate key variables and relationship for further analysis, which
helped in developing alternative course of action. Based on the collected data, an
analytical study was carried out to find and understand the customer’s attitude
towards our offerings and find a solution to accommodate customer’s expectation.
Surveys were conducted with the help of questionnaires, as it will provide an in-
depth knowledge about customer’s behaviour. While investigating the behaviors and
preference of people, many other related issues, though not obvious would also get
answered.
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DATA COLLECTION METHOD
There are different sources through which we can collect our necessary data. The
various sources through which we have collected the data can be divided into two
parts:
Primary method
The data, which is collected at first hand either by the researcher or by the person so
authorized for the purpose of this study is known as primary data. Their exist
various sources, through which primary data can be collected. Some of them, which
we have used for this study, are:
Questionnaires
The type of questionnaire is of - Structured and non-disguised in nature. This
is because no special skill is required on the part of researcher to work on such a
questionnaire. Thereby leading to less of mistakes by the researcher
himself/herself.
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Secondary method
It is that data which is already available as a starting point. This data can be
obtained both internally as well as externally.
INTERNAL SOURCES
The internal source had been ours institute i.e Greater Noida Institute of
Technology.,Greater Noida, library were we referred various books.
EXTERNAL SOURCE
Websites
Magazines
Newspapers
Sample Size - 100 people ( comprising of existing customers of Maruti and
New Prospects.)
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QUESTIONNAIRE
EXPECTATIONS FROM A LOYALTY PROGRAM
Dear Respondent, I am a Management Trainee undertaking this survey and would be greatly
thankful to you for your kind co-operation in helping me in filling this questionnaire.
Information provided by you would be kept confidential and would be used for research
purpose only.
1. How many cars do you have?
a) 1-2 b) 3 and more c) none
2. How many cars do you have from “Maruti”?
a) One of them b) Two of them
c) All of them d) None of them.
3. Since how long you have been associated with Maruti?
a) 0-1 yrs b) 1-3 yrs c) 3-5 yrs d) More than 5 yrs.
4. How do you consider Maruti in terms of post-sales services and interaction
with its customers?
a) Very Good b) Good c) Average d) Poor
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5. Are you a part of any loyalty program for any company?
a) Yes b) No
6. How do you get aware about the loyalty program for any company whose
products you purchase?
a) Friends b) Advertisements
c) Promotional activities by the company d) After purchase
7. Do you engage in more number of purchases for being a part of the loyalty
program?
a). Yes b) No c) Can’t say
8. How important is it for you to be a part of any loyalty program of a
company?
a) Very Much b) Somewhat c) Depending upon the benefits
d) Not so important e) Not at all
9. Do you expect your loyalty program to be more advantageous in terms of
monetary benefits?
a) Yes b) No
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10. Do you consider yourself related to the company when you are a part of its
loyalty program?
a) Yes b) No
11. Do you want to be a part of a loyalty program if it charges you an application
fee?
a) Yes b) No
12. If Yes, How much amount you would like to pay in order to become a
member of a Loyalty Program?
a) Rs.0-50 b) Rs.50-100 c) Rs.100-200 d) More than Rs.200
13. How much according to you should be the durability/existence of a loyalty
program?
a) 0-3 months b) 3-9 months
c) 9-18 months d) more than 18 months.
14. In your loyalty program how would you rate the importance of various
parameters of the program in driving you to be a part of it? (6 being the
highest in rating)
a) Redeemable points
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b) Ease of redemption
c) Durability of program
d) Application fee
e) Transferability
f) Points exchange with other companies
2. Rate the importance of parameters in earning you good benefits from the
loyalty program? (6 being the highest in rating)
a) Redeemable points
b) Ease of redemption
c) Durability of program
d) Application fee
e) Transferability
f) Points exchange with other companies
3. Do you keep track of the credit points/redeemable points of the loyalty
program?
a) Yes b) No
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4. Rate the importance of following benefits according to you from a Loyalty
program (7 being the highest)
a) Cash discounts/Monetary benefits
b) Value added services
c) Frequent customer interaction
d) Special privileges in terms of services.
e) Loyalty benefits in future transactions.
f) Entertainment activities.
g) Customized products and services
5. Apart from the parameters mentioned, what more according to you is
important in driving customers to become a member of a loyalty program?
