Documente Academic
Documente Profesional
Documente Cultură
Abhishek AK
Amit Shukla
Anshuk Pradhan
Kshitij Pathak
Shaunak Chakraborty
Vikas V. Singh
Acura RSX
Small sporty
sedan - $35,100
Cars bought directly from Hondas Canadian distributor and sold with a markup
Acura RL
Oldest model $79,812
Bargaining Power
of Automotive
Suppliers LOW;
numerous
suppliers rely on
some particular
auto
manufacturers to
buy their products
Competitive
Rivalry - HIGH ;
there are too
many choices for
the customers.
Threat of New
International
Entrants MEDIUM; initially
brand loyalty
towards American
car firms
Threat of
Substitutes LOW
; bicycles,
subways, buses,
and trains but for
many areas &
reasons, cars are
preferred
$120,000 spent annually marketing to new customers via billboards, direct mails, radio, television
etc.
Approximately 650 cars were sold each year spread over the six models. After the fixed expenses
net profit generated is usually two per cent of sales revenue.
$10/year/existing customer is spent by the firm much of which is spent on sending postcards and
sending out information.
Success of marketing efforts were judged by comparing the cost of marketing effort to the
number of extra cars sold. But this method did not take into account the possibility of repeat
customers.
New marketing initiatives were required to provide a significant return on marketing investments.
Sales was broken down into two types: sale to new customers and sale to previous customers.
Proposed strategy
New Customers:
According to the VP of sales Rachel De Lima, to increase the number of new customers the firm
need only do more of what they were already doing (more advertisements etc.).
However, the sales staff believed that by lowering the margin they would be able to achieve the
necessary volumes and increase their sales.
Retention of existing customers:
Since retaining an existing customer was less expensive than acquiring a new one, the firm
focussed their efforts on improving the customer retention rate.
Providing free oil changes, customer reward programs, increased contact with customers and
conducting surveys of existing customers were some of the suggested steps.
The Decision(1/3)
Increasing Bottom line
Greater Sales Revenue
Reduced Costs
CLV
Bottom
Line
ROM
Maximize
Stakeholder Value
Greater CLV
Increased price & retention rate
Decreasing maintenance costs & discount
rate
The Decision(2/3)
Greater CLV
Increasing Bottom Line CSX
8%
RL
9%
CSX
8%
RSX
6%
CSX
TSX
15%
MDX
29%
RL
9%
RSX
TL
33%
TL
33%
Gross Profit
CLV
CSX
TSX
15%
MDX
29%
TSX
RSX
6%
RSX
TSX
Greatest CLV for TL,MDX & TSX with given base data
Increasing retention rate via increased maintenance
Maximize ROM
ROM should be at least as high as returns obtained by investing in stock market : Considering investment in Honda
Motor Company(beta=1.24); Japanese Government return over 10 yr period(4 yr T-Bill); Average Market Cap Rate
the calculated Return on Equity : 1.07 %
The Decision(3/3)
Fixed Costs
Car
Total Sales
New Sales
Return Sales
Avg. Markup
Return (Yrs)
Retain Rate
Yr. Main Cst
Disc. Rate
Acq. Cost
Dealer Cost
Avg. Price
T Life Maint
Tot. Acq.
Unit Gross
T Gr Lifetime
T Gr Net of Acq.
Modified Settings
$1,20,000
CSX
Conclusion:-
RSX
84
65
19
7.8%
4.00
2.5%
$10
5%
$219
$29,500
$31,801
$2,807
$14,260
$2,301
$1,58,661
$1,44,401
TSX
62
40
22
7.8%
4.00
2.5%
$10
5%
$219
$32,500
$35,035
$2,072
$8,775
$2,535
$1,29,227
$1,20,452
TL
MDX
RL
114
100
14
8.0%
4.00
27.5%
$30
8%
240
180
60
8.0%
4.00
40.0%
$40
9%
180
130
50
8.0%
4.00
30.0%
$35
9%
35
32
3
7.8%
4.00
2.5%
$10
5%
$219
$39,800
$42,984
$13,518
$21,938
$3,184
$3,45,149
$3,23,211
$219
$46,000
$49,680
$43,888
$39,488
$3,680
$9,65,535
$9,26,047
$219
$57,200
$61,776
$24,687
$28,519
$4,576
$7,82,225
$7,53,706
$219
$73,900
$79,664
$1,170
$7,020
$5,764
$1,67,368
$1,60,348
PROFIT
MOD PROFIT
$24,28,165
INC COST
$60,035
BASE PROFIT
$24,22,632
INC PROF
$5,533
ROM
9.22%
GAIN
$5,533