The case is usually taken up in service marketing course in MBA.

1. HUNTER BUSINESS GROUP – TEAM TBA
Rohit Kumar
Indian Institute of Technology Bombay
1
Group 1

2. Players
Star Oil
HBG/ Team TBA
Enter HBG….
2
THE stage
 Star Oil was facing increasing
competition
 Struggling to run the TBA
business effectively
 Fearful that the closing the TBA
business would erode customer
loyalty
THE CONFLICT
 TBA(Tire Battery and Accessory)
business is unprofitable but
drives loyalty that translates into
increased gas sales

3. Background of the industry 3
 Gasoline service station evolved 1950’s with advent
of US interstate system
 “under the hood checks” were a way to differentiate
and strengthen customers bond, customers would
pay a premium branded TBA products
 1960’s/70’s star, shell, amco dominated the market-
high margin of industry attracted high volume/ low
price stores: Kmart/Walmart and specialty stores jiffy
Lube, NTB
 70% decline in 1970’s, which continued till 1980’s;
72,000 services stations closed; post 1990 80%
repairs were equally spread between private
garages, special repair shops, car dealers, gasoline
service stations

4. Background of company- Star Oil 4
 At time of this case 2,200 gasoline
service station were throughout US
 1991-92 stars was losing money;
revenue 20% fall in 24 months; variable
cost basis estimate $8 million loss
 Star management saw value in
preserving star brand
 TBA unattractive financially but it was
clear that TBA product line built
customer relationship

5. Background of company- Hunter
 Founded by Vic Hunter, 1981 after gaining a wealth of
direct marketing and sales management experience
 Hunter believed strategic use of direct marketing
technologies could revolutionize the face of business
marketing
 Goal: facilitate “the transformation of change” “highly
personal” respects and recognizes unique needs of
customers; step beyond traditional approaches to
marketing and sales- increase brand penetration and
customer satisfaction while cutting sales and marketing
expenses
 Experience with TBA- Amoco

6. 6
Primary and
Secondary
Issues
Conflicting management
agreement on TBA’s position
in the overall corporate
mission of star oil
Deterioration of both TBA as
viable product line and
gasoline service station niche
Business agreements and
program goals with star oil
and HBG
Maximizing brand equity in
industry and brand loyalty
from customers to deliver the
most profitable service to the
market

7. 7
HBG actions plans
Direct marketing
approach
integrating field
sales, phone calls
and mail delivering
a consistent
message
Developed
electronic dealer
database to
capture sales and
activity
Vendor partnership
and private labeling
based on quality
and volume
discount
opportunity
Identify and
develop gold
accounts (%
purchases of all
TBA products)

8. 8
Results of Action Plan
Improved dealer satisfaction
85% better service
5X gold account achieved
24% increase in active accounts
Exceeded initial revenue gold of $20million
Reduced operating expenses by 50%

9. 9
Strengths
 Expertized in highly personalized direct marketing
to increase brand penetration and customer
satisfaction
 Cut sales and marketing expenses
 Committed vendors to provide high quality
customized TBA products & to develop new ones
 Integrated information systems (ERP and TBA team
dealer master database) to support business
processes and
 Accurately track dealer information & develop
dealer specific plan
Threats
 Increased competition from high volume – low
price service models, specialty service chains and
independent dealers
 Duality of leadership of management of star oil and
Team TBA
 Volatility of Gas industry
Opportunities
 TBA products played a strategic role in boosting
star gasoline sales brand equity
 Customer loyalty – 4 times more gasoline purchase
for customers who had their cars serviced at gas
stations selling star branded TBA products
Weaknesses
 Unprofitable nature of TBA businesses in early 90s
 Dealer’s perception on value of star brand varied
with type of products they purchased
 Early 1994, the number of active accounts and total
sales volume began to level off
SWOT Analysis

10. 10
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
0 14 46 55 87 116 105 122 136 145 154
0
20
40
60
80
100
120
140
160
180
NumberofGOLDAccounts
Month
Linear ()
Analyzing the Scenarios

11. 11Scenario: HBG want to maintain its bottom line and expect teamTBA to fulfil the
promised operational cost cutting by 50%
Options
Available
1. Keep fixed cost Constant
2. Lower marketing and sales cost to $1.34 mn
3. Not abandoning any territories, or shutdown
any facilities/scale back operation
4. Eliminate field sales (cost cut $1.4 mn)
1. Maintain the fixed component of operating
expenses at 40-45% of revenue
2. Fixed costs frozen at $1.28 million.
3. Sales and marketing Costs kept at $1.56 mn
4. Job cuts
1. Reduce both fixed and sales + marketing
cost by 20%
2. Increase number of Gold Accounts
3. Boost sales volume and eliminate C & D type
of dealers

12. 12

13. 13
Recommendation
1. Limiting fixed cost will limit our scope to action. It will decrease the
flexibility to react to unwanted challenges from the competitor.
2. So, the should go for the third option.
• Reduce cost
• Focus on most profitable customer, i.e.; A & AA. Terminate C&D or
move C to D.
• Develop more of GOLD accounts in upcoming year by focusing on
profitable customer.
• Sales maximization should be the motive
• Consistent communication with the distributors.
• They should keep working with supplier in order to decrease cost of
good sold by implementing economy of scales with their
partner/supplier.
• Customized offer with standard products, increase penetration of the
others products, they imply the customer in the relationship and they
measuring the result.

14. 14
Other questions Answered
1. Would reducing the number of contacts hasten the decline in revenues?
Answer: It is possible because of the following reasons:
(a) Reducing contacts may cause decline in revenue.
(b) Reduction in dealer base
2. Was it possible for team TBA to improve effectiveness by increasing Gold accounts with
revised criteria?
Fixed cost = Rent, salary for internal office support, DBMS, Miscellaneous cost at headquarter
Direct marketing & Sales cost = email ($2.5), phone($16), field visit (200$)

15. 15
Other questions Answered
3. Will we be able to persuade these dealers to stock and sell a composite mix of TBA
products?
Answer: Yes, because using the brand name. Survey report suggests satisfaction among the
clients. Perception that contact has increased by the company
4. Were GOLD accounts asking too much from the dealers?
• The gold account was a good incentive to encourage sales reps to improve market
penetration and visibility of the brands through a large range of products.
• However you can’t force customers to buy what they don’t need or want, it improves your
numbers but on the long run, destroy your image
• Area specific sales (Ex- Seven-eleven Japan)

16. 16
Thank You