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Industrial Marketing Plan For
International Inc. Motorcycle Oils
In Partial Fulfillment of the Requirements in Industrial Marketing Subject
Submitted By: Joanne Palad Roanerie Año Lorman Maris Discipulo Ana Mandac Maristel Role Joanna Marie Roma
March 4, 2010
1 A. Executive Summary The oil industry is a major contributor to the whole country¶s economy. Aside from its ability to generate electricity, many enjoy and utilize fully the different benefits produced by oils. But even though oils are a good source of income and resources, there are many environmental factors that affect the production, distribution, and marketing of this product. These issues will be discussed further on the next pages of this paper. There are different kinds of oil but the main focus of this paper will be on synthetic oil. Synthetic oil is a lubricant consisting of chemical compounds artificially made or synthesized from compounds other than crude oil or petroleum. Synthetic oil is used as a substitute for lubricant refined from petroleum, because it generally provides superior mechanical and chemical properties than those found in traditional mineral oils. This synthetic oil is also being manufactured by Rainchem International Inc. Rainchem International Inc. produces synthetic oil and lubricants for industrial use, consumer use and other purposes. The marketing strategy of Rainchem International Inc.¶s certain product line will be the focus of this business plan with the hope of effectively reaching the objectives of Rainchem International Inc. at the end of the analysis and marketing plan. Improvements will be done in the marketing mix strategy and implementation after a thorough environmental scanning and SWOT analysis of Rainchem International Inc.
2 B. Company Profile Rainchem International Inc. was originally named RDLP RAIN
COMMERCIAL and has been producing oils, lubricants and specialty chemical to various manufacturing and business establishments in the Philippines since 1995. Their headquarters and office facility is located in Sucat Parañaque City, Philippines and a Sales Office and warehousing facilities in Cebu. The Company supplies to more than 40 customer nationwaide in the Philippines with deffirent product offerings. RAINCHEM INTERNATIONAL, INC.serves major industries such as:
Automotive Appliance Compressor/ Air Conditioning General Industry Mining Steel
Bearing Manufacturers Construction Electronics Heavy Equipment Paper & Pulp Transportation/Rail Food/Beverage Marine Specialty Manufacturers
RDLP Rain Commercial was renamed to Rainchem International Inc. on 2006 as an oil and chemical manufacturer. The company also buys base oils and additives. List of product lines Rainchem sells are Die Casting Release Products, Stamping Oil, Lubricating Oil, Preventive Maintenance, Janitorial Product, Degreaser, 2T and 4T Oil, Metal Working Fluids, Greases, Water treatment
3 chemicals, Aerosol, Automotive Oil, Painting Expertise, and other services related with oils and lubricants. As an ISO9000 certified company, it is one of the most reliable suppliers of lubricants and specialty chemicals in the Philippines. The company has the technical expertise to meet the specific requirements with the research and development staff that surely can provide customer with first class quality of lubricants and other chemicals. Engr. Robert De La Peña is the owner, President and CEO of the oil manufacturer RDLP Rain Commercial or also known as Rainchem International Inc. since 1995. The establishment has the following vision and mission statement, quality policy, code of ethics and safety and health policy: Mission To be known as one of the best manufacturer and distributor of chemicals and lubricants nationwide, most committed to being the future for our customers, employees and our country. Vision Place the customer first and deliver the best product and services towards the highest level of customer satisfaction. Respect diversity, recognize contribution, and reward achievement to bring out the best in everyone. Use strategy to unify and direct our actions to achieve.
4 Quality Policy RAINCHEM is committed towards ensuring customer satisfaction by providing product and services that meet defined customer requirements. We shall achieve this by delivering product and services on time, by implementing and maintaining a Quality Management System That meets established standards. Code of Ethics RAINCHEM employees will not engage in any behavior that is outside of the normal & acceptable practices of your company. We will partner with your corporation with the understanding to service & administrate your chemical program strictly on a professional business basis Safety and Health Policy People are our most important asset; their safety is our greatest responsibility. It is the policy of our company that every employee is entitled to a safe and healthful place to work. When the person enters the employ of our company, he or she has the right to expect to be provided with a proper place in which to work, as well as proper machines and tools with which to do the job, and that the employee will be able to devote his or her energies to the work without undue danger. It is our basic responsibility for to make SAFETY of human beings a part of their daily
5 hourly concern. This responsibility must be accepted by each one who conducts the affairs of the company, regardless of the capacity in which he functions. Employees are expected to use the SAFETY equipment provided. Rules of conduct and rules of SAFETY shall be observed. SAFETY equipment must not be destroyed or abused. The joint cooperation of employees and management in the observance of this policy will provide safe working conditions and accident-free performance to our mutual advantage. We consider the SAFETY of our personnel to be of the first importance, and we ask for your full cooperation in making this policy effective. C. Current Marketing Situation The current marketing situation of the market will be the detailed information about the type and size of the oil industry, the company¶s growth and competitiveness, the product¶s stage in the life cycle, current strategies employed and the macro-environment of oil industries as a whole. 1. Market Situation
The oil industry belongs to an already mature market because of stiffer competition present in the market, great cost and service, product innovation and new uses of their products are harder to come by, international
6 competition is present and increasing, industry profitability falls and mergers and acquisitions reduce number of industry rivals.
