This case discusses about an issue that have a potential to change the customers' perception of a company, which is highly regarded for continuously innovating and valuing its customers.
ABE Consumer Finance India
On 20th May 2005, it was yet another busy morning for Mr. Kumar, making calls and convincing his customers to buy the personal loan which his company sells. Kumar is a product marketing executive of the ABE Consumer Finance India. His work starts 10 in the morning and can extend even up to 8 in the night. Kumar's job involves working under extreme pressure. He sells personal loans for the existing customers of the company. He makes telephone calls to his customers to inform them about the details of the loan that has been offered by his company. He never misses a chance to sell at the slightest intent of the customer's interest in the product since the daily target fixed by his manager ranges somewhere between 1 lakh and 1.5 lakh rupees.
ABE GLOBAL INCORPORATION
ABE GLOBAL INCORPORATION was founded by a wealthy American businessman Mr. Jamie Fox during 1950s in America. Initially, the company manufactured electrical goods. During 1960s, it diversified into manufacturing electronic household consumer durables. Subsequently, the company flourished during the following years. It was regarded as one of the prestigious institutions in America. Soon ABE GLOBAL INC., amassed huge profits under the able leadership of Mr. Jamie Fox. ABE GLOBAL INC., found new growth opportunities in foreign lands too. So it started its operations in the European, Asian, and Australian countries and presently its operations spreads around 80 countries. ABE GLOBAL INC., has shown a profit after tax of $8 billion registering a compounded annual growth rate of over 40% for the past 10 years. (See EXIHIBIT 1 for the country wise breakup of profit). Keeping its philosophy of satisfying the household needs of the general public, ABE came out with an innovative idea of financing its products. To achieve this, ABE floated a special subsidiary called ABE CONSUMER FINANCE LTD. This has led more and more people belonging to the middle and lower income group buying ABE GLOBAL's products. This has helped ABE to a greater extent in maintaining the growth rate and thereby reaching out to the local masses in different countries. The tradition of constant innovation and delivery of values to the customers was maintained by all the CEOs who followed Mr. Fox for the past 57 years. Presently, ABE GLOBAL is headed by Mr. Alex Mathews. Mr. Mathews took over the reigns of the company in 2005. Mr. Mathews is one of youngest CEO and has received the BEST CEO AWARD for the year 2006.
ABE CONSUMER FINANCE INDIA
ABE Consumer Finance India Ltd., is the wholly owned subsidiary of ABE GLOBAL INCORPORATION in the Indian subcontinent. It sells loan products targeting the middle income group to satisfy their buying needs of household consumer durables. It found the path to the Indian market when the flood gates were opened post globalization. It is almost 10 years now since ABE started its operations and still finds the Indian market very lucrative. The Indian arm shows an annual revenue of over two billion dollars which is over 20% of its global sales (See EXHIBIT 2 for Indian sales figure). Presently, the Indian operation is headed by Mr. Henry Smith. Smith is an MBA from Harvard University. Smith is a highly ambitious person. He is young, energetic, and an active CEO whom ABE has ever found in its history. He personally designs all the new and innovative financial schemes for ABE. Keeping with the high expectations of his employer, Smith has brought out a new financial product for the market. At this time, he is targeting the existing customers of his company.
Smith's new product is exclusively based on the trust the company has on its existing customers. It mainly takes into account the good payment records for the loans which they had previously availed. Based on the risk rate, the company fixes the interest rate for the product. The interest rate ranges from 1.25 percent to 2.33 percent on a monthly basis. The loan has a fixed tenor which means once a loan has been availed, it should be paid back in fixed equated monthly installments (EMI). The tenor period usually ranges from a minimum of 12 months to a maximum of 36 months. The repayment period is usually decided when the customer avails the loan and it adds more flexibility in terms of repayment. The EMI has an insurance component and the loan has one time processing charge attached to it which means the customer has to bear the costs of insurance and processing charge. The insurance amount is paid with the EMI whereas the process charge of 3.5 percent for availing the loan is deducted from the actual loan amount. (See EXIHIBIT 3 for a model of loan details chart)
THE BUSINESS MODEL
Smith has designed an exclusive ad campaign to attract the customers. With the help of the company's database about its customers, the problem of reaching the customers has been eased. The company forwards a personal mailer to each and every customer informing them about the loan. The work doesn't stop there. The company employs exclusive marketing personnel to sell the loan. A typical marketing executive would make telephone calls to the customers reminding them about the mailer and giving further information about the loan. Thereby, ABE keeps itself in constant touch with the customers. This proves to be an efficient strategy for ABE which is evident from the sales figures for the year 2006. Once the customer evinces interest in the product, he is asked to visit the ABE office. At ABE office, the customer is verified for authenticity and asked to complete a set of formalities. Once he is cleared for approval, the loan is sanctioned to him in two days time. This is one of the core competence of ABE wherein the acquisition of a customer is done in a matter of days.
