strategic marketing & planning - pakistan state oil

STRATEGIC MARKETING AND PLANNING PAKISTAN STATE OILAutomotive Lubricants

BACKGROUND REPORT

Pakistan State Oil Company Limited is one of Pakistan’s largest companies which

posted an after tax profit of Rs. 4.2 billion this year.

For nearly two decades PSO had held the reigns of market leadership when it

came to lubricants. Yet in 1994, when the government announced a new petroleum

policy in which lubricants were deregulated, PSO failed to react and manage the

challenges of the free market conditions. It did not expand its stagnant product lines, and

the growing consumer needs were met instead by its closest competitors, Shell and

Caltex.

In 2000, PSO underwent a corporate restructuring, and thus began its

transformation process that has seen it restored as market leader in POL products, and has

regained significant confidence in its lubricants division. The following highlight the

changes brought on for lubricants during the transformation process:

1. The formation of a complete value chain under the new business unit

concept.

2. Extension of product line.

3. Technical seminars conducted for dealers.

4. Improved customer services.

PSO’s extensive progress in such short time warranted it a proposal for

privatization in 2003. Yet time passed, and the prospect of privatization kept being

delayed. Finally, with the completion of PTCL’s privatization process this year, PSO is

now scheduled to be next in line with the date set for the end of 2005.

1


1. BUSINESS SCOPE

Business we are in:

The provision of the highest quality petroleum products and services to

customers.

Specific Region:

3,800 retail outlets (stations) scattered all over Pakistan’s geography

Lubricants manufacturing plants in Korangi and Kemari

Who are we serving?

Automobile owners

High-Street distributors

What are we offering?

High quality grades of lubricants

The world’s leading brand of motor oils: “Castrol”

How are we achieving our goals?

Integrated value chain

Strong marketing capabilities

Largest retail network

Business we are not in:

Engine parts manufacturing

2


2. EXTERNAL ENVIRONMENT

2.1 Market Structure

End-Customer Brackets

BRAND LOYAL

Will buy lubricants based on perceived quality and from preferred vendor

Will buy lubricants from that station that has shown best service or quality

CONVENIENCE

Will purchase lubricants from vendor that is most convenient

Purchases from station closest to home/work

PRICE CONSCIOUS

Purchases based on lower price The loudest customer type, will buy

that lubricant that fits desired quality and fits the wallet

IMPULSE

Will buy lubricants on impulse While filling petrol at station, will

suddenly realize the need for lubricant

PSO has the most retail outlets, thus a good portion of its customers fall under the

Convenience and Impulse brackets.

However, the majority of PSO’s customers fall under the Brand Loyal brackets

because of Castrol’s higher quality offering.

3


2.2 Competitive Sales Analysis

Industry Sales

(Litres)

Industry

Player2001/02 2002/03 2003/04 2004/05

PSO 39,953,740.00 40,257,985.94 39,843,800.44 46,256,954.85

Shell 44,273,063.24 46,967,650.26 50,390,688.79 53,966,447.33

Caltex 19,436,954.59 22,365,547.74 23,437,529.67 25,698,308.25

Others 4,319,323.24 2,236,554.77 3,515,629.45 2,569,830.83

Total 107,983,081.07 111,827,738.71 117,187,648.35 128,491,541.26

4

-

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

Litres

2001/02 2002/03 2003/04 2004/05

Fiscal Year

Yearly Sales (Litres)

PSO

Shell

Caltex

Others


5

Sales Growth Over Four Year Period

-

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

PSO Shell Caltex Others

Industry Players

Litres

2001/02

2002/03

2003/04

2004/05

Total Industry Sales(Litres)

95,000,000

100,000,000

105,000,000

110,000,000

115,000,000

120,000,000

125,000,000

130,000,000

135,000,000

2001/02 2002/03 2003/04 2004/05


2.3 Competitive Market Share Analysis

Market Share in Lubricants Category

(Percentage of Total)

Industry

Player2001/02 2002/03 2003/04 2004/05

PSO 37% 36% 34% 36%

Shell 41% 42% 43% 42%

Caltex 18% 20% 20% 20%

Others 4% 2% 3% 2%

Total 100% 100% 100% 100%

PSO is currently number two in the industry with a market share in 2005 of 36%.

Shell continues to be the market leader.

Caltex has consistently maintained its position in the market.

Oil marketing giant Total has recently entered the Pakistani market, yet still has

not afforded marketing efforts towards their lubricants.

There was a dip in PSO’s sales at the end of 2004.

PSO has shown the largest jump in sales from 2004 to 2005.

6


7

Market ShareFiscal Year 2001/02

41%

18%

4%

37% PSO

Shell

Caltex

Others


20%

42%

36%

2%

PSO

Shell

Caltex

Others


8


42%

20%

36%

2%

PSO

Shell

Caltex

Others


3%

20%

43%

34% PSO

Shell

Caltex

Others


2.4 Competitive Market Growth Model

9

Sales Forecast

0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

80,000,000

PSO

Shell

Caltex

Others

PSO 46,256,954.85 46,201,985.07 48,051,530.98 49,901,076.88 51,750,622.79

Shell 53,966,447.33 57,025,260.11 60,275,579.19 63,525,898.27 66,776,217.35

Caltex 25,698,308.25 27,698,595.79 29,684,200.08 31,669,804.37 33,655,408.66

Others 2,569,830.83 2,167,983.94 1,771,043.68 1,374,103.43 977,163.17

2004/05 2005/06 2006/07 2007/08 2008/09

Forecast of Total PSO Sales

0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09

Total

PSO shows the slowest growth rate among the industry players.

A dip in sales is forecasted for fiscal year 2005 – 2006.


