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MAK LUBRICANTS

SERVICING THE CUSTOMER

M a r k e t i n g c a s e s t u d y

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MAK LUBRICANTS : SERVICING THE CUSTOMER

1. Lubricants Market in IndiaIndia is the sixth largest consumer of lubricants in the world and the third in the Asia Pacific. Indias

current lubricants market sold in organized sector is estimated to be 1500 TMT, constituting of 60%

automotive and 40% industrial sector. Unlike other countries where lubricant demand has witnessed

near stagnation, the Indian market has been growing at approximately 3.5% to 4% per annum. Having

predominance by the three major public sector oil companies i.e. IOCL, BPCL and HPCL until 1993, thelubricants market in India encouraged private players to invest in this industry, on liberalization.

Presence of more than 35 established players in the market (mostly MNCs) have made it an extremely

competitive market.

2. MAKLubricants- BackgroundBPCL has been marketing lubricants under various brand names since its nationalization in 1976. In

2003, BPCL decided to go for umbrella brand - MAK for all categories of lubricants. Consequent to

the restructuring of BPCL in 1998, six strategic business units (SBU) were formed with Lubricants

business unit being one of them. The main objective of restructuring was to have a customer focused

approach to each business with emphasis on process based working instead of function based

working. Currently, in all, BPCL markets over 400 SKUs in reseller (Retail and Bazaar) and industrial

channels.

3. Business Performance (Reseller Channel) :i. Retail Outlet Channel (BPCL Petrol Pumps)

BPCLs core strength and the most profitable channel are the 9250 retail outlets with 250/300 stations

being added every year. BPCL also markets MAK lubricants through retail outlets of Numaligarh

Refinery (NRL), Indraprastha Gas (IGL) and Mahanagar Gas (MGL) where BPCL is a JV partner.Although there is a constant shift of lubes market from retail outlets to Bazaar (consisting of mechanic

shops, Spare parts shops, Authorised Service stations, Lube shops, Fleet owners garage etc.), BPCL s

Lubes SBU has taken various initiatives to arrest the negative trend. Currently, the major chunk of

lubes sales in retail outlets is 2T oil and small packs for bikers and auto rickshaws. The Lubes SBU has

been able to sustain volumes through this channel by taking various initiatives like putting up Hero

Service Stations (service tie up between Hero Moto Corp and BPCL), Tata Authorised Service Stations

(TASS), both together 182 numbers and installation of Quick Oil Change machines at retail outlets.

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Retail Outlet channel is not only profitable having a large captive customer base, but it also gives

opportunity to personally interact with customers. The challenge would be to revitalize the channeland win back the oil change business.

ii. Bazaar ChannelConsequent to shift in market for automotive grades from oil company retail outlets to Bazaar, the

market share of oil PSUs have fallen sharply. In early nineties, 70% of automotive lubricants were

marketed through retail outlets of oil PSUs. Now the share has reduced to a mere 30% and bulk of the

market in this segment has shifted to Bazaar. This shift in automotive lubes market has necessitated

development of new connections and relationships along with new learning and unlearning of selling

lubes in the high street. BPCL, therefore, from 2001 onwards started marketing in the Bazaar channel

by creating a separate marketing structure at Regional and Territory level to handle this channel inexclusivity.

With a network of 281 Primary Lube Distributors (PLD), 115 Industrial Lube Distributors (ILDs), 18

Rural Lube Distributors (RLDs), 59 LPG Distributors selling lubricants, 550 MAKGarages (automobile

garages assisted by us in exchange for sale ofMAKbrand lubes), the Lube business has continued to

show year on year growth. However BPCLs share in bazaar channel still continues to be lower as

compared to other established players. BPCLs sales volume in Bazaar channel has increased from

5000 MT in 2000-01 to 55000 MT in 2010-11. This channel has thrown up several challenges in

particular as BPCL needs to compete with several reputed and experienced MNCs.

Future Aspirations

Lubes business has drawn up plans to target substantial higher share in Bazaar market by 2015 with a

significant high brand recall. The brand vision is that MAK Lubricants shall be one of the most

Reliable, Innovative, Youthful and Endearing Lubricant Brands in the country.

