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A Case Study on Tactics for Customer Retention at Hyundai Motor India Ltd

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A Case Study on Tactics for Customer Retention at Hyundai Motor India Ltd International Journal of Management (IJM) Volume 12, Issue 4, April 2021, pp.150-163, Article ID: IJM_12_04_015 Available online at http://iaeme.com/Home/issue/IJM?Volume=12&Issue=4 ISSN Print: 0976-6502 and ISSN Online: 0976-6510 DOI: 10.34218/IJM.12.4.2021.015 © IAEME Publication Scopus Indexed A CASE STUDY ON TACTICS FOR CUSTOMER RETENTION AT HYUNDAI MOTOR INDIA LTD Dr. Shrikant Ratley Associate Professor, Marwadi University, Gujrat, India Dr. Ganesh Waghmare Balaji Institute of Management and Human Resource Development, Sri Balaji University, Pune, Maharashtra, India ABSTRACT This case relates to the Indian subsidiary of South Korean automaker Hyundai Motor Company, Hyundai Motor India Limited (HMIL), and how it faces the customer retention problems. It made their products appealing to Indians of the upper middle class who had little alternative but the blandly built versions offered by market leader Maruti Suzuki. With the launch of models like the Fluidic Verna and the Elantra, HMIL slowly began to emerge as a leader in many high-end automobile segments. In the automotive industry, customer retention is a big problem with the purchasing cycle of consumers ranging from at least 3 to 5 years and the cost of brand switching being negligible. Consequently, the challenge for marketers is to provide the customer with continuous satisfaction by providing a quality product, excellent after-sales service and regular customer engagement to make him more engaged with the company. Key words: Customer Loyalty, Customer Relationship Management, Automobile Industry, Customer Retention, Customer Satisfaction. Cite this Article: Shrikant Ratley and Ganesh Waghmare, A Case Study on Tactics for Customer Retention at Hyundai Motor India Ltd, International Journal of Management (IJM), 12(4), 2021, pp. 150-163. http://iaeme.com/Home/issue/IJM?Volume=12&Issue=4 1. INTRODUCTION 1.1 Automobile Industry in India The automobile sector officially came into exist in 1952, that time Government employed it’s primarily tariff commission in aiming of set of this industry within the country. In 1952 like wise noticed the launching of passenger cars in the India. Companies like Premier Automobiles Standard Motors and Hindustan Motors were first time came in the name &fame. http://iaeme.com/Home/journal/IJM 150 [email protected] Shrikant Ratley and Ganesh Waghmare In the accordance of industry growing track, SUV’s taking place being factory-made by Mahindra and Mahindra, Bajaj, Standard Motors, etc. Unwieldy and average commercial vehicles remained manufactured by 7 companies hence involving Simpsons and Co., Premier Motors, Ashok Motors, and more. Two-wheeler vehicles like scooters, motor bikes or mopeds remained mass-produced by Escorts Group, Royal Enfield, Bajaj Auto, Vehicles Manufactured goods of India, Ideal Jawa, etc. HMIL entered the Indian market in the 1990s when it launched the Indian automobile market open to foreign players. It quickly grew to become a market leader. HMIL followed a strategy whereby it introduced feature rich and stylishly designed models for a reasonable price in the Indian market. Like some of the new foreign players including Volkswagen, Skoda, Toyota, Honda Siel Cars India Ltd who entered the Indian market and offered their products in the compact automotive segment. The MSIL, HMIL, and Tata Motors had dominated this segment earlier. Therefore, HMIL's retention ratio has dropped and was less than its closest competitor, Maruti Suzuki, and further declined due to intense competition from the global market as well. Figure 1 (Source: TechSci Research, Annual Report) Table 1 Domestic Market Share for 2018-19 Passenger Vehicles 13 Commercial Vehicles 4 Three Wheelers 3 Two Wheelers 80 Grand Total 100 • The automotive industry includes the manufacture of commercial vehicles, passenger vehicles and 3 &2-wheelers. http://iaeme.com/Home/journal/IJM 151 [email protected] A Case Study on Tactics for Customer Retention at Hyundai Motor India Ltd Figure 2 (Source: Society of Indian Automobile manufacturers (SIAM)) • Two-wheelers are by far the most popular vehicle in India, taking a share of 80 per cent in2018-19. • FY19 produced 26.28 million automobiles. Figure 3 (Source: Society of Indian Automobile Manufacturers (SIAM), The Economic Times) • In 2017, India became the fourth largest car market with sales (excluding two-wheelers) rising by 9.5 per cent year-on-year to 4.02 million units in 2017. Overall domestic car sales rose to CAGR 6.71 per cent between FY13-19 with 26.27 million vehicles being sold inFY19. • With 30.92 million vehicles produced in the country in FY19, domestic automotive production increased by 6.96 per cent CAGR between FY13-19. • In FY19, commercial vehicles registered the fastest growth in domestic sales at 17.55% year-on-year, led by three-wheelers at 