Case Learning Notes Custom Car Care.pdf

CASE LEARNING NOTES ON CUSTOM CAR CARE 1) Describe the Case Situation: Si tuation:

Viability of Full Time Custom Car Care from Mr. Glenn’s Perspective

Mr. Glenn Rozycki, 25 year old has recently founded & registered his own company in the name of Custom Car Care. The company provides complete interior & exterior cleaning &  preservation for cars. The company uses quality brand products & works manually. He is looking into the various marketing possibilities& requires preparing a complete marketing  plan. He is analyzing the market scenario by segmenting the car-owners on the basis of Old car owners, Newer &mid-priced car owners (price =$35,000/-). He is exploring the various opportunities of targeting, positioning  promotion through which he can reach his target audience. aud ience. Mr. Glenn is testing the viability (profitable enough) of the plan to quit his present job& get in to the full-time business of Car cleaning.

2) Evaluate the various market segments given in the case on the basis of revenues, profits & break-even points.

The evaluation of the 3 market segments on the basis of revenues, profits & break-even are as follows: Let us consider Mr. Glenn is charging $100 per Car to Old Car Owners & Mid-Priced Car Owners & is charging $175 per Car for Expensive Cars. We are not considering Advertising Cost. We are considering the machinery is depreciated 100% in the first year. A) Old Car Owners: Revenue & Profits:

 No. of Working Days: 313 Days  No. of Cars Served per Day: 3 Cars Total No. of Cars Served: 939 Cars

Prepared By: UR14054 Harshvardhan UR14072 Ruma Paul UR14078 SomnathKejriwal SomnathKejriwal

UR14067 Preeti Shankar UR14074 Sarvottam Prasad UR14081 SwetaKejriwal

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CASE LEARNING NOTES ON CUSTOM CAR CARE Expenses

Revenue

Particulars

Amount Particulars Amount

Machinery

5000

Rent

14400

Telephone

420

Utilities

1200

Total:

21020

Operating Profit:

72880

Cars

93900

Total:

93900

Break Even:

Fixed Cost: 21,020/Variable Cost ($20/Car): 12,320/Total Cost: 33,340/Fixed Cost Contribution Margin per Unit: 80/Break Even: 21,020 / 80 = 263 Cars (Approx.) i.e. 88 Days Mr. Glenn if served only this segment of customers’ needs to at least serve 263 Cars. Evaluation: These segments of customer are hardest to reach, thus Mr. Glenn requires to intensive & effective advertisement expenses to reach this target group which leads to additional costs, thus decreasing the Net Profit. Thus this segment is profitable but not viable at the startup as he has fewer funds for investment. B) Mid-Priced Cars Owners: Revenue, Profit & Break Even:

Following the above assumptions it would be the same as the Old Cars Owners. Evaluation: The difference here is that this market is more approachable. With less investment on advertising Mr. Glenn can attract larger consumer base. In this case the expense on Prepared By: UR14054 Harshvardhan UR14072 Ruma Paul UR14078 SomnathKejriwal

UR14067 Preeti Shankar UR14074 Sarvottam Prasad UR14081 SwetaKejriwal

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CASE LEARNING NOTES ON CUSTOM CAR CARE advertising is relatively less than other two consumer segments, thus the net profit in this case is more than the Old Car Owners. He can attract the customers through Flyers & Yellow Pages only. The advertisement costs in considering Flyers & yellow pages will be $1140 (Approx.) (i.e. one time flyers & 12 months in Yellow Pages). C) Expensive Cars: Revenue & Profit: Expenses

Revenue

Particulars

Amount Particulars Amount

Machinery

5000

Rent

14400

Telephone

420

Insurance

1200

Utilities

1200

Total:

22220

Operating Profit:

85580

Cars

107800

Total:

107800

Break-Even:

Fixed Cost: 22,220/Variable Cost ($25/Car): 15,400/Total Cost: 37,620/Fixed Cost Contribution Margin per Unit: 150/Break Even: 22,220 / 150 = 148 Cars (Approx.) i.e. 74 Days Mr. Glenn if served only this segment of customers’ needs to at least serve 148 Cars. Evaluation: These segment of consumers are brand loyal, to attract this consumer base he needs the  proper advertising plan. The profit in this case is larger but this consumer base is harder to achieve. These segments are more profitable but the investment for this segment is also high. Thus he can prefer this sector for long term. Prepared By: UR14054 Harshvardhan UR14072 Ruma Paul UR14078 SomnathKejriwal

UR14067 Preeti Shankar UR14074 Sarvottam Prasad UR14081 SwetaKejriwal

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CASE LEARNING NOTES ON CUSTOM CAR CARE 3) Which is the best target group to serve?

Being a startup company, Glenn does not have the luxury to spend much for his venture’s advertisement. He has to pay a lot on various startup costs. Looking at this scenario he must focus on the newer Mid-priced car owners. The other two groups are not preferable  because of the following factors:Old car owners: - They are highly price sensitive and would only expend on the necessary repairs as needed. They prefer to wash their car themselves or at local inexpensive automated car wash. They do not care much about car looks. Expensive car owners: - Very high competition exists in the market. 18 car care companies are already available for expensive car owners. The Toronto car show advertisement for this segment will come very costly for Glenn. Also the customers are loyal to the existing companies because of their good service and are less willing to switch. What makes the switching difficult is the fact that the expensive car customers rely primarily on the input given by their friends. Also there is a fear of damage to car during its servicing. There is additional cost in setting up mobile units and this group of  people is less in numbers too. Focusing on the above reasons, Glenn should target the newer Mid-Priced car owners as a start-up. The various other factors supporting the fact are as follows:

They constitute the largest segment.



There are both occasional and regular people in this segment which gives diversity to the services provided.



They are not as price sensitive as low cost car owner group. They are flexible in their spending for car servicing.

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The advertisement medium like yellow pages, flyers are less capital intensive and are very effective.



The customers don’t need additional services like mo bile unit which will incur extra

cost to setup.

Prepared By: UR14054 Harshvardhan UR14072 Ruma Paul UR14078 SomnathKejriwal

UR14067 Preeti Shankar UR14074 Sarvottam Prasad UR14081 SwetaKejriwal

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