2.5 Customer Buying Criteria

QUALITY AND PRICE PSO Shell CaltexNon-Price Attributes Affecting Customer

Choice

%Weight

Product – Related 94%

1. Engine Maintenance 36 14 10 12

2. Performance 30 10 9 11

3. Brand Image 12 2 7 3

4. Quality 9 2 5 2

5. Longevity 5 3 1 1

6. Color of oil 2 1 0 1

Service – Related 6%

1. Attendants’ Responsiveness

3 0 1 2

2. Efficiency of Free Oil Change Service

3 1 2 0

Total 100% 33% 35% 32%Has Quality gone up/down (+/–) in past 4 years

+ + +

Relative price today Higher Higher Higher

Relative price 4 years ago Lower Lower Lower

PSO’s Relative Performance Rating

Engine Maintenance

Quality

Attendant’s Responsiveness

Brand Image

10

QUESTION ITS COST

DO NOT SWEAT

KEEP IT UP

IMPROVE FAST

Better

Same

Worse

Least 10% Most20%


3. INTERNAL ANALYSIS

3.1 Profitability

PSO operates with a lowest cost operations policy.

It is closing the gap in market share with leader Shell.

It offers the highest quality lubricants in the market.

It has a significantly high turnover.

Lubricants have very high profit margins; an average of Rs. 20 profit per litre sold.

11

Relative Product Quality

Relative market share

Relative cost (low)

Relative Price

(High)

Margin

Relative- capacity utilized- capital intensity- age of capital

Relative turnover on fixed capital

Relative- product availability- product variety- collection time- plant layout

Relative turnover on

working capital

Turnover

ROIRelative

Productivity

STRATEGIC VIEWPOINT

ACCOUNTING VIEWPOINT

OPERATIONS VIEWPOINT


12

Castrol CR is PSO’s best performing lubricant.

Castrol CR is a diesel lubricant, and the largest market is in the diesel engine

vehicles category.

PSO’s in-house brands, Carient, DEO and Blaze 7 all show signs of

continuous progress over the next four years.

However, there has been no significant effort in the marketing of GTX

Magnatec, which is in fact the highest grade of lubricants worldwide.

Unbranded lubricants account a high contribution toward sales, yet is

showing a steady decline in the years to come.


3.2 Driving Forces

1. Global rise in petrol prices.

As the price of an oil barrel reaches $60, Oil Marketing Companies (OMCs) are

forced to increase their prices of petrol. This in turn leads to consumers limiting their

petrol consumption which accounts for a lower frequency of visits to petrol stations. This

would hurt lubricant sales from both convenience and impulse buyers.

Shell Pakistan has been able to sustain lower prices due to backing from their

worldwide operations. Thus price conscious consumers would also be swayed from

purchasing at PSO outlets.

2. Economic Situation.

The economic situation of Pakistan serves as a major driving force in this

industry. Since a large part of economic wellbeing for any society depends heavily on

the petroleum industry, a global rise in petrol prices would impact the economic situation

of Pakistan negatively. Similar to the first driving force, economic instability would lead

to a lower emphasis on consumption nationwide, and would inhibit lubricant sales.

Conversely, positive economic conditions would lead to higher overall

consumption rates, which would promote sales in this industry.

3. Government Regulation.

Government regulations serve as a major driving force in this industry. Tariffs on

imports, lower duties, and entry barriers, all play a part in the wellbeing on the industry.

The Pakistani government provides incentives to OMCs as they contribute significantly

towards the economy.

PSO, being a government organization, has to adhere to government regulations

in several forays of their marketing activities. This has both positive and negative

implications on business efforts.

13


4. Car Financing.

More and more banks are offering low rebate rates on car financing. This leasing

phenomenon has led to an influx of sales in the motor vehicles industry. The automobile

industry and motor oil industry have a positive relationship, the more cars on the road,

the more demand for lubricants.

3.3 Key Success Factors

PSO’s Sustainable Competitive Advantage is their association with Castrol.

Castrol is the world’s leading manufacturer of the highest quality grade of

motor oils, and PSO has garnered the license to solely mix and market their

lubricants under the Pakistan State Oil mantle.

Lead time in manufacturing and marketing.

Lowest cost operator.

Largest retail network.

Corporate emphasis on pioneering innovation.

14


3.4 SWOT Analysis

Strengths Weaknesses

Pioneered quick oil change service: Speedy

Sole licensee of Castrol Lubricants Initiated free lube delivery service Mobile Quality Testing Unit Largest retail distribution network:

3800 retail outlets Integrated Value Chain

Semi-bureaucratic system Slow decision making Bad product positioning Lower perceived quality Lack of trust with dealers Failed promotional scheme (‘Jeet Hee

Jeet’, 2004)

Opportunities Threats

Privatization prospect Use of the success of Castrol to

reposition consumer perceptions of National Company offerings

Pioneers of innovation in industry

Induction of new player: Total Global Externalities Global rise in petrol prices All competitors have strong

international backing from worldwide operations

15


4. STRATEGIC MARKETING AND PLANNING

4.1 Vision

To continually excel in the provision of unmatched value to customers by offering

the highest quality of lubricants sustainable through dynamic innovation.

4.2 Mission Statement

To identify PSO automotive lubricants in the minds of consumers as the premier

choice for their automobiles through the following:

1. Promise of exceptional quality;

2. Integrated Value Chain;

3. Sustained growth in earnings in real terms.

4.3 Strategic Intent

To consolidate the belief in consumers that PSO lubricants surpass those of Shell

and Caltex in terms of higher quality.

4.4 Core Competencies

Pioneer in product and service innovation.

Most ‘New Vision Outlets’.

4.5 Business Objectives

To gain a market share of 45% in three years.

To be the market leader in lubricants within five years.

To slowly phase out Castrol XL, and invest in developing Castrol Magnatec

Advance1.