The Lubricants SBU also has the following business aspiration for the next 5 years :

To Strengthen Brand Equity and be amongst the Top Two Lubricant Brands in India.

The Lube Business has also drawn up plans to upgrade support services to make this happen.

Even though BPCL has the strategy to enhance the business potential and increase the market share

of MAK through various initiatives, there are still certain areas which need strategic

decisions/investments. Apart from selling only Lubricants, can MAKbecome an automotive solution

provider to its customers?

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4. Emerging trends and Challenges for Auto Servicing :According to industry estimates, in the next four years, automobile companies in India will roll out

more than double the number of cars than they make today. BPCL expects the domestic demand to

grow at double-digit rates for the next three to four years. The growth which is being witnessed in this

segment has changed the dynamics of the automobile service industry in India. The authorized service

stations, though, are expanding their base, the high service costs involved at these station is unable to

pull the customer back after the sales. It is evident from the fact that most of the OEs operate at the

level of less than 30% for after sales services at authorised service stations.

The potential of the growing automobile population is common knowledge and is attracting lots of

outside interest. The service segment in particular is about to face the toughest competition that the

segment has ever seen. And, this will not come from the local garages, or the road-side mechanics, or

even other dealers.

The competition that this segment is facing today, and the gravity of which would increase with time,

is from large business houses who have sniffed the huge potential that this rapidly expanding segment

presents and are willing to pump in enormous amount of capital to capture a significant pie of the

after-sales service market. They will do this by providing top class services and a positive overall

experience to the customer.

Historically, strong brands like Castrol have depended on a strong service network (Bike Zones and PitStops) to maintain a connect with the customer as well as the people influencing the purchase.

Relationship building has formed a strong part of their strategy, which includes relationship with the

customer in terms of better and stronger services and relationship with influencers in terms of tie ups

etc.

Currently, servicing if offered is in different variants which are spread across the value ladder and

offer different propositions to consumers seeking vehicle servicing. The different segments are:

1. Mechanics who are normally attached to retailers and carryout servicing.2. Road side garages which have sufficient infrastructure, however their business model is verycrude and does not focus on customer amenities.3. Structured service stations independently operating or are franchisees of renowned groups like

BOSCH, TVS, Carnation etc.

4. Authorised Service Stations who service only specific brands of vehicles.

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BPCL has identified few challenges for each of the above segments which must be addressed so as to

make MAKa dominant brand. These challenges mainly pertain to reseller market and are :

i. Mechanicsthe Influencer in enhancing Lubricants brand and business:Automotive Lubricant is a Low involvement category where users have very little knowledge of the

product, due to which mechanics exert high influence on the selection of the lubricant brand.

Consequently, the road side mechanics/garages (unauthorised) play a vital role in both the promotion

of the brand as well as influencing the purchase of the lubricant. It would be beneficial for BPCL to

build a relationship with mechanics of those customers who do not visit Authorised Service Stations to

get their vehicles serviced. This trend is more prevalent in the 2 wheeler sector where customers

prefer the advantage of quicker, convenient and economical servicing.

The challenge would be to enrol these mechanics into becoming our brand ambassadors with the

ultimate aim of recommending our brand and also to retain them in their association with MAK

Lubricants through a tie up / franchisee set up.

ii. Un authorised Service NetworkPotential for MAKServicing Vertical NetworkDuring last 4-5 years with the emergence of foreign automobile makers and advancement in

automobile technology, servicing and repairing of vehicles has shifted to Authorised service stations

(ASS) of original equipment (OE) manufacturers. However, the general perception of the Indian

Consumers is that the Authorised Service Stations tend to overcharge the customers and the economy

of service and value for money will be available only through reputed Mechanics / UnauthorisedGarages.

The challenge would be to have a service vertical which would provide the value for money benefits of

an unauthorised service station while at the same time reassuring the customer that his vehicle is

getting the best service under trained manpower supervision.

