Question

Topic: Strategy

Over-ambitious But Under-utilized Limo Service.

Posted by K.J.P. on 6/10/2008 at 1:08 AM ET 1000 Points
Hello, hello to the Luminaries of Marketing and Strategy-Building.

I am in the process of signing up a strategic marketing consultancy with a company that runs a premium limousine service in Dubai. The dilemmas are quite challenging which I will breakdown as follows:

BACKGROUND:

The premium limousine service is part of a group that runs a luxury mall and 5-star hotel facility. It was initially set-up to cater to their select customer base with the objective of staying true to the prestige of their brand.

However, as business decisions go, they have now in the last year operated the unit at a loss. They have a fleet of Range Rovers and Jaguars that have huge depreciating costs, and my study shows that they are at most 25% utilized.

Their utilization is on airport-hotel-city transport plus corporate events booking as they come. They charge based on point-to-point, daily and package rates.

CURRENT MARKETING STRATEGY:

Basically non-existent. They leverage on the Group's marketing unit but they have obviously been neglected. The website has been in gestation for a year and is still not up and running, only 1 salesman is doing the business development leg work, a call center that only takes in-bound calls for bookings that are next to none.

CONSTRAINTS:

Current customer base falls within the traffic generated by the mall and hotel plus a few corporate, which only makes up for 25% utilization.

The brand represents their hospitality name, and at the onset , I see targeting other hospitality names a constraint because these companies wouldn't want their clients associating the "premium transport" to a competing brand.

TARGET/OBJECTIVES:

a. Commercial/Volume: Utilization from 25% to 100% in 1 year.
b. Strategic Marketing Design and Implementation.
c. Customer base: Target corporate, events management firm, or a 10% increase in customer base every month if the volume targets are to be met.

MY DILEMMA:

a. Is re-branding the first order of things?
b. Is the business development target of 100% utilization in 1 year at all feasible?
c. What kind of strategic marketing plan can be implemented given the objectives above? What is the strategy that will fly?
d. My business development strategy recommendations would include augmenting systems and manpower complement. Is this sound?
e. What kind of success fee shall I look at applying for a 30% quarterly increase in volume?

Help, help, help anyone and everyone! I have assigned 1000 points here and I know it is not much compared to the points posted in this forum, but by God, it's just about everything I have to give.

Jay--you have given me wonderful insights before and I call on your genius yet again!



To continue reading this question and the solution, sign up ... it's free!
SUBSCRIBE
Or, SIGN IN

RESPONSES

  • Posted by Jay Hamilton-Roth on 6/10/2008 at 8:39 AM Accepted
    I wouldn't start by rebranding. I'd first create the marketing strategy to get clear on who you're targeting, your competition, etc.

    Some simple things to generate awareness include: park the limos in prominent places on your properties, provide the limos free to clientèle (instead of using a taxi) for their mall shopping and dinner outings, and comarketing opportunities (when people call to make reservations at the hotel, ask if they want your hotel+limo package or when they call the store, offer a limo+private shopping package).

    I would get the website up and running, since it can help people find your business 24/7.

    When your hotel is booking an event, it's the natural time to offer the limo services: both for arrival/departure of their guests and also for event-related activities.

    You can get it to 100% in a year, but it probably won't be 100% paid utilization. You need to build awareness, get your scheduling systems in-place (and other infrastructure tested), etc.

    I would suggest marketing to event planners and local travel agents, since they'd be ones to recommend your services. Also, as you identify where your hotel's clientèle are traveling from (and who booked their tickets), and likewise market to those people.
  • Posted by Frank Hurtte on 6/10/2008 at 8:49 AM Accepted
    First of all, 100% utilization is impossible. Based on my experience with many in the service sector - top performers hit 80% utilization then adjust their prices upwards. Once you hit the 82-85% mark logistics and service issues begin driving your own costs upwards.