____________________________________________________________
6. According to you what more is expected out of a loyalty program?
_____________________________________________________________
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7. If you are a member of any loyalty program, are you completely satisfied
with the benefits and services?
a) Yes b) No
8. If Not satisfied, what are the reasons for your discontentment?
__________________________________________________
NAME : __________________
AGE : ____
CAR MODEL : __________________
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RESEARCH ANALYSIS
1. People’s Association with MARUTI.
2. Maruti in terms of post-sales services and interaction with its customers
3. Are you a Part of any loyalty program for any company?
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4. Awareness about the loyalty program for any company whose products
you purchase
5. Engage in more number of purchases for being a part of the loyalty
program
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6. Importance to be a part of any loyalty program of a company.
7. Loyalty program to be more advantageous in terms of monetary
benefits.
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8. Related to the company when a part of its loyalty program.
9. Part of a loyalty program if it charges an application fee.
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10. Amount would like to pay in order to become a member of a Loyalty
Program
11. The durability/existence of a loyalty program
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12. Track of the credit points/redeemable points of the loyalty program
13. In your loyalty program how would you rate the importance of various
parameters of the program in driving you to be a part of it? (6 being the
highest in rating)
i. Redeemable points
ii. Ease of redemption
iii. Durability of program
iv. Application fee
v. Transferability
vi. Points exchange with other companies.
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4. Rate the importance of parameters in earning you good benefits from the loyalty program? (6 being the highest in rating)
i. Redeemable pointsii. Ease of redemption
iii. Durability of programiv. Application feev. Transferability
vi. Points exchange with other companies
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15. Rate the importance of following benefits according to you from a Loyalty program (7 being the highest)
i. Cash discounts/Monetary benefitsii. Value added services
iii. Frequent customer interactioniv. Special privileges in terms of services.v. Loyalty benefits in future transactions.
vi. Entertainment activities.vii. Customized products and services
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RESEARCH FINDINGS
After the conducting a detailed survey of customer’s expectation from a Loyalty
program, I had following inferences from the same:
1. More than 65% of the people rate Maruti as above average in Post Sales Services
and its interaction with its customers.
2. When asked about that whether they are a part of any loyalty program or not,
68% people said that they are not a part of any loyalty program yet. Since the
buyers of cars were not absolutely acquainted with the concept of loyalty
program, thus there was a difficulty in explaining the concept behind it, what
actually it is and how being a part of it could be beneficial for them
3. When asked about the awareness of the Loyalty program, around 30% of the
people said that they get awareness through the advertisements in the print media
and 28% said through promotional activities by company like mailers, newsletter
etc.
4. 34% respondents said that they make more purchases in order to be a part of a
loyalty program whereas 28% refused to do the same.
5. 38% of the respondents said that the importance to be a part of any loyalty
program depends largely upon the benefits that are attached with it, whereas 16%
of them said that they consider it very important to be a part of a loyalty program
for any company irrespective of the benefits. Thus a company needs to make
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awareness about the benefits attached with a loyalty program at the time of
promotional activities.
6. 82% of the respondents said that they want a loyalty program to be more
advantageous in terms of monetary benefits.
7. 72% of the respondents find themselves related to a company when they are a
part of a loyalty program of any company.
8. When asked about whether they would like to be part of a Loyalty program if it
charges an application fee, there was a very big NO by 66% of the respondents.
9. If an application fee is to be charged, what should be the approximate fee, 74%
of the respondents said between Rs.0- 50 and meager 4% of them said above
Rs.200.
10. 48% of the respondents feel that the durability of the loyalty program should be
more than 18 months.