To eradicate un-branded lubricants within ten years and consolidate a more

concise product portfolio.

1 XL customer base has high probability of switching easily to PSO brand Carient.

16


5. KEY ISSUES

1. Price sensitive market will not accept expensive Magnatec Advance.

2. Consumer perception of “cheating”, mixing of impure oils, low quality product

offering at PSO.

3. Consumer perception that internationally renowned competitors offer high

quality, whereas national company equals low quality.

4. Sales from un-branded lubricants account for nearly 35% of total sales.

5. PSO has the largest retail network, yet still fails to secure the highest market

share in the industry.

6. Being a semi-government organization means more bureaucracy and slow

decision making.

7. PSO does not maintain the same standards of quality for service and point of

sale at all of its stations.

8. Lack of trust with dealers.2

9. Non-effective provisional checking policies and standards.

10. There is a 70% variation in quantity sold between Karachi’s top selling site and

the average of Karachi’s top 50 sites.

2 During promotional schemes, lack of trust with dealers leads to heavy investment in provisional checking policies.

17


6. OVERALL STRATEGIC DIRECTION

To change customer perceptions regarding PSO’s product quality.

The majority of consumers perceive Shell’s lubricants as being of the best quality.

Yet this is far from the truth. In fact, PSO and Caltex both offer better quality lubricants,

but Shell has managed to capitalize on incredible product positioning. Through their

better service, and marketing campaigns, one of which claimed that Shell fuel gives you

better mileage, they created an image of exceptional quality and brand loyalty. This in

turn applied not only to its fuels, but to all of its product offerings, especially lubricants.

Therefore, even by offering products of lesser quality than those of its competitors, Shell

has managed to convince the buying public that it is better.

Furthermore, PSO launched a promotional scheme for lubricants in early 2004,

called Jeet Hee Jeet. Due to mismanagement and distrust between their dealers, this

campaign failed in its purpose of garnering extra sales. Prizes were not being awarded to

customers, and some dealers actually paid for them out of their own pockets and were

never compensated. This left many of PSO’s customers and several of their dealers with

a waning sense of trust in the company. In hindsight, this failed scheme only added to

the belief that was prevalent before the restructuring in 2000, that PSO was a

mismanaged and defunct government company interested only in their own gains.

Therefore, it is vital that PSO invest heavily in the long-term product positioning

and restructuring of consumer perceptions.

18


MARKETING AND PRODUCT PLAN

7.1 Segmentation Analysis

Lubricant Brand Income Bracket Vehicle Type Example of Vehicle

Castrol Magnatec 50,000+ 2000CC+ [Petrol] Honda Accord/BMW

Castrol GTX 25,000 - 50,000+ 1300CC - 1600CC [Petrol] Honda Civic/Toyota Corolla

Castrol XL 18,000 - 30,000 850CC - 1300CC [Petrol] Suzuki Cultus

Carient 24,000 - 44,000 1000CC - 1600CC [Petrol] Honda City

Castrol CR 10,000 - 42,000+Carriers and 2000CC cars [Diesel]

Toyota Corolla 2.0D

Castrol RX 8,000 - 18,000Pick-up trucks and Vans [Diesel]

Suzuki Van

DEO 10,000 - 24,000Large Transport Trucks and SUVs

Transport Trucks

Castrol Activ 10,000 - 35,000 4-Stroke [Motorcycles] Honda CD 125

Blaze 7 5,000 - 18,000 70CC - 125CC [Motorcycles] Yamaha

Two-Stroke Oil Under 5,000 - 15,000 2-Stroke [Motorcycles] Yamaha Royale

PSO’s best selling lubricant is Castrol CR.

Castrol CR falls under a broad range of customer segments.

Its dual appeal, to both lower end truck drivers, and higher scale Corolla 2.0D

owners, allows it to capture a greater piece of the market.

GTX Magnatec’s potential customers are not informed of its attractive

features, and thus opt for GTX Plus instead.

19


7.2 New Product Plan

Product CategoryB

ran

d N

ame

Existing NewE

xist

ing

Line Extension

Castrol Magnatec Advance

Brand Extension

New Multi-Brands New Brand

Although PSO has had Castrol GTX Magnatec on the market for the last few

years, no significant effort has been made to position it in the minds of the

consumer.

Features of Magnatec Advance:

1. Best grade of lubricant worldwide

2. Manufactured with highest quality standards

3. Life of lubricant nearly three times as long as any other currently on the

market: can run for 15,000 kms without needing to be changed

These features need to be highlighted in a heavy marketing campaign in order to

raise awareness about Magnatec, as well as build overall consumer perception

regarding PSO’s lubricants.

20


7.3 Product Portfolio Management

Lubricant (Motor Oil) Category

Passenger Car Motor Oil Diesel Engine Oil Motorcycle Oil

Ind

ust

ry P

laye

r

PSO

(Includes

Castrol)

Carient

Castrol GTX Magnatec

Castrol GTX

Castrol XL

DEO

Castrol CR

Castrol RX

Blaze 7

Two-Stroke Oil

Castrol Activ

Shell

Helix Ultra

Helix Plus

Helix Super

Helix CNG

Helix Diesel

Helix RimulaAdvance

Caltex

Havoline Formula

Havoline Motor Oil

Delo Gold

Delo SilverRevtex

BCG Matrix

Market Share

Star

Castrol CR

Question Mark

Blaze 7DEO

Cash Cow

Castrol GTXCarient

Two-Stroke Oil

Dog

Castrol MagnatecCastrol XLCastrol RX

Castrol Activ

21

High

High

Low

Low

Mar

ket G

row

th


Product Line Categories

Petrol Engine Oils1. Carient

a. Ultrab. Plusc. Superd. Advancee. Extra

2. Castrol GTXa. Magnatec b. Magnatec Advancec. Plusd. GTX 20W50

3. Castrol XLDiesel Engine Oils

4. DEOa. 8000b. 7000c. 6000d. 5000e. 4000f. 3000g. 2000h. 1000

5. Castrol CRa. Ultrab. Plusc. CRD 10, 20, 30, 40, 50d. CR 10, 20, 30, 40, 50

6. Castrol RXa. Super Maxb. Super

Motorcycle Oils7. Blaze 78. Two Stroke Oil9. Castrol Activ

22

PSO has an excessive number of product variations.


