Case study

Building relationships

Background

Kimsoong, a Korean car manufacturer, has its European headquarters near Paris. It has sales franchises in most European countries which not only sell cars and motor accessories but also have servicing facilities. The larger outlets also offer fast-fitting of tyres and exhausts and deal in used cars.

Over the last ten years Kimsoong, with its reputation for reliability at low prices, has built up market share at the lower end of the market. Their basic models include many 'extras' which other manufacturers charge for. Kimsoong also makes large donations to environmental groups and is seen as an organisation with a social conscience. Furthermore, its R&D Department is developing an 'eco-car' which uses an alternative power source.

Problems

Intense competition is forcing Kimsoong to consider new ways of generating business. Management believe that if the company looks after existing customers well, they may buy three or four Kimsoong vehicles over a ten-year period. Therefore, Kimsoong’s new strategy is to hold on to develop a more accurate buyer profile. (At present, data is from questionnaires sent to customers following sales but only 40% are returned.) However, because of pressure on profits, they need to achieve these objectives at a low cost.

Solutions

A customer loyalty programme will be developed by the Customer Services Department at head office. It will be available to all European franchises and costs will be shared 50/50 with head office. Its aims are:

· to build up long-term customer relationships, thereby increasing profits

· to increase customer loyalty

· to draw up an accurate buyer profile

· to encourage staff to be more active in bulding up good customer relations.

Kimsoong customer profile

Age Under 30 48% 31-40 27% 41-50 15% Over 51 10%	Sex Male 52% Female 48%	Occupation Student 8% Self-employer 15% Employed 75% Retired 2%
Interests (in order of importance) 1 Eating /drinking 2 Sport 3 Travel 4 Environment 5 Health / fitness 6 Reading 7 The arts 8 Politics	Percentage of repeat buyers 15%	Income group Higher income 2% Middle income 82% Lower income 16%
Reason for not repeating purchase Bought competitior's model 52% Dissatisfied with service 26% Relocated 8% No longer drive 5% Don't know 9%	After-sales care (customer rating) Excellent 4% Very good 12% Good 17% Fair 61% Poor 6%	Customers' priorities (in order of importance) 1 Economy 2 Price 3 Reliability 4 After-sales service 5 Lenght of warranty 6 Performance 7 Comfort

Task

Work in small groups. You work in Customer Services at head office.

1. Prepare a presentation of your plans for the customer loyalty programme. In addition to your own ideas, you may want to include some of the following:

· discounts to existing customers who buy a new Kimsoong car

· a monthly company magazine sent free to all customers

· free servicing for the first three years of ownership

· generous terms when customers trade in old models.

2. Present your ideas to your colleagues.

3. Working as one group, devise a customer loyalty programme using the best ideas from each group.