    I suggest the business model consider this point.
  • Posted by K.J.P. on 6/10/2008 at 12:18 PM Author
    Hi W.M.M.A, Jay and Frank!

    Thank you for your posts, I have been in breathless anticipation since I uploaded mine this morning.

    W.M.M.A., I can certainly wait until you have put your inputs across and I am very excited to hear it since you have dealt with a similar platform, albeit I understand the market conditions might be different but a sound marketing strategy is a sound marketing strategy.

    Jay--Dubai and the United Arab Emirates are in the thick of a hospitality boom. I did some brainstorming with my team and understand the constraints approaching other hospitality brands with the limousine services of a competing one. I certainly agree that the first order of things would be to define the structure of a marketing strategy but I cannot neglect that a chunk of the business volume is derived from hospitality.

    Utilization outside, the target for the next year is to break-even as they have operated at a severe loss in the last year. I agree with both you and Frank that 100% paid utilization is impossible, but I would like to ask whether a 30% increase in customer base quarterly is possible, with a very niche product like this.

    How do we break-out from a market that has every tom, dick or harry offering premium limousine services? You have the big operators and the medium and small-scale ones, all after the same pie. Outside hospitality, events management firms, and corporate, what is out there waiting to leap at you like a bright idea? "Think increasing volume or customer base, " has been my mantra of late and still!
  • Posted by K.J.P. on 6/11/2008 at 2:10 AM Author
    Hi Pat,

    Thank you for such response.

    I take it to mean that you say 30% quarterly growth is possible, as it is the parameters you have work with and continue to do so with your client base. That would be an 80% growth in a year, and while the numbers look great, the market in Dubai is one where Range Rovers and Jaguars are common place, as "your everyday vehicle," so as a Marketer, I get the jitters. That's a huge commitment to make for such a niche product like this.

    I love your ideas on the destination management companies and the suggestion to tap into the limo network of US and European companies. The Green Aspect might be a challenge, as the Range Rovers and Jaguars are gas guzzlers, and not a model vehicle for reduced carbon footprint. So any further thought towards this would be welcome.

    WMMA, I am still waiting for your inputs and hope to receive it soon!






  • Posted by Tracey on 6/11/2008 at 7:01 PM Accepted
    I don't have all the answers, but here are some ideas for immediate action.

    Rebranding: Can you fall under the existing brand of the hotel/mall so you don't have to support a new effort?

    Is the hotel marketing the cars - on its website or in any other campaigns they do, and communications with their clientele? Is the hotel concierge recommending the car service to every guest?

    Relationships: I would start with organizations like a convention and visitors bureau (or its Dubai equivalent). These organizations tend to already have strong relationships with travel agents and event planners, so you can leverage 1 relationship with the CVB into relationships with many or most of the agents and planners that work in the region.

    Website - Get a professional designer or design firm on the project. The site doesn't have to be that complicated, and probably could be developed with a couple of months max. There will be cost associated, obviously, but less than the cost of the lost business due to the website not being up for so long.

    Hope that helps; best of luck.
  • Posted by K.J.P. on 6/12/2008 at 12:44 AM Author
    Hi Tracey! Collectively I believe, we would have the answers I need to go forward with the project.

    I have read the posts again, and I would just like to apologize for my post referring to the 80% growth. The current company would like to to achieve an 80% growth in the business in a year. Pat has mentioned that her commitment to her clients is 30%. I just wanted to ask, as a point of clarification if she was referring to this on a per annum basis.

    I would love to hear a couple more inputs before I close the question and I thank everyone who have participated so far!
  • Posted on 6/12/2008 at 2:35 PM Member
    How many cars are there now...? What more will they add as less cars cannot justify the marketing.

    Dubai is booming, and with traffic jams even 500 is small...the city needs a powerhouse player...but do they have the muscle...

    I have been ushered many time by such limos in Dubai and the shortage is screaming.