7.4 Pricing Strategies

API LEVEL

CASTROL AUTOMOTIVE BRAND

PACK SIZE

PRICE RS.

SL / CFGTX MAGNATEC 10W-40 (Advance) 4 Ltr Can 390

SJ/CF GTX MAGNATEC 4 Ltr Can 224.75

SJ/CF GTX MAGNATEC 1 Ltr Can 249

SJ/CF GTX Plus 4 Ltr Can 190

SJ/CF GTX Plus 210 Drum 164

SG/CD GTX 20W50 4 Ltr Can 170

SG/CD GTX 20W50 3 Ltr Can 171.67

SG/CD GTX 20W50 210 Drum 140



SF/CC GTX-XL 4 Ltr Can 131

SF/CC GTX-XL 3 Ltr Can 133

SF/CC GTX-XL 210 Drum 109

CH-4/SG CR Ultra 4 Ltr Can 195

CH-4/SG CR Ultra 210 Drum 180

CH-4/SG CR Ultra 10 Ltr Can 195

CF/SF CR Plus 4 Ltr Can 150

CF/SF CR Plus 210 Drum 129

CF/SF CR Plus 10 Ltr Can 150

CD/SE CRD 10, 20, 30, 40, 50 210 Drum 113

CC/SD CR10, 20, 30, 40, 50 210 Drum 110

CC/SD CR40 (Tin) 4 Ltr Tin 93.56

CC/SD CR40, CR50 4 Ltr Can 117.5

CC/SD CR40, CR50 10 Ltr Can 115

CF-4/SG RX SUPER MAX 15W40 210 Drum 160

CD/SE RX SUPER 20W50 210 Drum 114

SG CASTROL ACTIV 4T 20W-501 Ltr Bottle 125

23


API LEVEL PSO AUTOMOTIVE BRAND

PACK SIZE

PRICE RS.

SJ/CF CARIENT ULTRA 20W-50 210 Drum 158.75

SJ/CF CARIENT ULTRA 20W-50 20 Ltr Can 160

SG/CD CARIENT PLUS 20W-50 210 Drum 128

SG/CD CARIENT PLUS 20W-50 20 Ltr Can 130

SG/CD CARIENT PLUS 20W-50 04 Ltr Can 137.5

SF/CC CARIENT SUPER 20W-50 210 Drum 117

SF/CC CARIENT SUPER 20W-50 20 Ltr Can 110

SF/CC CARIENT SUPER 40 210 Drum 115

SF/CC CARIENT SUPER 40 20 Ltr Can 108

SE/CC CARIENT ADVANCE 20W-50 210 Drum 113

SE/CC CARIENT ADVANCE 20W-50 20 Ltr Can 108

SE/CC CARIENT ADVANCE 40 210 Drum 111

SE/CC CARIENT ADVANCE 40 20 Ltr Can 105

SD/CCCARIENT EXTRA 10, 20, 30, 40, 50 210 Drum 103

SD/CCCARIENT EXTRA 10, 20, 30, 40, 50 20 Ltr Can 89

SD/CC CARIENT EXTRA SAE 40 04 Ltr Can 115

SC/CC CARIENT 10, 20, 30, 40, 50 210 Drum 100

SC/CC CARIENT 10, 20, 30, 40, 50 20 Ltr Can 98

SC/CC CARIENT 40 04 Ltr Can 111

CH-4DEO 8000 SAE 15W- 40, 20W- 50 210 Drum 175

CH-4DEO 8000 SAE 15W- 40, 20W- 50 20 Ltr Can 170

CH-4 DEO 8000 SAE 15W-40 04 Ltr Can 180

CG-4DEO 7000 SAE 15W- 40, 20W- 50 210 Drum 170

CG-4DEO 7000 SAE 15W- 40, 20W- 50 20 Ltr Can 160

CF/SFDEO 5000 SAE 10, 20, 30, 40, 50 210 Drum 125

CF/SF DEO 5000 SAE 20W-50 210 Drum 128

CF/SF DEO 5000 SAE 20W-50 20 Ltr Can 118

CF/SF DEO 5000 SAE 40 20 Ltr Can 115

CF-4/SGDEO 6000 SAE 15W- 40, 20W- 50 210 Drum 145

CF-4DEO 6000 SAE 15W- 40, 20W- 50 20 Ltr Can 135

CEDEO 4000 SAE 15W- 40, 20W- 50 210 Drum 115.75

CEDEO 4000 SAE 15W- 40, 20W- 50 20 Ltr Can 110

CD/SEDEO 3000 SAE 10, 20, 30, 40, 50 210 Drum 105

CD/SEDEO 3000 SAE 10, 20, 30, 40, 50 20 Ltr Can 100

CD/SEDEO 3000 SAE 15W- 40, 20W- 50 20 Ltr Can 105

24


CD/SEDEO 3000 SAE 15W-40, 20W-50 210 Drum 107.5

CD/SE DEO 3000 SAE 40 04 Ltr Can 114

CC/SDDEO 2000 SAE 10, 20, 30, 40, 50 210 Drum 103

CC/SDDEO 2000 SAE 10, 20, 30, 40, 50 20 Ltr Can 89

CC/SCDEO 1000 SAE 10, 20, 30, 40, 50 210 Drum 101.75

CC/SCDEO 1000 SAE 10, 20, 30, 40, 50 20 Ltr Can 85

CC/SC DEO 1000 SAE 40 04 Ltr Can 111

DOT - 3 2- STROKE OIL (Plastic Bottle)1 Ltr Bottle 113

PSO employs a diversification strategy when it comes to pricing.