11. On the analysis of importance of parameters in driving customer’s to be a part of
a loyalty program, Application Fee scored the maximum score of 466, with Point
exchange with other companies as second most important parameter with a score
of 348, Transferability and Durability of program were the third most important
parameters both at a score of 346. Redeemable points were the least important
parameter in driving customers.
12. Important parameters in earning good benefits from a loyalty program, Points
exchange with other companies scored highest with 388, Durability of program
was up next at 378 points with Transferability following the suit at 376 points.
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Application fee was the least important parameter in earning good benefits from
a loyalty program.
13. When asked about keeping the track of their redeemable points, 69% of the
respondents said that they do not keep a track of their points.
14. Important benefits from a Loyalty program:
Cash Discounts scored the highest 540, Preference for Customized products and
Services was second with 472, then Value added services followed the suite with
a score of 424, Entertainment activities were the least expected out of a loyalty
program with a meager score of 268.
The other factors that lead to redemption inertia and low participation levels vary a
lot. Well, at a broad level it's often down to insufficient attention being paid to the
construction of the rewards catalogue. But more specifically, the main reasons are:
1. Little or no excitement value
Rewards catalogues often fail because they don't excite the minds and emotions of
the audience they're aimed at.
2. Not enough variety
This is a problem that customers faced when associated with other loyalty programs.
A catalogue that contains only one or two items in each redemption level provides
very little choice and leads to certain redemption inertia
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3. Width of reward intervals
Another thing that's often overlooked is the width of the redemption interval; in other
words, what are the points gap between different items in the catalogue? If
insufficient attention is paid to the reward intervals, it will lead to irritation for
program members, as well as large unusable points balances in their accounts (a high
'breakage' level).
4. Minimum Accrual Points
This is another major problem that customers encountered with a loyalty program, is
setting up of very high minimum accrual points.
5. Long Redemption Period
The time required to redeem the points accumulated is observed to be another factor
hindering the customers driving to be a part of a loyalty program, for ex: Minimum
membership of 1 yr in certain cases is required before you can redeem your points.
The whole issue of points breakage is a typical example of where some loyalty
program providers consistently get it wrong. If you make points hard to redeem or
expire them after two years you shouldn't be surprised to see very little positive
bottom-line impact from your loyalty program because for the consumer you've
destroyed the very reason to participate in the program in the first place i.e. the value
of the reward.
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6. Program Rules should be Simple so that it could be easy for a common man to
actively participate and reap the benefits of a loyalty program
The most important success factor for a loyalty program is the reward must connect
the consumer to the brand and motivate the consumer to earn the reward in the first
place. Too often loyalty program providers fail to create a unique and compelling
reward for the target audience or set the threshold to achieve rewards too high or
create unnecessary barriers to redemption. Not surprisingly this results in consumer
apathy towards the program and hence no positive change in their attitudes and
behavior for the business – a lose/lose situation.
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LOYALTY PROGRAM FOR
MARUTI
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INTRODUCTION
Looking at the motor trade, if the lifetime value of car buyers is taken into account, it
becomes obvious that their loyalty is extremely important. Car buyers generally used
to be inherently loyal - a 'Chevy man' always bought a Chevrolet; a 'Ford man'
always bought a Ford. Often, that trend even ran throughout entire families. But such
blind '100% loyalty' is now much less common. There are several reasons for this:
With a few exceptions, cars are less differentiated. Cars of similar price tend to have
pretty similar looks, size, performance and reliability; National pride has in many
cases been taken out of the equation. Globalization of the industry has led to the
same car being sold under different badges in different countries; Different
manufacturers commonly share many elements of the same car (e.g. the engine, or
the body platform); Last, but not least, build quality has improved to the extent that
most cars are equally reliable and long lasting.
Loyalty is strategic and about the long-term retention of the organizations most
valuable asset – it’s CUSTOMERS.
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About Loyalty Programs
Today, loyalty programs are ubiquitous. There are more than 1 billion people
worldwide enrolled in loyalty programs, and in some industries such as airlines and
hotels, loyalty programs have become one of the most critical means by which
companies manage their customer relationships.
