INTRODUCTION TO MARKETING

CASE 4
CUSTOM CAR CARE

XAVIER INSTITUTE OF MANAGEMENT

BHUBANESWAR
SUBMITTED TO:
PROF. JEEVAN ARAKAL

SUBMITTED BY:

Q1. What is the case situation?

A1. Glenn Rozycki is a 25 year old guy from Scarborough. He is an employed person.
He established Custom Car Care company to provide complete interior and exterior
cleaning and preservation for cars. As per the current scenario the company provides
service only on weekends. Now the dilemma in Glenns mind is whether to quit his
current job and pursue this business on a full time basis.
Being in this business there are various issues like:
i)

Competition from other custom car cleaning companies.

ii)

Incurring different kind of expenditure for advertising to obtain the initial

business. The case also talks about various consumer segments existing in the
current market.

Glenn wants to enter the market so as to gain a good reputation. He wants to start (if
he does so) without leaving any stone unturned.

Q2. Critically analyze the different consumer segments mentioned in the case:
A2. There are three consumers segments in custom car care market. They are
i)

ii)

Owners of old cars which are in poor condition:

Mostly they wash their cars themselves or take to local gas station
They will not spend lot of money on preservation of car
It would be hard to attract them due to their price sensitivity
Owners of newer, mid-priced cars(under $35,000)
Largest consumer group
Mostly they will go for automated car wash and sometimes hand wash,

specialised car cleaning companies

They are curious about the price estimates and they often look for
companies which deliver door to door in yellow pages or consulted

iii)

flyers
Owners of expensive cars ($35,000 and above)
Smallest consumer group
They had most money to spend on their cars
They do not prefer to go to automated car wash rather they like to wash

by hand or take them to specialised car cleaning companies

They are most concerned with the reputation of car company and once
they are happy with it they are not likely to change the company

Q3. What are the key conclusions that can be drawn from a detailed competitor
analysis?
A3. From the detailed competitor analysis we can conclude that the no touch
carwash was gaining in popularity because of its advantage of minimized damage to
paint and exterior accessories. This type of car wash option is bit expensive but the
advantage outweighs the investment. The custom car cleaning companies are in varied
numbers depending upon the geographical location and size of the market. There were
18 custom car cleaning companies in Scarborough. These companies included Auto
Image, Sparkles etc and all of them had their services priced between $ 175 & $ 225.

Q4. Which alternative should Glenn choose?

A4. Glenn has to decide about the following:

Which segment of customers to target?

How to reach the target through an appropriate advertising plan?

Suppose he is not doing any advertising and continues to rely on word of mouth and
manages to keep his customer base intact, i.e. 2 cars per week( 8 cars per month) , he
would only be earning $1200 per month whereas his target is to earn $1600 to $2000
per month. Therefore he has to look for avenues for expansion.
Currently he has a savings of $8000 and $1200 which he earns from his part time
business: totaling $9200. Investment in equipments will leave him with a savings of
$4200.
High end users
If he focuses on the owners of the expensive cars, he can charge a maximum of $200
per car. Assuming he gets 2 cars per day (48 cars per month), his contribution margin
will be $8400. If he is able to employ his nephew, his contribution margin will be
$9100(52 cars per month) and he will have to incur an additional fixed costs of $240
per month as salary to his nephew (net CM $8860). Employing his nephew will lead
to an additional $460 margin. Therefore he can consider this option.

Advertising Plan
Car shows, advertisement in The Globe and Mail business section and billboards are
the appropriate options for the high end users. If these are used, advertising expenses
will come up to $2700.

Once the advertising expenses are met, he will be left with $1500 savings with him.
Contribution margin: $8400
Less: Fixed costs:

($1435)

Profits:

$6965

This projection shows that he has funds to the tune of $8465 with him after incurring
all the fixed costs and the advertising costs. Therefore it is profitable for him to target
the high end users. Nevertheless, this will be true only if he is able to service 2 cars
per day.
Mid priced owners
If he focuses on the owners of the mid price cars, he can charge $100 per car.
Assuming he gets 3 cars per day (72 cars per month), his contribution margin will be
$5760. If he is able to employ his nephew, his CM will be $6080, incurring an
additional fixed costs of $240 per month (net CM $5840). Employing his nephew will
only give him an additional $80 and hence it is not advisable to go with this option.
Advertising Plan
Yellow pages, Billboards, newspaper advertisement in the Sunday Mirror, radio spot
will be good options

Advert in the newspaper twice a month costing $600

Yellow pages advertisement costing $124
Billboards costing $1150
Radio ad costing $400 ( 4 times a month)

Total advertising expenses come up to $2274. Savings after meeting these expenses
will be $1926.
Contribution Margin: $5760
Fixed Costs:

$1435

Profit

$4325

He will be left with earnings of $6251 after incurring all the fixed costs and the
advertising expenses.
Conclusion
It is evident from the above calculations that the high end users give Glenn more
margins than the mid price owners. He could start his business by catering to the high
end users and charge $200 per car and offer quality service. This will ensure repeat

sales and also brand loyalty. Therefore he will be able to capture a small yet loyal
group of customers
Gradually, he could target the owners of the mid price cars charging $100 per car.
Since they are price sensitive and compare prices, aggressive advertisements have to
be done. Therefore as time passes, he should target both the high end users and mid
price car owners. Simultaneously he should also target the owners of old cars through
aggressive advertisements.
Q.3 Break-even analysis
Cost analysis of Glenns custom car care for 1st year
|Fixed cost towards rent garage & office |$ 14400 | |($ 1200 per month) | | |
Utilities ($ 100 per month) |$1200 | |Telephone ($35 per month) |$420 | |
Advertisement- (yellow page 2inch*2 inch $996 + 6000 flyers cost $360) |
$1356 | |Insurance cost @ $100/month |$1200 | |Total fixed cost |$18576 | |
Variable cost per unit |$20 | |Contribution margin (return per unit-variable cost)
|$80 | |Return per unit $100 | | |*Glenns nephew salary @ $60/day |$18780 |
No of car services at Break-even point = fixed cost Contribution margin per
unit
QBEP is 232 or 116 days for Glenn, when he worked alone and given
services to mid and low price group charging $100 per car wash.
Other alternatives and break-even analysis...