Each product and sub product is priced differently.

Depending on the amount of fixed purchase, the prices also vary.

PSO’s pricing on lubricants needs to be standardized on homogenous packs.

A maximum of three pack sizes may be offered, but the subdivisions of prices

need to be curbed.

25


7.5 Distribution Strategies

PSO Shell Caltex

Retail Outlets 3866 1290 650

High-Street Distributors 14 22 30

PSO has three times the number of retail outlets that Shell has, and six times

that of Caltex.

However, the trend is opposite when it comes to high-street distributors.

Out of the 3866 outlets, more than 50 are CoCo sites, (Company Owned and

Company Operated).

PSO needs to curtail the resources spent on developing new sites, and in turn

invest in optimizing its distribution network, (more is better is not necessarily

the best strategy).

PSO needs to capitalize on their larger retail network by offering long-term

discount schemes to its dealers.

The major gap in PSO’s distribution network is that there is little trust

between the company and its dealers.

26

Distribution Structure


7.6 Marcom Plan

1. Formulate a comprehensive marketing and advertising campaign to build

customer perceptions of GTX Magnatec.

See Sample Ads on page 33

2. Introduce promotional activities that not only capture short-term sales, but also

build long-term customer loyalty.

See Attachment 1

3. Invest in dealer relationship management by offering long-term incentive schemes

and discounts, so as to build trust between both parties.

See Attachment 2

4. Manage lubricant displays at stations and auto-workshops that house PSO brands.

5. Develop an SOP (Standard Operating Procedures) which would standardize

quality of service at all points of sale, as well as on the Speedy free oil change

service.

See Attachment 3

6. Enlist an endorsement from the CEO of BMW, MetroCab and/or White Cabs, in

which they would highlight the superior quality of PSO lubricants.

7. Negotiate partnerships with major auto-workshops and service stations by

offering them rates lower than market rates, in exchange for effective shelf space.

8. Develop a co-branding campaign with Yamaha in which Blaze 7 and Castrol

Activ would be backed by a strong motorcycle brand.

27


8. SUMMARY OF ACTION PLAN

ACTION METHODOLOGY TIMELINEPROPOSED

INVESTMENT

1. Promotional Schemes See Attachment 1: ‘Pump it Up’ (Race to

1000 Litres) ‘Spin and Win’ (Wheel of

Fortune)

1/10/2005 to

31/3/2006

Rs. 35 Lakhs

2. Magnatec Marketing Campaign

Nationwide advertising: Print ads, TV Spots, Hoardings

Corporate Dinner/Letters to corporate heads informing them of Magnatec’s benefits

1/4/2005 to

30/6/2006

Rs. 15 to 25 Lakhs

3. Build Dealer Relationships

See Attachment 2 1/1/2006 to

30/6/2006

Rs. 2.5 Lakhs

4. MetroCab Endorsement

TV Spot: CEO MetroCabs endorses PSO’s lubricants

Provision of free lubricants for one promotional period of three months

1/6/2006 to

30/8/2006

Rs. 2 Lakhs

28


THE FOLLOWING ADVERTISING CAMPAIGNS FOR MAGNATEC WERE DESIGNED BY BABAR MUSHTAQ FOR PSO DURING HIS INTERNSHIP IN THE SUMMER OF 2005.

29


30


ATTACHMENT 1

___LUBRICANTS SCHEME

31

‘PUMP IT UP’ -RACE TO 1000 LITRES


OBJECTIVE

To promote lubricant sales

To promote Premier XL petrol sales

To increase the number of PSO Loyalty Card holders

ESSENTIALS

PSO will launch a promotional scheme in which a figurative race will take place

where all the participants will try to achieve the filling of 1000 litres of Premier XL in

under three months.

This contest will be open to all PSO Loyalty Card holders, upon purchase of

lubricants. In order not to limit the target segment, another facility will be available, and

that is that lubricant buyers who do not have a loyalty card will have the opportunity to

fill out the Loyalty Card application form which will be attached to the promotional

pamphlet printed specifically for this event.

The pamphlet that will be attached to all lube packs during the promotional phase

will include a description of the event, all rules and regulations, as well as a prizes list.

Attached to the last page of the pamphlet will be an application form which will

serve as the entry into the competition. For potential loyalty card customers, a copy of

their NID card is required and must be submitted before last date of submission. After 15

to 20 days the card will be issued to all those participating individuals and will serve as

their entry into the competition.

A database will be compiled using the current operational database that the PSO

Cards division maintains. This database will sort on a daily basis all the fields required

for upkeep. Fields include:

1. Participating Loyalty Card Holders

2. Type of petrol filled (Premier XL only)

3. Car license number

4. Name and number of registered individual

5. Quantity in Litres

6. Date and time of transaction

32


Scoreboards will be set up at selected PSO outlets which will be updated on a

daily basis, and will show that day’s top ten leaders.

Leader-boards will also be available for viewing on the website www.psocl.com.

Another facility will be offered to participants, in which they can send a query

through an SMS, and then they will receive a reply message regarding their position on

the leader-board, as well as all other quantitative details regarding their progress in the

event; such as amount of petrol filled, approximation of kilometers traveled each week,

estimated lag behind the leader, and other similar data.