10.27% year-on-year, respectively. http://iaeme.com/Home/journal/IJM 152 [email protected] Shrikant Ratley and Ganesh Waghmare Figure 4 (Source: Society of Indian Automobile Manufacturers (SIAM)) • The domestic Indian auto market is dominated by two-wheelers and passenger cars. Sales of passenger cars are dominated by cars small and medium in size. • Two-wheelers and passenger cars accounted for 81 per cent and 13 per cent, respectively, of over 2,97 million vehicles sold inFY19. • In FY19, total automotive exports exceeded 4.63 million vehicles, showing a CAGR of 8.11 per cent between FY13 andFY19. • Two-wheelers constituted 70.9% of the vehicles exported, followed by passenger vehicles with 14.6%, three-wheelers with 12.3% and commercial vehicles with2.2%. • In FY19, total exports of automobiles increased by 14.50 per cent year-on-year. Figure 5 Major Players in Indian Automobile Industry (Source: ET Auto.com (from the Economic Times) http://iaeme.com/Home/journal/IJM 153 [email protected] A Case Study on Tactics for Customer Retention at Hyundai Motor India Ltd 1.2 Company Hyundai Motor India Ltd is a wholly owned subsidiary of the India headquartered Hyundai Motor Company. It is the second largest producer of automobiles with a market share of 16.2 per cent as of 2018 and a turnover of 5.8 billion USD in India. Hyundai Santro Xing / Atos Prime (Discontinued-2014) was produced exclusively by Hyundai Motor India Limited. On 6 May 1996 Hyundai Motor India Limited was founded by South Korea's Hyundai Motor Company. The brand Hyundai was almost unknown in India when the Hyundai Motor Company entered the Indian Car Market in 1996. There were only five major car manufacturers in India at the time of Hyundai's 1996 entry, i.e. Maruti, Hindustan, Tata, Prime Minister and Mahindra. Daewoo had entered the Indian car market with Cielo just three years ago, while Ford, Opel and Honda had entered the automotive market less than one year ago. Maruti Suzuki had a near-monopoly over the passenger car segment for more than a decade until Hyundai arrived because Tata Motors and Mahindra & Mahindra were exclusively manufacturers of utility and commercial vehicles, while Hindustan and Premier built outdated and uncompetitive products both. HMIL operates two production plants in Irungattukottai, Sriperumbudur, Chennai, Tamil Nadu. HMIL's manufacturing plant near Chennai claims to have the country's most advanced capabilities in production, quality, and testing. In February 2008, HMIL commissioned its second plant, which produces an additional 300,000 units per year, to cater for rising demand, increasing the total production capacity of HMIL to 700,000 units per year. Hyundai Motor India Engineering (HMIE) is a wholly owned subsidiary of Hyundai Motor Company, headquartered in Hyderabad, Telangana, South Korea. HMIL formed HMIE in November 2006 and contributed to the development of popular new models for the Indian market by Hyundai Motors beginning with the Eon and now followed by the I series, and in SUV segments such as the Creta. Many overseas R&D centers of Hyundai Motors are based in the United States, Germany, Japan, Korea and China. Mr. Y K Koo has been MD & CEO of Hyundai Motor India Limited as of November 2015. 1.3 Main Content On May 13, 2011, two days after the successful launch of the new Hyundai Verna, Nalin Kapoor (Kapoor), General Manager (Sales and Marketing) of Hyundai Motor India Ltd. (HMIL), was sipping coffee in his sixth-floor cabin in Jasola, New Delhi, and looking at internal reports from the firm. HMIL had been doing satisfactorily since 1996, when it started operations in India. The Hyundai Santro had been released ambitiously in the year 1998. Since then, after Maruti Suzuki India Ltd (MSIL), HMIL had grown to become the second-largest car manufacturer in India, an emerging market. Kapoor contemplated the growing threat posed by major players such as Volkswagen, Skoda, Toyota, Honda Siel Cars India Ltd that had entered the Indian market and offered their products in the compact car segment. The MSIL, HMIL, and Tata Motors had dominated this market earlier. The internal reports indicated that the customer retention ratio of HMIL was lower than that of its closest MSIL rival, and was further decreasing due to intense competition on the global market. 1.4 Kapoor Pointed Out In the automotive industry, customer retention is a big problem with the purchasing cycle of consumers ranging from at least 3 to 5 years and the cost of brand switching being zero. The challenge for marketers is therefore to give the consumer continuous satisfaction by providing http://iaeme.com/Home/journal/IJM 154 [email protected] Shrikant Ratley and Ganesh Waghmare a quality product, excellent after-sales service and regular customer contact to make him more involved with the business In the past, HMIL had been running customer retention projects such as providing an exchange incentive and improving products and carrying on other activities related to public relations (PR), but these were of a short term nature.
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