Several broad definitions of Loyalty exist, including:
The commitment of customers to a particular brand or company.
The extent to which your customers continue with key loyalty behavior when
competitors offer more attractive prices, products, and/or services.
Loyalty is a positive belief in the value that a company provides, leading to
increased purchases over time.
Loyalty should not be confused with customer satisfaction. While loyalty is built on
satisfaction, organizations can have satisfaction without loyalty. Customer loyalty is
a results measure that includes expectations of future behavior. Thus, when
designing a rewards program to build loyalty, it is critical to think about how to
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encourage true, long-term customer loyalty and not just meeting customer
satisfaction.
The popularity of loyalty programs has led numerous companies to offer loyalty
programs that simply mimic the program offered by the leader in their industry.
Rather than providing a competitive advantage, this strategy simply creates a
competitive stalemate, while driving up expenses due to the cost of maintaining the
loyalty program. The key point is that a company must design its loyalty program to
create competitive advantage today and in the future.
Incentives programs have been successfully implemented in nearly every major
industry imaginable. They can be used in any environment where a customer’s
purchasing behavior is measured. The best incentive marketing fosters a sense of
excitement and generates awareness of your company and product. A good incentive
program should also have a clear, consistent message and concrete, measurable
objectives.
Do we know if our customers are loyal and how can we increase their loyalty? That's
the aim of a customer loyalty program. A customer loyalty program is a portfolio of
research techniques and action programs designed to assess customers' attitudes
towards our organization or company and to take action to improve their opinion.
Both quantitative and qualitative research efforts are needed to capture the full
breadth of information needed to assess and improve.
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Loyalty programs are known for some of their more obvious effects - such as
increasing spend (and therefore customer lifetime value), and better retention - but
they can also achieve a number of other things that impact the company's business
strategy, operational efficiency, human resources policy, and more. Some of the
benefits of a loyalty program are:
Customer acquisition,
Up-selling and cross-selling,
Intelligent de-selection (getting rid of unprofitable customers).
Winning back defected customers,
Selection of new outlet locations,
Reducing advertising costs,
Stock planning and merchandising,
Getting competitive responses right first time,
Setting pricing policies,
Building lasting relationships.
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Benefits of Loyalty Programs
A properly executed loyalty program can deliver significant, long-lasting benefits to
the host company in the areas of customer knowledge, product and service
differentiation, customer retention, and profitability.
Greater Customer Knowledge
A loyalty program enables a company to gain detailed knowledge about its customer
base with the customer’s consent; customers actually want to provide transaction and
detailed profile information to ensure that they receive the full benefits of being a
member in the program. In B2C industries, loyalty programs enable companies to
match their faceless customer purchase data (what was bought, when, at what store)
with special customer profile information, which can then be used to create targeted
marketing promotions or redesign services around high-value customers needs.
Increased Customer Retention
A well-honed loyalty program improves customer retention rates by increasing a
member’s “switching costs,” which are costs that a member would bear in order to
switch to a competing provider. These costs can include decreased service and the
time and resources required to build a new relationship. The higher a member ’s
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switching costs, the more likely that member is to remain loyal. However, if the
loyalty program offers a unique set of benefits that a competitor could not easily
duplicate, it would be much less tempting for members to switch.
Companies use their loyalty programs to create these switching costs by:
Leveraging in-depth member profile and transaction data to create unique
offers and product/services that a competitor, who does not know as much
about the member, cannot match
Providing targeted service consistently across all channels
By using the personalized data provided by their loyalty program, companies
can create a win-win relationship with their members that cannot easily be
replicated by their competitors.
Differentiated Service and Brand Equity
Most companies do not want to compete on price. Even those whose business
models are initially predicated upon providing the lowest-cost service often and that
they must focus on providing value beyond price as they mature, their costs rise, and
new upstarts beat them on price. Companies can create this additional value by
moving away from generic, one-product- meets-all-requirements to targeted products
and services that address their customers ’ unique needs. A loyalty program provides
this detailed information on transactions, demographics, and personal preferences
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required to successfully identify the unique groups among a company ’s customer
base and then design products or services that meet those segmented members needs.