Entry Barriers and Cost Structure
There is a present stiff competition in this industry because of the oil deregulation law, allowing entry of small oil suppliers like Rainchem International Inc. The oil deregulation law caused barriers for new entrants to be low. Also, the pricing of different industry players are changing rapidly due to the absence of the Oil Price Stabilization Fund as an effect of the law formerly stated. This issue will be further discussed in the issue analysis portion.
Market Size, Profitability and Growth
The oil industry leaders are Petron Corporation, Chevron Phils., and Pilipinas Shell.According to the Department of Energy or DOE, total market share for petroleum products on fiscal year 2007 has more than eighty-four percent (84.2%) credited to the combined sales of Petron Corporation, Chevron Phils., and Pilipinas Shell.
Meanwhile, other industry players which include PTTPC, Total Phils., Oilink, Seaoil Corp., TWA/Filpride, Liquigaz, Petronas, Prycegas, Trisolid, Andan, Mawab and Jetti as well as the end users who directly imported part of their requirements got the remaining 15.8 percent of the market (Fig. 1). Rainchem International Inc. belongs to 13.5 percent of other players.
Figure 1 2007 Market Size
On fiscal year 2008, Petron Corp., Chevron Philippines and Pilipinas Shell Petroleum Corporation maintained their dominance of the market with a total of 81.9 percent share of total demand while other industry players which include PTT Philippine Corp. (PTTPC), Total Phils., Oilink, Seaoil Corp., TWA/Filpride, Liquigaz, Petronas, Prycegas, Trisolid, Andan, Mawab and Jetti as well as the end users who directly imported part of their requirement got 1.8 percent of the market.
The local refiners (Petron Corp. and Pilipinas Shell) captured 68.2 percent of the total market demand, while 31.8 percent was credited to direct importers/distributors (Fig. 2).
Figure 2 2008 Market Size
But upon reaching the first half of the fiscal year 2009, the major oil companies¶ (Petron Corp., Chevron Phils. and Pilipinas Shell Petroleum Corp.) dominance of the market was reduced to 78 percent share of total demand vis-à-vis 2008¶s 83 percent. This may be due to the increased market share of the other players in the LPG business as well as to the entry this year of new players in the oil industry who are also importers.
Other industry players, on the other hand, of which include PTT Philippine Corp. (PTTPC), Total Phils., Unioil/Oilink, Seaoil Corp., TWA/Filpride, Liquigaz, Petronas, Prycegas, Micro Dragon, Zhenron, Ixion
9 Corp., Cross Country, Jetti and World Precision as well as the end users who directly imported part of their requirement has market share that grew from 17 percent of a year ago level to 22 percent this year. Other small players are 18.7 percent of the total market size (Fig. 3).
Figure 3 2009 (first half) Market Size
Meanwhile, the local refiners (Petron Corp. and Pilipinas Shell) captured 65 percent of the total market demand, while 35 percent was credited to direct importers/distributors.
Phoenix Petroleum Philippines Inc., Resource One Corp., and Oracle Petroleum Corp. are among the new small companies manufacturing and
10 supplying oils to different end users in markets from Luzon, Visayas and Mindanao. The sales of Rainchem and other competitors in the industry are listed below (in thousands) from year 2007 to 2009, as taken from the books in the office of the Securities and Exchange Commission. Table 1 Market Sales 2007 to 2009 (Security and Exchange Commission, 2010) Company Petron Corp. Caltex-Chevron Phil. Phoenix Petroleum Corp. Shell Chemical Phil. Inc. Resource One Corp. Rainchem International Inc. Oracle Petroleum Corp. 2006 212,825,750.10 76,774,709.71 2007 212,932,163 77,887,943 2008 213,038,575.90 79,001,176.29 2009 213,149,888 80,114,409.58
For the whole 2009, Petron was still leading the market having the most number of market shares in the motor oil industry, with Caltex as second, then, Phoenix Corp. as third and Shell Corp, fourth. Next are Resource One Corp., then, Rainchem International Inc and Oracle Petroleum Corp as small players with minimal share in the industry.