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So the questions that need to be answered are

1. To enhance the business potential and to be perceived as an all round lubricants service andsolutions provider, is it necessary for MAKto venture in to a Service Vertical?

2. If yes, what should be the business model options for BPCL which would bring in value for allstake holders (Customer, Company, Mechanics, Garage / Service Station Owners, OEMs)?

3. For each of the segments mentioned above what should be the business strategy for BPCL tostrengthen its presence in lubes market? Participants should cover the following :

i. Short term tactical measures BPCL should take immediatelyii. Long term strategy which can give sustainable competitive advantage to lubes business.

4. Management feels that the first segment i.e) the mechanics, could be taken on first as it involvesleast infusion of funds. If that be the case, how do you feel the company should develop a

comprehensive model to enthuse this important stake holder?

5. Is BPCL increasing or devaluing the value of its brand MAKby entering into service tieups? Howwould the customer look at this overall initiative?

6. Do you think service initiatives can emerge as a separate revenue stream for BPCL in near future,please justify your recommendations?7. Will these initiatives create any channel conflict - Inter (between Retail & Bazaar) / Intra

(mechanics, service stations & MAKbranded service stations) channels ?

Participants are required to carry out complete environment analysis (SWOT, PESTAL, Competitor

analysis) while they workout the modalities of proposed model. It is also suggested that dipstick

surveys be carried out to understand the current AS-IS models of BPCL and other key competitors in

this space. The participants must cover the financials of the Model and ROI for the investments

recommended both for BPCL and Channel Partners (If any).

The participating teams should focus on improving the current value proposition to the company,

associates, as well as the customer. The participants must give due consideration to the changing

economic scenario, changing demographic profile, growing middle class aspirations, realistic

assessment of improvement in literacy levels in society- Urban, semi urban and rural, in next 5 to 10

years etc.

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Annexure I :

In case of any further information following persons can be contacted :

S.N City Name Designation Office Contact

No.

Cell No.

1 Mumbai Mr. Pushp Kumar Nayyar National Channel Manager (Lubes)

Reseller

022-22713798 9619381991

2 Mumbai Mr. Akshay Wadhwa Business Strategy Manager 022-22713787 9967656478

3 Mumbai Ms. Sheilagh Nair Brand Manager 022-22713793 9819980398

4 Mumbai Mr.K.Ravi Territory Mgr. Lubes Mumbai - Reseller 022-24117588 9967665099

5 Delhi Mr. Rajen Saha Territory Mgr. Lubes Delhi - Reseller 011-23326369 9868178945

6 Kolkata Mr. Sanjay Maity Territory Mgr. Lubes Kolkata - Reseller 033-24293170 9831911311

7 Bangalore Mr.Rajeev Kumar Territory Mgr. Lubes - Bangalore 080-22955470 9448990901

8 Chennai Mr.S.Kannan Territory Mgr. Lubes Chennai 044-26142371 9941311559

9 Hyderabad Mr.M.Sudhakar Babu Territory Mgr. Lubes Secunderabad 040-27260707 9866678585

10 Pune Mr.D.Saha Territory Mgr. Lubes Reseller - Pune 020-26359790 9920011490

11 Ahmedabad Mr.H.V.Gireesh Territory Mgr. Lubes Ahmedabad 079-26465254 7698850600

12 Bhopal Mr.Brij Dutta Territory Mgr. Lubes Bhopal 0755-4232251 9977098698

13 Lucknow Mr.Vinay Sharan Territory Mgr. Lubes Lucknow 0522-2236889 9453020764

14 Bhubaneswar Mr. Sanjay Kanotra Territory Mgr. Lubes Bhubaneswar 0674-2547760 9437080383

15 Jamshedpur Mr.Shailesh Malhotra Territory Mgr. Lubes Ranchi 0651-2462273 8051100106

16 Kozhikode Mr. Suresh Kumar Territory Mgr. Lubes Kochi 0484-2114073 9847418044

17 Guwahati Mr.Ashish Nigam Territory Mgr. Lubes Guwahati 0361-2234888 9678010770

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