It is critical to note that customers are typically willing to pay for those products and
services that do a better job of meeting their under-served needs. It is “value,” rather
than price, that defines a good deal for these customers. Brand equity, which is
achieved by providing highly valued, well-differentiated products and services, is the
corner- stone of loyalty. It is the additional value that customers believe a company
provides relative to its competitors that encourages loyalty to the host company and
makes customers potentially willing to pay more for its products and services.
Improved Profitability
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All of the benefits discussed to this point lead to a loyalty program ’s key goal and
most important metric of success, improved profitability, Greater profits are a result
of:
Profitable customer retention
Higher prices paid for unique products/services
Increased average purchase size
Decreased marketing and systems costs
Decreased unsold expired inventory
Increasing customer retention significantly improves a company ’s profitability.
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Marketing with SMART CARDS
Smart cards are not new. They have long been a technical solution looking for a
problem. Their use in relationship marketing is a potential application that is being
explored by a number of organizations as they strive to get ever closer to their
customers. The key feature here is the smart card’s ability to hold information about
the cardholder, which becomes available to sales personnel at the point of use to
assist them in delivering a service uniquely tailored to the individual. The potential
storage capacity of smart cards is much greater than magnetic stripe cards. Now, as
well as the central data warehouses of customer information, the data can also be
stored on the smart card itself, which the customer carries with them.
All the above-mentioned features (security, storage, and multi-purpose) are linked.
As the number of applications on a single card increases so does the need for more
storage capacity and the higher level of security needed to prevent data stored for
one retailer being accessed by a competing retailer etc
Unlike magnetic stripe cards where the data stored is limited to the customer’s
number and name, a smart card can hold a wealth of information, including:
Personal attributes, including likes/dislikes, inside leg (and other)
measurements etc.
Purchasing behavior, including spend, frequency and even the contents of
previous shopping baskets.
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Response history - which promotions are of interest, what turns them on,
what makes them spend more, visit more often etc.
Personal attributes are available from the usual sources (registration forms, lifestyle
databases etc.), which can be loaded on the card on issue. Purchasing data is
accumulated and stored as the card is used. Spend and visit history enables a
customer’s worth to be assessed and any changes in activity patterns to be identified.
From details of products purchased in the past, cross-selling and trading-up
opportunities can be identified. The activity can differ according to each of the three
categories of data mentioned previously (personal, purchase, response) depending
upon the objectives of the campaign. All activity should be personalized, which
helps to build stronger relationships. Examples are:
A ‘thank you for being a customer’ triggered on a birthday or anniversary
A ‘thank you for your business’ triggered by the level of cumulative spend or
frequency
Promotions to encourage increased spend: extra ‘points’ for transaction spend
above the customer’s average plus x%
Promotions to encourage increased frequency: extra ‘points’ for the nth visit
in a period
Cross-selling of a related (or new) product
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About VOYAGE-Loyalty Program
The VOYAGE - Loyalty Program is an initiative designed specially for you. This
unique Program is our way of saying that you are special to us. It is part of our effort
to build and strengthen the relationship between us that begins when you start using
our products.
As the just over five million current users, the Loyalty Program opens for
you a world full of exciting rewards and benefits. And with its presence in over 300
authorized Maruti Dealerships and 1500 Service Centers, no matter where you go,
you will always find a friend in us.
Benefits
Special discounts on spares and free services for your car along with attractive
gifts at various milestones. This is our way of making sure that every time you
come to us for servicing your car, you take away more than just the benefit of
world class servicing in our automated workshops!
An effort to be in constant touch with you through our quarterly newsletter,
"Borne Voyage" will give you an insider's view to our company, Maruti Udyog
Ltd. along with the latest happenings in the MUL’s family.
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If you are an active member of the Loyalty Program and use your card
regularly, you could get the chance of being invited to special events like
Musical nights, Movie screenings, Award shows, etc.