PRIZES AND CONDITIONS

Prize List

a. The first three participants to reach 100 litres first will choose between

three prizes (first winner will get fist preference of prize and so on):

i. Dinner for two at Lal Qila restaurant

ii. Voucher for Rs. 1000 at Laraib

iii. Warid sim card

b. On 200 litres;

i. Creative mp3 player

ii. Shopping coupon at EBCO for Rs. 5000

iii. Sony CD Player

c. On 300 litres;

i. Gift voucher at Jaffarjees for Rs. 7500

ii. Body Shop products

iii. One year subscription to SHE magazine

d. On 400 litres;

i. Sony Ericsson Mobile Phone

ii. Perfume/Cologne set

iii. Designer watch and sunglasses

33

http://www.psocl.com/


e. On 500 litres;

i. Pentium 4 Desktop computer

ii. Sofa/Bed set from ChenOne

iii. Dining Room Tableware Set

f. On 600 litres;

i. LG Split AC Unit

ii. Sony Camcorder

iii. Trip to Murree for four people with accommodation for four days

and three nights

g. On 700 litres;

i. Rs. 20,000 shopping spree at Park Towers

ii. Round Trip for two to Dubai with hotel stay for two days and three

nights

iii. Free Makeover at Nabila’s

h. On 800 litres;

i. Home Theater System

ii. Car Accessories

iii. Tessori Gold Jewellery Set

i. On 900 litres;

i. Flat Screen LG TV

ii. Latest Toshiba Laptop

iii. Rolex

j. The first participant to reach 1000 litres;

i. Grand Prize: Mitsubishi Lancer 2005

Conditions

Certain measures and parameters have been developed in order to minimize the

risk of deviation on the part of dishonest participants who fill petrol in more than one car

with their card. These measures are necessary in order to maintain a healthy and fun

competitiveness to the contest, and serve as an assurance to other players of the fairness

involved.

34


Option 1

This promotional scheme will be monitored on a daily basis. Thus, by enforcing a

rule that will count only the single highest transaction of each participant per day, it

would enforce an accurate and fair checking system.

This system would include the following:

1. The risk that participants may cheat by filling petrol in more than one car

on their card in a day would be eradicated, as only their highest transaction

every day will be counted.

2. Attendants would not need to be held responsible or accountable on the

accuracy of transactions.

3. This would promote a fair atmosphere to the contest and would allow

participants to potentially see themselves as feasible winners.

4. This would allow participants the chance to develop strategies and involve

themselves in planning on how to effectively win each stage.

Option 2

Each participant will be issued two stickers; one sticker with their participation

number on it for their car, and another smaller identical sticker that will be pasted on their

loyalty card. These stickers will remain for the duration of the event, and for two weeks

following the close of the competition, the small sticker may be traded in or shown for a

discount on lubricants. During the duration of the event, all attendants will be responsible

for checking and matching the number on the card with the number on the car. If they do

not match, the attendant should swipe the loyalty card twice; this will identify double

entries on the database which would then be disqualified.

Although this system may not be enforced properly due to attendant negligence, it

will still serve as a form of assurance to the majority of participants that a proper

checking system is in place.

35


Alternative Prize Condition

In order to maintain the competitive drive in participants, an option is to offer the

nine runners up a Nokia mobile phone, upon reaching 1000 litres.

FINANCIALS

Cost

Fixed

Marketing Expense: Rs. 750,000

Prizes Cost: Rs. 1,874,0003

Total Fixed Cost: Rs. 2,624,000

Variable

Pamphlet Cost/participant: Rs. 10

Revenue

Profit Margin on Lube packs/participant: Rs. 80 (20 Rs. per litre x 4 litres)

Profit Margin on Premier XL/participant: Rs. 1397 (0.0954 x 49.025 x 3006)

Total estimated profit margin from this promotional scheme: Rs. 1477

Break-Even

Fixed Cost = 2,624,000 = 1789 participants

Selling Price7 – Variable Cost 1477 – 10

Estimated Profit

At 5000 participation level: Revenue – Variable cost – Fixed cost

7,385,000 – 50,000 – 2,624,000 = 4,711,000

At 10,000 participation level: Revenue – Variable cost – Fixed cost

14,770,000 – 100,000 – 2,624,000 = 12,046,000

3 See attached financial workings page.4 Average profit margin per litre of Premier XL generated by PSO.5 Price of one litre of Premier XL.6 300 litres is the estimated amount of extra petrol consumption per participant during the three month promotional quarter (about 25 litres extra per week).7 Because we are calculating the break even number of participants for a promotional scheme, the Selling Price is set as the total profit margins being made off of the scheme.

36



59,080,000 – 400,000 – 2,624,000 = 56,056,000

IMPLEMENTATION PLAN

In order to effectively implement this plan, a deal must be established with Dewan

Mushtaq Motors in which they will entirely sponsor the car or give a discounted price for

exchange of the marketing of their company throughout our promotional phase. The

advertising effort put forth would include mention of their company as co-sponsors of the

event in all the print mediums utilized.

Furthermore, an event will be held on the first Saturday following the close of the

contest, in which all of the winners will be invited in order to receive their prizes. The

event will be televised, and will culminate with the grand winner receiving his keys to his

new car. This event may be called “The Crowning of the King” or “The PSO

Coronation”.

37

FRONT COVER BACK COVERCENTER SPREAD

PAMPHLET DESIGN


___LUBRICANTS SCHEME

38

‘SPIN AND WIN’ -WHEEL OF FORTUNE


OBJECTIVE

To promote lubricant sales.

ESSENTIALS

1. Spin and Win

A spinning game wheel will be set up at the top fifty lube selling stations in

Karachi. One spin of the wheel will be offered to all PSO customers upon purchase of a

lubricant pack. The wheel will be divided into eight slices, with each slice containing a

prize valued at around fifty rupees. The prizes will be instant giveaways.