Today, Mr. Kumar, our marketing executive, is facing a tight corner situation which he has never experienced. A customer, who has completed all the formalities for getting a loan like submitting the cheques, necessary proofs and securities, is unwilling to accept the loan sanctioned to him. Kumar is very upset considering the effort he put in to convince him. The bone of contention is that the customer is not satisfied about paying a processing charge of 3.5 percent for the loan amount. Kumar has tried his level best in trying to convince his customer but all in vain. The customer was very particular that he was unaware of the high processing charge. When Kumar brought this information to the notice of his manager, he was called in for a review of the situation to find out what went wrong. Together they found out that while briefing about the details of the loan to the customer, Kumar did not give much importance to the processing charge. As a result, the customer was kept in dark about the processing charge rate and the costs associated with it. At the outset, Kumar and his manager were worried about whether they would able to retain the customer, the implications of this particular incident on the company, and the image of the company. Moreover, both the parties stand to lose their valuable time and the cost spent in the whole process.
To discuss about the importance of ethics, transparency and candor in business communication To understand how the integrity of the salesperson / marketing executive affects the customer's perception of a brand or a company
Target audience - Post Graduate students of Business Administration
Course focus - Business Communication / Consumer Behavior / Corporate
Case duration - 1.5 hours to 2.5 hours
This case was developed based on the model given in the appendix.
Country-wise breakup of revenues and profit for the year 2006 (dollars in millions) Country Revenue Earnings before tax Profit after tax US 2,581 1,864 1,656 UK 2,650 2,368 2,190 Australia 1,805 1,532 1,276 Asia 3,690 3,280 2,981 TOTAL 10,727 9,044 8,103
Region wise breakup of sales in India for the year 2006 (Rs in millions) Region Revenue Rs. Earnings before tax Rs. Profit after tax Rs. Northern India &Capital 30,578 22,167 17,212 Eastern India 26,143 19,790 14,654 Central India &Deccan 22,231 16,889 11,590 Southern India 23,165 17,124 12,345 TOTAL 1,02,117 76,970 55,801
A typical loan details chart Customer name Loan amount Rs. Interest rate per month Tenor (months) EMI Rs. Loan sanctioned * Rs. Ram 20,000 1.25% 12 1500 19,300 Parthiban 25,000 1.88% 24 1250 24,125 Karthik 50,000 2.33% 36 1400 48,250 *Loan sanctioned= loan amount - processing charge @ 3.5% of the loan amount
The author(s) certify that this case has not been published or under consideration for publication elsewhere.
*K. Sri Gayathridevi, Sr. Lecturer, PSG Institute of Management, Coimbatore, India.
e-mail: [email protected]
I am currently a faculty member at one of the top B-Schools in Tamilnadu State in India. I've been in the teaching field for the past 12 years. I have published many articles, 4 cases and research papers in magazines, news papers and National and International Journals. Also I have presented cases and research articles in National and international conferences within and outside the country. I have conducted nearly 50 training programs for students, teachers and corporate on Communication Skills, Presentation Skills, Leadership Skills, Team Building, Interpersonal Communication, Telephone Etiquettes, E-mail Ettiquettes and Written Communication. I have attended 4 months intensive Faculty Development Program at IIM-Ahmedabad, the number one B-School in India and several other programs in leading Business Schools in India. My areas of interest and research are Business Communication and Managerial communication. Currently doing my doctoral research on the topic 'Kinesics Pattern Study of Sales Personnel in Retail Clothing Sector'.
*Dr. D. Sudharani Ravindran, Prof and Head, Marketing, PSG Institute of Management, Coimbatore, India.
e-mail: [email protected]
Professor and Head for Marketing; I started my career as a Consultant and after more than a decade of experience shifted to academics. I obtained my doctoral degree in Management from Bharathiar University in 1998. I have an experience of 10 years in teaching and 7 years in research. My areas of interest include Supply Chain Management, Logistics and Marketing. I have also conducted Management Development Programs in those areas for company executives. I was the Secretary of (PSGMAA) PSG Management Alumni Association from 2003-06. I am guiding Ph.D. Scholars in the areas of Marketing and Supply Chain Management. I was the controller of Exams of PSGIM from 2002 to 05. I was awarded an AICTE project on Community participation in 'Water Supply Management and Revival and Sustainability of Water Resources in Tamilnadu'. I was also the Coordinator for AIMA ,PGDM course from 2007- 10.
**KP Naachimuthu, Lecturer, PSG Institute of Management, Coimbatore, India.
e-mail: [email protected]
Mr. K.P. Naachimuthu was previously associated with Centre for Organization Development (COD), Hyderabad as a Research Fellow; Sona College of Technology, Salem, TamilNadu as a Lecturer; Indian School of Business, Hyderabad as Research Assistant. He has over 30 publications to his credit in reputed National Journals and Newsletter. He has compiled / authored and co-authored 4 books. He has constructed, standardized and published two psychological tests. He has also presented several papers in National and International conferences / seminars in India. He also has coordinated national level seminar & conference. Other than his regular teaching at Sona he also handled classes for MBA Distance Learning Programme of Anna University (Chennai & Coimbatore) and Periyar University. He is a resource person for handling sessions on Premarital Counseling jointly organized by Central Social Welfare Board, New Delhi & YMCA, Tiruppur. He was a Resource person for the beneficiaries of Prime Minister Rozgar Yojana (PMRY) training organized by Community Polytechnic, Salem. He has been bestowed with a Gold Medal from Institute of Education, Research and Development (Kolkata) for his research and publications initiatives in Management discipline; and Dr. Ram Gopal Soni award of Best author from Indian Psychometric and Educational Research Association (Patna). He is a founder member of the quarterly journal Global Management Review, Sona Journal of Marketing Research, and Editor for Sona e-Mag (monthly electronic Magazine).