Rewards and Points
All these amazing rewards and benefits come to you as you earn points in the
Loyalty Program. Once you become a member, you will earn points for a host of
regular transactions that you conduct even now at your local Maruti authorized
Dealership or Service Center. These include:
Purchase of Maruti genuine spares
Purchase of accessories
Servicing of your car
Bonus points on:
Free Service
Paid Service
Referrals i.e. recommending a friend to purchase a Maruti
product.
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So all you have to do to earn points & rewards is just keep maintaining your Maruti
car, buy genuine Maruti Spare Parts and accessories and we'll give you one point
for every rupee you spend.
Elite Club and Treasured Rewards
This unique club has been introduced for those members who get their cars
serviced regularly from authorized Maruti Service Centers. The Elite Club
membership not only identifies the member as special for the MUL family, but also
brings in some added benefits like:
30% discount on Labour
7.5% discount on spares, till the validity of the Card
Criteria of Selection
Points: At least 10,000 reward points.
Transactions: Minimum of 8 service transactions in 2 years of membership.
Beyond 2 years of membership, at least 4 transactions every year.
Introducing Treasured Reward
The MUL Treasured Rewards will be available at 8 prescribed milestones
beginning from 1.25 lakh points and ending at 3 lakh points, with each milestone at
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a gap of 25,000 points. In other words, the new milestones are placed at 1.25 lakhs,
1.5 lakhs and so on till 3 lakhs
Each time a member reaches a milestone a Car Privilege Voucher of Rs. 5000/- will
be given to him. This voucher may be used to avail a discount on the purchase of a
new Maruti car. This voucher is transferable and can be given to friends or relatives
who may be planning to buy a new Maruti car.
Under the Rewards Program, the elite customers would be issued Gold Card,
distinguishing them from the rest. The gold card members would be offered a co-
branded card with a Visa power, so that they could use it as a credit card.
To enroll for the Program:
If you are 18 years or above of age and are the owner /user of a Maruti car, just
Visit your nearest Maruti dealership/Service Center and fill in the application
form
Attach 2 card size photographs.
Pay the enrollment fee.
Collect your receipt cum temporary Maruti Card.
Your personalized Maruti Smart Card will be with you within 4 weeks
How to use your card
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Always remember to carry your Maruti Card with you when you visit a Maruti
authorized dealership/service center.
Every time you do a transaction at a Maruti showroom/workshop, the dealer
would reward points into your Card. You are eligible to accumulate points,
against purchase of spares, accessories, and service and by referring friends
to purchase a Maruti car.
Do not forget to get your card swiped against the purchases you made or
amount you spent at each transaction.
On the accrual of every 25,000 points you would be entitled to a special gift,
free tickets to movies and much more.
Do collect your rewards as soon as you reach the specified milestones.
Please note that points do not become zero after a gift collection in the Card
Program and you can keep collecting gifts as you reach a particular
milestone.
The Service Record Sheet would help you get a 'Car Service Certificate',
which can be very useful at the time of your car resale.
One can redeem these points once you complete 6 months of membership and accrue
a minimum of 2500 points. The validity of the program is 5 years from the date of
first sale of the Vehicle, points accrued will be valid for one year beyond this period.
Application Fee:
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Free for the customers who have been associated with Maruti since more
than 5 years.
Free for the customers who have more than 2 cars from Maruti.
New customers will have to pay Rs.50 as one time registration fee for the
loyalty program.
With the launch of a Smart Card based loyalty program, Maruti would be able to
capture extensive information about its customers leading to a strong customer
database providing details about the purchase patterns, customer profile, and many
more. Moreover customers are far from the hassles of keeping a record of their
redeemable points, as all the details would be on the card itself which a customer
could easily take note of during each transaction he makes. This card could also be
co-branded with some renowned financial organization so you have the option of
making payments for your services through this card.
We can launch this VOYAGE Loyalty program in coalition with other partners, as
they are attractive, because they offer clear benefits to both the program partners and
the consumer. For the partners they offer reduced capital outlay, reduced operational
expenses, and a larger reachable database of customers. For the customers they offer
faster points accumulation and redemption as well as a wider variety of rewards.