    If they have the numbers you will win in no time
  • Posted by K.J.P. on 6/13/2008 at 2:33 AM Author
    Hi KW. There are currently running a fleet of 30 vehicles. They are premium vehicles, Jaguars and Range Rovers. They certainly have the muscle, but at the current size is even only 25% utilized.

    I have worked in the automotive industry in Dubai for nearly 3 years and it is not a question of fleet size when your utilization is as outlined above. The first order of things obviously is to get the customer base up such that you can look at achieving 85% utilization. This is why the strategic marketing strategy and business development is key.

    Maybe you can help and let me know how you avail of the premium limousine services when you are in town?

    Any other suggestions on strategy and business development are very, very welcome too!
  • Posted by Vigyan Verma on 6/13/2008 at 6:13 AM Accepted
    I have gone through many of the above suggestions and they are really wholesome. I would like to add the following.

    Sometimes, a mother brand becomes a liability if one starts looking at an extension as a business unto itself. I get the same sense as far as the limousine service brand is concerned. It was originally intended to be an extension of the hotel and mall businesses so that one could have a seamless brand experience across hotel, mall and limousine.

    In my view one should consider the following.

    1. You should first do a realistic assessment whether the Jaguars and Range Rovers based limo service really represent an edge of exclusivity in the hospitality services in Dubai.
    a) Are these vehicles aspirational enough to market?
    b) Are other hotels/malls offering similar or better vehicles? Does it make the existing limo service a positive discriminator?

    If the answers to these are favourable then you'll have to perhaps align closely with the Marketing-in-charge of the hotel and mall, which are part of your group. It could be a joint promotion with the hotel, with your limo service as an attractive value add. The starting point of consumer interface in this case is the hotel or mall. They can talk about this added feature to corporates and event managers.

    If the limo service, in its current form does not provide any exclusivity (or at least parity) to the hotel vis-a-vis limos by other hospitality outfits, then the expectations out of the business may be unrealistic.
    Even in case of it being at least parity, it may be sensible to pare down the number of vehicles so that the utilization level is high and operations are profitable. The reason is that having a brand extension of a hospitality group prevents other hospitality groups from accessing these services.

    2. Another option is to hive off the limo business branding wise though the business ownership may remain with your hospitality group. This will open up options for this limo service to associate with other hospitality units while remaining conveniently accessible to your own business group.
    This sort of branding arrangement is also most ideally suited to on-line booking etc. On the other hand, one may guard against making a luxury brand (if it were your hotel brand name extension) too accessible through a 'democratic' medium like internet. Hiving off your limo branding-wise while remaining as part of group business could result in better utilization of the services.



  • Posted by K.J.P. on 6/15/2008 at 12:21 AM Author
    Thank you so much for the great inputs you have given me and I am truly mighty appreciative!

    Be assured that I will be back for more!

    All the best,
    Kristine
  • Posted on 7/3/2008 at 12:29 PM Member
    hi...

    am NOT a Limo Biz Guru...
    But PPL consult me for Marketing services in Dubai...
    as am a Travel & Tourism Professional...
    I work with a support team...who are hands on guys operating a limo biz at a 5 star hotel...they are in the field...

    I can assist you with the task you have at hand...maximizing capacity utilization...and rest will fall in place...

    Am currently advising an Investor who is setting up a Luxury Limo bizness...I also assist in getting contracts...

    To guide your limo biz towards profitability...

    Identify the resources / limitations you have...

    No. Of Drivers,
    No. of Vehicles,
    No. of hotel contracts...( Its NOT taboo exploring other hospitality contracts...There is a huge need )
    No. of Corporate accounts...etc...

    I dont take anything in advance if your group is big...i deliver and then i take a cut of the bootie...contracts are for one year periods...so its a continuous process...

    I think 30% as fees u r seeking for turning around the business is Fair...

    let me know...lets TALK...

    Mohamed

BACK TO TOP

Post a Comment

Related Discussions

Community Info

Top 25 Experts
(Strategy)