The game will be called ‘Spin and Win’, and would be conducted on a daily basis

for the duration of three months.

Alternative Option

2. Wheel of Fortune

Upon purchasing a lubricant pack, the customer will receive a coupon. Upon the

collection of four or more coupons during the promotional phase, the customer will

qualify for the ‘Wheel of Fortune’, an event to be held at the Forum.

The ‘Wheel of Fortune’ event will basically be a televised event in which all

qualifiers will get the chance to win big prizes by partaking in different fun games. Three

wheels will be set up ranging in size and prize value, and qualification for the respective

wheels will depend on the participant’s performance on these games. The games include:

1. ‘Dart Mania’

2. ‘The Mean Spinner’

3. ‘Hole in One Ace’

Dart Mania

A dart board will set up where each participant will get five throws. There will be

ten different sections of the board, ranging from the outer rim which is one point all the

way to the bulls-eye which is ten points.

39


The Mean Spinner

Participants will have the opportunity to test their might by spinning one of the

wheels the hardest. Depending on number of spins (rotation of wheel) they will qualify

for a spin on one of the wheels of fortune. Each participant will get five attempts.

Hole in One Ace

A small mini golf hole will be set up in which participants will have to sink the

ball in the least number of tries. Each participant will get five attempts.

Scoring

After each game, the participants’ scores will be tallied, and the winner of each of

the three games will get to spin the Gold Wheel of Fortune. The next five highest scorers

in each game will qualify for a spin on the Silver Wheel of Fortune, and the rest will get a

spin on the Bronze Wheel of Fortune.


Prize List (Spin and Win)

Each slice on the wheel will contain one of the following prizes costing Rs. 50:

Stuffed Toy

Audio CD

Cap

1.5 litre Pepsi

Cybernet: Internet Prepaid Card

Photo Frame

Chocolate Pack

Gillette: Two disposable razors

Conditions

1. On purchase of one lubricant pack, only one spin may be taken by

participant.

2. Only one gift will be given per spin.

3. Gifts will not be exchangeable or refundable.

40


Prize List (Wheel of Fortune)

Bronze Wheel

Warid sim card

Bad Luck (Keychain)

Jump to higher Wheel level

Swatch watch

50 Rupees

Silver Wheel

Nokia Phone 9210i with sim card

Bad Luck (Drop to lower wheel level)

100 Rupees

Sony CD Player

Jump to higher wheel level

Gold Wheel

Grand Prize Sony 60” TV

Bad Luck (Drop to lower wheel level)

500 Rupees

Return Tickets to Dubai

Spin Again

41


FINANCIALS

‘Spin and Win’

PSO will receive a revenue of Rs. 80 per customer of lubricants through the ‘Spin

and Win’ scheme, and will need to spend Rs. 50 per prize gift for each customer. Thus

the cost of the prizes will be adjusted from the profit margin itself. The other costs such

as marketing expense and the manufacturing of the wheels would be included as fixed

costs.

Cost

Fixed

Marketing Expense: Rs. 250,000

Wheels Manufacturing Cost: Rs. 5000

Total Fixed Cost: Rs. 255,000

Variable

Prizes Cost per unit: Rs. 50

Revenue

Total profit margin per participant: Rs. 80

Break-Even

Fixed Cost = 255,000 = 8500 participants

Selling Price – Variable Cost 80 – 50

Estimated Profit


800,000 – 500,000 – 255,000 = Rs. 45,000


4,000,000 – 2,500,000 – 255,000 = Rs. 1,2 45,000

Considering that on average, around 10 to 20 customers buy lubricants from

PSO’s top 50 sites in Karachi, we can estimate potentially more than 50,000 customers in

42


the three months promotional phase. Thus, it would seem feasible to launch this event to

further promote the sale of lubricants.

The financial directive of the ‘Wheel of Fortune’ event would be interpreted in a

long-term strengthening of our lubricants customer base, and the high expense attached to

it would be recovered through a larger clientele in the future.

IMPLEMENTATION PLAN

‘Spin and Win’

Wooden boards can be fashioned into spinning wheels that will serve as the

Wheel of Fortune.

Prizes must be stocked at each participating station.

PSO would need to invest in the advance purchase of at least 1500 gifts of

each type.

This would mean a total number of 12,000 gifts.

43


ATTACHMENT 2

___DEALER RELATIONSHIP

MANAGEMENT STRATEGY

44

‘THE HIGH ACHIEVERS’ –DEALER INCENTIVES


OBJECTIVE

To build trust and garner respect of all channel members.

To offer incentives and motivation to dealers so as to encourage the sales of

lubricants through building competition between themselves.

ESSENTIALS

At the beginning of the quarter, an announcement will be made to all PSO

lubricant dealers, that their sites will be evaluated on the basis of three parameters:

1. Highest sales of lubricants

2. Most well maintained station

3. Best customer service provided

These parameters will be judged through an evaluation by a team of PSO

appraisers, and an overall score will be awarded to each station.

The three highest scoring sites will be showcased as ‘high achievers’, and will be

rewarded with special awards and prizes8.

From the results garnered from the top ten sites, a list of key positive indicators

highlighting their success will be fashioned. This list will serve as a quarterly bulletin

that will then be distributed to all dealer sites.

At the end of the quarter, the evaluation team will once again appraise all the

dealer stations, and compare the scores achieved at the end of the quarter with those at

the beginning.

The station that shows the most progress since the last check will be classified as

‘Highest Climber’ and will be awarded an incentive prize that will in turn serve as a

motivational factor to all other dealer sites.

8 See Prizes Section

45



Prize List

Top three ‘high achievers’

First Place

1. Round Trip for two to Dubai with hotel stay for two days and three

nights.