11 2. Product Situation
Since motorcycle trend is tremendously arising in the Philippines, buyers and users of the said vehicle are also increasing. Because of this, 2T and 4T motor oils are now in the growth stage of the product life cycle since new chemical and technological developments and innovations are continuously being introduced. Barriers for new entrants in the industry are not too high that¶s why high level of investment in promotion and distribution is also highly needed. 2T and 4T are under the product category of motor oils except that 2T are fuel oils for two-stroke motorcycles while 4T fuel oils are for fourstroke motorcycles. The technology platform of the 2T motor oil is its ³Decarbonizer´ content while 4T motor oils have their advance and modern base oil technology, superior high temperature performance and maintains full engine power that exceeds API SG/JASO MA. The 2T ³Decarbonizer´ technology promotes lesser carbon emission to address the carbon production issue that is nowadays being talked about by environmentalist in the national government and in other countries. Low cost production also makes it possible for Rainchem to sell the 2T and 4T motor oils in a lower price than the competitors. Competitors of Rainchem 2T and 4T motorcycle oils are those distributed and manufactured by the leading oil companies, Phoenix, Resource One, Oracel Corp. and other small players.
12 3. Competitive Situation Rainchem International Inc¶s competitive edge over its competitors can be seen on its current product, price, distribution and promotional strategy. a. Product Rainchem International Inc. is a reliable supplier of Lubricants and Specialty Chemicals in the Philippines. The products of Rainchem was made with the technical expertise to meet their client¶s specific requirements in providing first class quality of lubricants aimed at all levels of industry because of its Chemical Engineers that are highly trained, well-experienced and well-compensated. But the product brand and positioning is weaker as compared to the equity built by the leading market players and other booming small players. b. Price The company offers cheaper price of lubricants and oil to industrial parks and other oil retailing company as compared to other players of the same industry. They purchase the cheapest price of raw chemicals to be able to supply low priced of hydraulic products in the Philippines.
13 Rainchem¶s price is 20 percent cheaper than the national market leaders and 5 percent cheaper than its direct competitors, namely, Resource One, Oracle Corp and other players. c. Place Rainchem International is a supplier of generic lubricants and oils to few players in the industry even to their competitors. Rainchem, import raw materials from Korea and Taiwan and supply products to industrial parks and gasoline companies as generic oil. Rainchem products are available nationwide particularly in Cebu, Bacolod and Davao. Other competitor such as Phoenix Corp. utilize distributorship and franchising to be able to reach wholesalers, retailers and end users and build trust for other industrial consumers. d. Promotion Rainchem personalize their packaging depending on their clients¶ preference. They are known for their on-time delivery and good customer relationship. A year ago they had a onetime promotion offer to their clients which is the free whole body massage for every order of 10 barrels chemical oils. Competitors, on the other hand, are engaging in sponsorship, advertisements endorsed by big time celebrities and sales contest for brand building.
14 4. Distribution Strategy
Raw materials can be imported or locally produced but with right machineries and technical expertise. Local refineries and newly discovered oil fields are being utilized mostly by the top three oil companies, namely, Petron, Caltex and Shell. Other small players buy their raw materials, such as oils and additives, outside the Philippines since they don¶t have refineries to produce such. Motor oil products are processed in the black oil pipelines and sent to retail outlets and industrial or consumer buyers via tank trucks. The industry structure is shown in the figure below as seen from the webpage of the Department of Energy.
