Building the Land Rover Brand

See Harvard Base Case: LAND ROVER NORTH AMERICA (LRNA) (Case no 9-596-036)

Opportunity

Help transform a loose group of luxury car dealers selling Range Rovers into a franchise of Land Rover Retailers.
Create the auto industry's first variable holdback program to boost dealer profitability enough to justify dealer investment in the Land Rover Franchise.

Building New Land Rover Centres

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Bottom-line

700% revenue growth for Land Rover in the U.S.; from $150 million to $1.2 billion.
Franchise transformed a loose group of luxury auto dealers into profitable, stand-alone Land Rover Centers.

Situation

Range Rover of North America was formed in the late 1980s to allow Land Rover to sell their expensive Range Rover model in the U.S. Initially it was good incremental business for Land Rover, selling 3,000 or so incremental units per year. However, virtually all of the dealerships were luxury car dealerships that stocked a few Range Rovers as a source of some incremental profitability for them as well. For Land Rover to move along to the next level, a different type of dealer network was needed: one with a single-minded focus on all things Land Rover. The challenge? How could the company entice luxury car dealers to invest several million dollars to build new Land Rover Centers?
Fran O'Hagan was tasked with helping to invent and implement the "Business Builder" program, which was the auto industry's first variable holdback program.

Approach

The Business Builder program concept was an increase in vehicle wholesale cost, while keeping the retail price fixed. Dealer margin which previously could be negotiated away would now be returned to the dealers at a later date, and in an amount that would vary based upon dealer performance at meeting operational criteria. The result? Dramatic increase in dealer profitability, which allowed the dealers to embrace building new Land Rover Centers.