2. 30% higher profit margin on lubricants for next quarter.

Second Place

1. LG Split AC Unit.

2. 20% higher profit margin on lubricants for next quarter.

Third Place

1. Sony CD and Cassette Player.

2. 10% higher profit margin lubricants for next quarter.

‘Highest Climber’

1. 6630 Nokia Phone with Warid sim card.

Conditions

At the end of the first quarter, those sites that receive prizes will not be eligible in

the next appraisal period. In the case that any or all of the same sites remain as ‘High

Achievers’, the three sites who score directly under them will be announced as that

quarter’s high achievers. The same applies to the ‘Highest Climber’ position holder.

Financials

The entire cost incurred by implementing this event would be done so in order to

motivate dealers to achieve higher sales figures.

Extra Wages Cost: Rs. 25,0009

Prizes Expense: Rs. 89,100

Total Expense: Rs. 114,100

9 Based on an estimated Rs. 5000 to be paid to each of the five employees in the appraisers’ team.

46


Total estimated income generated: Rs. 800,00010

Return on Investment: Rs. 800,000 = 7.01

Rs. 114,100

By investing in this scheme, we would be instigating dealers to achieve even

higher sales figures in the upcoming quarters. By awarding them prizes, we would be

showing that PSO acknowledges and rewards its dealers for their efforts, and in turn

dealers would be motivated to perform even better in the future. Thus this scheme’s

positive repercussions would be felt in the long-term increase of efforts on the dealers’

part in achieving higher sales of lubricants.

IMPLEMENTATION PLAN

For each area or city, a team comprised of capable PSO employees should be

formed. This team would be charged with the task of grading the different sites on the

afore-mentioned criteria. The team would include one employee from the customer

services department, one from lube sales, one from retail, one from brand, and one from

finance. This cross-functional team would allow an unbiased focus to the appraisal, with

each individual scoring based on his or her area of expertise.

10 This figure is based on an estimated extra sales volume of 100 litres of lubricants every quarter for a year by a force of 100 better-motivated dealers.

47


ATTACHMENT 3

___QUALITY OF SERVICE AT POINT OF SALE

48

STANDARD OPERATING PROCEDURES


STANDARD OPERATING PROCEDURES

I. Attendants

1. Attendants trained to fulfill all required tasks must undergo time trials to establish

efficiency levels.

2. An incentive bonus11 is on offer from the company to selected attendants upon

selling a certain number of lubricants and/or achieving the fastest completion time

during ‘Speedy’ trials.

a. This would create competition among attendants and would further

enhance the quality of service.

3. Selected attendants are to receive attractive new uniforms.

4. Potential attendants are to participate in training sessions.

II. Lubricants Display Canopy

1. The canopy is to be easily accessible.

2. It is to be fitted with luminescent bulbs so as to make it well-lit at night.

3. It is to be positioned so that potential customers filling fuel can see the canopy

from anywhere in the station.

4. Lubricants are to be situated based on categorization on either side of the canopy.

5. Monthly checks are to ensure the upkeep and proper maintenance of the canopy.

III. Rules and Regulations

1. Attendant must be wearing uniform jackets at all times.

2. The water used to clean the windows must be changed after every five ‘Speedy’

services.

3. The goody bag with added valuables (AV) must be offered to first time ‘Speedy’

customers. First timer bag includes branded Speedy keychain, tissue packet, and

candies.

4. Returning customers are to receive only AV perishables (tissue packet and

candies).

11 A bonus of Rs. 10 will be offered to attendants upon every three cars serviced/lube sold. (Amount will be paid as a monthly stipend).

49


5. Customers must be informed of the best lubricant for their vehicle, as well as all

the service components and total time needed to complete the entire ‘Speedy’

service.

6. Mobile checks must be given to all customers upon first service.

7. From returning customers, the attendant must politely ask for the mobile check,

and should fill it out accordingly.

8. Customers should be informed of the discount available to Privilege Loyalty Card

holders.

9. Customers should be informed of lubricant price ranges and quality (in

accordance to their car specifications).

10. Customers must be offered mineral water if they are waiting in their car.

11. While service is taking place, customers must be offered the option of utilizing

the internet facility in the business center, or shopping in the Shop-Stop.

IV. Provisional Checking Policies

1. Random maintenance checks are to be facilitated every three months in order to

gauge the efficiency of the attendants, upkeep of the canopy, and enforcement of

regulations.

2. Checks are to be facilitated at the behest of the company, and the checker must

not be discernable as a representative of PSO.

3. The checker’s evaluation must be interpreted as constructive feedback, and action

must be taken accordingly.

50


V. Service Components for Speedy ‘Quick Oil Change’

12

12 With two attendants, one would be working on the engine, while the other would be working on the body

and tires. Therefore, the two processes would be carried out simultaneously and this would minimize the

time duration for the entire service.

51

7

0.5

1

1

4

4

0.25

0.5

0.5

0.25

One-time process

Inclusive process [1.1]

Inclusive process [1.1]

One-time process

One-time process

One-time process

One-time process

One-time process

One-time process

One-time process

1.0 Engine Work

1.1 Oil change

1.2 Cleaning of air filter

1.3 Cleaning of spark plugs

1.4 Radiator water check and/or filling

2.0 Body Work

2.1 Tyre air pressure check/filling

2.2 Cleaning of windows

3.0 Interior Work

3.1 Spraying of Air Freshener

3.2 Placing of ‘Mobile’ check

3.3 Cleaning of ashtray

3.4 Placing of Tissue Packet

Activity Duration(maximum minutes spent)

Comments

Total duration 9.5 (10) Two attendants14

Total duration 17.5 (20) One attendant

strategic marketing & planning - pakistan state oil

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