Crude Import Refinery Refinery/ Import/Export Terminal
Product Imports Product Exports
White Oil Pipeline Tankers/ Barges
Black Oil Pipeline Tank Truck
Industrial Consumer/ End User
Figure 4 Industry Structure (DOE, 2009)
15 Rainchem International Inc. currently imports raw materials from Korea and Taiwan and supplies directly to both wholesaler and retailers via truck and van containers. 5. Macro-environmental The assessment of political, economic, socio-cultural,
technological, environmental and legal factors was used to define and summarize the general environment and the associated issues that Rainchem International Inc. operates within. The Oil Industry started off more than five thousand years back. The demand for Oil was much higher than what it actually produced and this brought forward the concept of making oil production companies. The Oil Industry is a very important industry in the world and a lot depends on the price of the oil and it has been observed that whenever the oil prices increase the price of various products also increases. Political Factors The political factors that may have an effect on the operation of Rainchem in the Philippines are: 1. Unstable political environment 2. Product Stewardship Arrangements for Waste
16 3. Oil ± Subsidies for different used oil based products 4. PSO Transitional grant scheme ± provided collection facilities 5. Oil Deregulation Law Economic Factors The economic factors that are present in the Philippine oil industry which might have an effect on Rainchem and other player¶s operations are the following: 1. Unstable price in the market 2. High unemployment 3. High level of activity in resources sector 4. Increasing cost of transport fuel Socio-Cultural Factors Of the social influences, key issues are the relatively small population base and distance from further markets to either provide used oil supplies or provide markets for the resulting products. The volumes of used oil generated are unlikely to increase beyond the influence of economic cycles, therefore the total volumes are relatively static and this factor may make some process technologies unviable in the Philippines due to insufficient volumes to achieve the required
17 economies of scale. A further key social influence is the poor perception of the quality of recycled lubricating oils. Buyers of base oils typically blend base oils with additive packages to achieve a consistent product that delivers specified performance attributes. These buyers are highly sensitive to the risk of using materials that may cause their own products to fail in use or for their own production process to be stopped as additive packages fall out of suspension. Moreover, lubricants offer performance-critical attributes for a value that is typically insignificant when compared to the equipment (motor vehicle or industrial equipment) it is protecting. Other issues arising from socio-cultural issues in the country are: 1. Increasing demand motorcycle ownership 2. DIY oil change and disposal by community 3. Small population base 4. Remote communities / used oil sources 5. Illegal disposal 6. Poor perception of recycled and synthetic oils Technological Factors With the increasing complexity of lubricating oils, a wide variety of additives are added to base oils during the manufacture of
18 lubricants. All of these additives provide benefits in terms of performance but can create difficulties for re-refiners. Technological externalities can reduce economic efficiency if the benefits (improved performance) are not as great as the costs (reduced recoverability). Hence, economic efficiency can be reduced if incentives are not provided to ensure that the product designer does not take the downstream costs into account. Some of the most problematic additives for re-refiners are chlorinated hydrocarbons and
dithiocarbamates (containing lead and used as extreme pressure agents), polysulphides and several sulphur containing compounds that can cause emissions. Additives such as styrene butadiene (SBR) and styrene isoprene (SIP) are used in engine oils to provide shear stability appear in the waste from re-refining as asphalt or as a substitute for heavy fuel oils used in cement kilns (OECD, 2005). If the costs associated with re-refining are not transmitted back up the product chain, it is possible that sub-optimal specifications for lubricating oil will be developed. As noted above, a technological externality results in suboptimal design if the performance advantages associated with the additive are of smaller positive value than the negative values associated with reduced potential for re-refining. Indeed, it has been argued that minimum quality standards can be redrafted with a view toward increasing the potential for re-refining (AATSE, 2004). Other
19 technological issues arising with the production and selling of oils are listed below. 1. Increasing service intervals for lubricating oils 2. Increasingly complex lubricating oils (e.g. synthetics) Environmental Factors The most significant environmental impacts associated with lubricating oils almost certainly arise from illegal disposal. A survey commissioned by the Government found that one in three households have motorists who change their own vehicle oil. It was found that nearly half of those people inappropriately dispose, store or reuse the oil. The amount of uncollected waste oil has been estimated to be in the region of 40-65 million liters. Thus, significant quantities of used lubricant are deliberately spilled on the ground or in surface waters. The Oil Industry also through oil production accounts for a large amount of the consumption of energy. According to the statistics the amount of oil consumed by the world every year is as many as 30 billion barrel. The Oil Industry can be parted in two, Upstream and Downstream. The importance of oil in the world evolved at a slow
20 pace but once it was identified, it became one of the most important things in the lives of human beings. 1. High pollution potential from µillegally dumped¶ used oil and lubricants 2. Used oil and lubricants classified as Hazardous Waste 3. Carbon emission in using oil which has an effect on Global Warming Legal Factors The legal factors generally affecting the operation and production of oil in the Philippine industry are the following laws and policies related with the production, distribution and waste management of oil manufacturing. 1. Hazardous Waste (Regulations of Exports and Imports) Act 1989 (Commonwealth Act) restricts to exporting of µwaste¶ products 2. DENR License for treatment site 3. Controlled Waste Regulations for transport storage by the Environmental Management Bureau. 4. Dangerous goods licensed for storage by the Environmental Management Bureau.
