Back in January of 2003 we presented a white paper by
our Principal, Ralph Mroz,
entitled, Is Your Business Model Right for Tomorrow's
Market. Many of you provided us positive feedback
paper (thank you). We recently ran across an
example of business model change we thought
you would find enlightening.
To quickly summarize the definition of a business
model: Your business model is the component of your
strategy that determines How you execute to
As many of you know, and some of you are examples
of, a lot of today's car buyers are using the Web to
prepare themselves for the car buying "experience." Car
dealers across the U.S., regardless of manufacturer
represented, have been struggling with making a profit
given the knowledge that today's buyer has when
visiting a dealer.
Today's new car buyer is armed with "complete"
knowledge of costs, features, and probable selling
It is estimated that 60% of today's U.S. car buyers
online before visiting a dealer.
While other car companies and their dealers have been
bemoaning this new situation (and wishing for the "good
old days"), Mazda Motor Company has been doing
something about it. Mazda appears to be the first
(only?) company to figure out how to make a profit by
leveraging what 60% (and growing) of the buying public
is going to do anyway...use the Web.
So what is Mazda doing? They are using a variation
of something Roy Fields, a former Group VP at
used to say, "If you can't fix it, feature it." Recognizing
that a majority, and growing percentage, of their
customers were using the Web to be "savvy" car
buyers, Mazda decided to embrace this "new"
By acknowledging that their customers know
the "secret," Mazda has stopped trying to pretend it
isn't so. By dealing with the price issue one-on-one
with the buyer and getting past it, they are finding that
their sales people can then have truly meaningful
conversations with the prospective buyers about their
needs, wants and demands.
Once the dialogue moves
to that arena, the sales people are better able to sell
(read, help the customer buy) accessories, extended
warranties, service contracts, etc. that are high margin
Mazda has accepted that their business model has
changed. Today's customers are different than
yesterday's. You may have noticed that dealers have
been reluctant to offer test drives since the buyer
shopped on price, a test drive was often a waste of
time in terms of getting the sale for the dealer.
Mazda has recognized that a test drive is still
something that the buyer wants from the dealer. So, as
part of making the "new" buyer comfortable with the
dealer, their dealers focus on getting you into a test
drive as soon as possible. They have a "fleet" of
available vehicles to test drive. As Mazda's COO points
out, "It helps sell the product before you even talk
They have also made their dealerships a
destination. Not only can you "price shop" on their
Internet terminals, you can spend time in their new
central cafe and entertainment zones. These also tend
to bring the customer back for post-sale service needs
(another profit center).
Besides, if the service customer
is "waiting" in a cafe surrounded by new cars...what
Does it work? Mazda reports that at the showrooms
that have been revamped they are seeing a 32% jump
in sales and a doubling of profits compared to the
dealerships still doing it the "old way."
When the customer changes How they want
to buy, that is a flag to you that your business model
may no longer be effective. Recognizing the need (and
opportunity) to make a change to your business model
can give you a competitive advantage.
We hear many business people talking about the
price-driven, inevitable commodization of their markets.
We suggest you remember to "think like a customer,"
and focus on where you can add value (and therefore
achieve higher margins) in your new business
If you would like to read (or re-read) our white
Is Your Business Model Right for Tomorrow's Market?,
just click the link below.
Read the Business Model white paper...