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The advent of smart card technology should also make it possible to overcome some
of the infrastructure requirements of an online real-time scheme. It would be possible
to set-up a hybrid scheme with a mixture of online and offline point’s accumulation
and redemption.
In fact, it would be possible to design a scheme as an offline real-time solution. The
cards would store the participants' transaction and points history, and the terminals
would record transaction data and upload it to the host at the end of each day
(midnight rollover) via modem or transport card. With a city-based scheme, even the
transport card solution should still make it possible to have the host updated daily; the
data would only need to be collected from POS locations within a single city.
Redemption would be catalogue based, and would be offline and online.
The program would still have main sponsors - these could be found in traditional
sectors such as fuel retail, financial services and telecommunications. Thus the
scheme would have probably two main sponsors, and retail partnerships would join
based on a "many retail partners per sector with exclusivity by city district or local
council area basis". This will necessarily make the master partnership agreement more
complex, but I believe that it would work and still provide the advantages for each
partner, whilst ensuring a large base of earning locations for the consumer.
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Launch a Prepaid Maintenance Plan
Having a strong prepaid maintenance program is an important feature to achieving
high customer loyalty and critical to ensuring greater sales, both new and used. A
maintenance program drives customers back to your dealership, as well as generates
quality trade-ins, higher grosses on repeat business, better CSI and ultimately
increased customer loyalty. When a customer has a prepaid maintenance plan, it
ensures that he or she is visiting your dealership at least three times per year, or nine
times or more over the life of the car's ownership. During that time, a long-term
relationship is being developed. However, the dealership receives other valuable
benefits such as generating vehicle maintenance records on their car and exposing
your customers to new vehicle models for potential future sales. And, when he or
she is ready for a trade-in, you know the history of the vehicle and have a happier
customer, as well.
This plan when implemented effectively can:
Assist with making cultural changes in the service drive that will
help increase sales and retention rates.
Results in a bond between your dealership and service drive customers.
It is important to know that satisfaction doesn't build customer retention.
Relationships build customer retention. Having the tools and the training in place on
the service drive to build on those relationships and sell the value of the products
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makes a tremendous difference in the percentage of satisfied customers who come
back for additional products and vehicles from the dealer.
We can club this program with the loyalty program, at an extra cost to our
customers. Through this program we can grant special benefits and discounts to
customers who purchase the Car Care maintenance plan. Some of the features of a
good Car Care program include:
Service menus: As the customer’s present the maintenance plan, the managers
detail the additional benefits customers receive for making the purchase. The same
service menus are posted on boards in sales and service to reinforce the program
benefits and coverage.
Price reductions for Club members: Maruti can offer special pricing for Club
members and posts it prominently on the menu brochures and boards. For example,
the cost for 5,000 km maintenance runs Rs.500 for Club members and Rs.750
otherwise. We can also offer a 10 percent discount on parts and labor for Club
members on work the plan doesn't cover.
Special Car Care Club perks: Rs.200 extra value on a customer's trade-in value. Car
Care Club members also receive free one-day rentals when the shop must keep a
customer's vehicle overnight, and they arrive in the service drive without an
appointment and get express treatment. We can also set up a separate Car Care Club
window at the cashier, which draws inquiries from non-Club members.
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Custom coupons: Another opportunity that can benefit both the company and the
customer is the use of receipt coupons, or custom coupons, as part of our gift card
program. You can use these coupons to drive customers to locations that need an
increase in traffic. Or better yet, make your coupons applicable to certain times of the
day when traffic isn't as high as you'd like it to be. For example, many restaurants are
finding this an effective way to drive traffic to days of the week or times of the day
that are not traditionally strong for them. Giving customers a free appetizer or dessert
is a great marketing investment for creating a busy restaurant during traditionally slow
periods. Thus cost of providing free gifts to customer is highly reduced when you tie
up with any such company.
Make Your Customers Feel Special!!
