The terms of guarantee offered by Kia are just excellent: for example for the car called ‘cee’d’ Kia gives a guarantee on the whole car for five years or up to 150 thousand kilometres and on the drive mechanism - seven years or 150 thousand kilometres. What benefits will Kia gain from taking such a big risk?
It is good to start answering this question with realizing who is the potential client wanting to buy a cee’d. Usually it is a moderately rich person who expects from a car a good ratio of its size and equipment to price and fulfilling basic functions. This person tries to allocate a relatively small amount of money for buying and using a car, because his or her income doesn’t allow a wastage of assets. The average mileage of such a driver amounts between 15 and 20 thousand kilometres per year. It is quite possible that the c’eed could interest this type of driver.
It is a solid car, designed in Europe for European tastes and produced in the Slovakian factory. It represents workmanship of better quality than its predecessors and offers a functional interior and good equipment for a fair price. Its competitiveness has been confirmed by a lot of tests done by journalists and by a five-star result in the crash test of Euro NCAP, which indicates also high investments in safety.
In light of these facts, it is probable that Kia has also improved the reliability of its product, which is very important for customers today. Such a conclusion can be confirmed by the very long guarantee. The carmaker would not propose it if the car would not be reliable enough, because losses could be large. A customer thinks also: ‘I can risk and buy this car. Even if it breaks down, I will have the guarantee’.
These arguments have already convinced a lot of customers to buy cee’d and to fill up the bank accounts of Kia. By the average mileage of 20 thousand kilometres per year, they would not drive more than 100 thousand kilometres before the end of the full guarantee. These cars may possibly be able to drive 150 thousand kilometres without bigger problems – this will satisfy every user.
Such potential clients of Kia (and other car manufacturers, too) after the end of the guarantee period would decide to resign from authorized services of the manufacturers, where the prices for parts and service are relatively high, and would start servicing the car at a local mechanic's or by themselves. They would also use less expensive unoriginal spare parts. Now the potential user will service his car at authorized services and will use original parts, because otherwise he will lose the guarantee. This is the second (after bigger sales) source of incomes for Kia.
What will precisely be the source of incomes?
- The sale of spare parts. It is obvious that a lot of parts normally wear out during the use of the car and they are not included into guarantee.
- The regular overhauls which are required by the terms of guarantees and the materials which are periodically changed in cars, for example oils and filters.
- The owner of the car, when visiting the service, can buy some additional accessories.
- He will also visit the salesroom because it is in the same building as the service. Thanks to that, salesmen will have more opportunity to contact with client and more time to offer them a newer car version.
In this way, intelligent managers have found a source of compensation for the investment in the improvement of quality, safety and the overall image of the firm.