You might be tempted to groan as you assume that this is just another party that will
detract from the work at hand in your company. In fact, celebrate Customer Service
Week with five objectives in mind, all of which will directly impact your bottom line.
They are:
1. Boost morale, motivation and teamwork in your customer service department.
2. Reward your frontline reps for the important work they do all year long.
3. Raise company wide awareness of the important role customer service plays in
your organization’s success.
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4. Thank other departments for their year long support.
5. Let your customers know about your company’s commitment to customer
satisfaction.
We need to continually let our customers know we care about them. We need to keep
in touch, write to them, send them information and occasionally 'phone them. When
they contact us we need to make sure we sound warm and friendly, pleased to hear
from them, efficient and maybe even look and sound like we're fun to do business
with. It's not a lot different from our personal relationships. If we don't keep telling
the people close to us how much we care and keep writing and 'phoning, then we
shouldn't be too surprised if they leave us one day. Use logic and emotion to keep
your customers. Give them the best products and service and give great value for
money. However, always remember, your competitors will be doing much the same
thing. The difference will be determined by how you communicate with your
customers on an emotional level, either face to face, on the 'phone, by letter or email.
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CONCLUSION
Exceed client’s expectations at all times. Go the extra mile and it will pay off for
you time and time again. Your clients will feel good about spending their money
with you over and over again. Consumers are no longer settling for poor or average
service. They have choices and exercise their options to spend their money with
whoever provides them what they want and gives them exceptional customer
service too. Keep the competition back over your shoulder. They don't have to be in
the distance, just as long as they are behind you. Exceeding your clients’
expectations only takes a little bit of effort, but it can do a lot for your sales.
The new car market is declining for original equipment manufacturers (OEMs) and
their dealers. Competition is increasing. Dealer margins are shrinking. Lots are
overflowing with inventory. Customers can now order a customized vehicle with
upscale options from virtually any automaker. But they can't request superior,
proactive customer service. That's why customer relationship management (CRM) is
gaining momentum. Today, OEMs and dealers compete over customer ownership by
gathering specific data. But they need to combine their intelligence to be more
effective.
Customer Lifetime Value analysis as the focus for a company's operation provides a
sustainable growth model for your business. The emphasis is then firmly on market
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share rather than profitability. The implementation of a customer-loyalty-centric
approach through a Customer Loyalty Program is straightforward. It delivers a
positive feedback loop to your customers; to keep them behaving in the way you want
them to. This virtuous circle creates a self-refining set of tools and behaviors to
deliver steadily growing profits, contented customers and a rising asset value.
"Customer equity is one of the key success factors for the future of the automotive
industry. Organizations who fail to focus on customer needs to enhance customer
loyalty and build brand equity will lose control. By understanding customer needs,
manufacturers and their sales channels can move profitably beyond customer
satisfaction, increase shareholder value, and ultimately leave their competitors behind.
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BIBLIOGRAPHY
Websites
www.marutiudyog.com
www.cars.tatamotors.com
www.hyundai.co.in
www.loyaltylogic.com
www.blonnet.com
www.domain-b.com
www.agencyfaqs.com
www.dmdirect.com
www.kpmg.com
www.india.ford.com
www.bnet.com
www.crm2day.com
www.loyaltyprograms.com
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Articles
1. Vishvanath Kulkarni, On a Smooth Road, Financial Daily, Wednesday Jan
30, 2002, Available from
http://www.blonnet.com/ew/2002/01/30/stories/2002013000230300.htm
2. Maruti earmarks nearly 0.3 per cent of its turnover as IT spend available form
http://www.globalsuzuki.com/globalnews/2003/0425.html
3. Maruti procurement goes global, Friday, September 03, 2004, Available
from http://www.indiacar.net/news/n7143.htm
4. N. N. Sachitanand, What makes Maruti tick?, The Hindu, Monday, Nov,
2003.
5. K. Giriprakash ., Smart planning leads to drop in car inventory levels;
Businessline. Chennai: Aug 25, 2004. pg. 1
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