21 D. Opportunity Issue Analysis The strengths, weaknesses, opportunities and threats internally seen in Rainchem International Inc.¶s operation are discussed below and will be used to analyze right positioning and strategy of Rainchem International Inc. 1. Strengths The strengths of Rainchem are its cheap price, and quality products that has a technology addressing the issue of carbon in oil usage. Affordability Rainchem offers chemicals and lubricants in a much affordable price as compared to its direct competitors in the in the industry High Product Quality Rainchem manufactures high quality products that will surely take good care of the vehicle engine. Good Product Platform Product technology, especially the ³Decarbonizer´ of their 2T product addresses the issue of carbon emission of motorcycles that is polluting the atmosphere and causing worse effect on global warming.
22 2. Weaknesses Low brand awareness Rainchem still have low brand popularity. This may be associated with the company¶s few advertising and promotional activities. Mediocre distribution strategy Distribution strategy is not efficient for a nation widest reach and may be costly because of the lack of an independent intermediary. Weak Sales Force Sales force is not trained and compensated enough for a better industrial prospecting coverage. 3. Opportunities Increase connection with other suppliers, retailers and wholesalers This innovation in value chain will help Rainchem International Inc. reach its target market easier and better. Increase sales to current customers through strategic alliances An increase in sales can happen through right strategic alliance, advertising and communication mix.
23 y Supply generic oils to industrial motorcycle manufacturer Sales force¶ effort to reach, support and build rapport with industrial motorcycle manufacturers will be needed. 4. Threats Costly Raw Materials The oil fields are in hard-to-reach that¶s why imported raw materials might increase in price. Non-polluting vehicles There are lots of innovations that can minimize the use of oil since environmental issues like pollution and global warming is now being addressed in the whole world. These innovations may lessen the demand for motorcycle oils. 5. Issue Analysis The issue on low brand awareness can be addressed by a vast advertisement, promotion and sales strategy. Also, Rainchem¶s weak distribution strategy can be improved by a strong and well-trained sales force to reach both industrial consumers and end-users. The threat of price increase in raw materials will always lead to price increase in oil products. This is inevitable because of the presence of
24 the oil deregulation law making it impossible for competitors, especially the leading companies to increase prices. But raw material price increase caused by production and importation will heighten Rainchem¶s motor oil price on a rate that is still reasonable. The issue on hazardous waste produced by the manufacturing of oils will be addressed by a hazardous waste management where experts will be paid to study and manage the hazardous wastes of the company. E. Marketing Objectives The marketing objectives of Rainchem International Inc. are to increase its market share in the industry from 0 percent to 1 percent by the year 2014 through conducting a vast promotion and sales force coverage. Also, reach a growth of 500 percent in it sales and revenues by the year 2014. Rainchem also aims to create a unique identity for its motorcycle oil through a recognizable brand name and high technical performance in the motorcycle market which can be seen by an increased number of retailers and wholesalers from motorcycle dealers and parts suppliers by 70 percent at the end of the year 2014. Promotion and advertisements will be done to increase brand awareness of motorcycle manufacturers, dealers and suppliers in NCR and CALABARZON areas by 150 percent on 2012. This will be evident through the growth in sales and revenues.
25 F. Marketing Strategies Rainchem marketing strategies will be choosing the right market segment, positioning, product improvement, advertisement, sales force, promotion, contest and research and development. 1. Target Market The target market of Rainchem International Inc. would be mainly from the motorcycle industry in the Philippines. Under this industry are segments from the motorcycle industrial manufacturers, dealers and motorcycle parts and accessory suppliers. Rainchem will target the manufacturers, dealers and accessory or parts supplier in the National Capital Region (NCR) and Region IV-A (CALABARZON) since the main industrial manufacturing sites and offices of motorcycle companies are usually located in these areas. Major motorcycle manufacturers and dealers are Honda, Toyota, Mitsubishi, Kawasaki, other high-end motors and new industry players. Rainchem will prioritize the industrial manufacturers of
motorcycles through telemarketing, personal visits and web mails. Dealers and Suppliers will be reached out via the executive sales team. Nevertheless, if the NCR and CALABARZON market will be substantial, expansion to different markets from other regions in Luzon, Visayas and Mindanao will be considered at the end of the fiscal year 2014.
26 2. Positioning Rainchem International Inc. motorcycle oil offers a carbon enginesmoke reducing technology formulated by licensed engineers with expertise focused on chemical mixtures. Its 2T two-stroke and 4T four stroke motor oils are available for motorcycle industrial manufacturers, distributors and parts suppliers. This will help minimize the pollution problem caused by motorcycles and will address one of the environmental issue motorcycle industry may encounter. Aside from its decarbonizing platform, Rainchem motor oils have the same quality that is offered by leading brands but is more affordable than the competitors. It is 20 percent cheaper than the leading brands and 5 percent cheaper than competitors. With this, Rainchem motor oils will be positioned as a top of the mind motor oil that has a recognizable name and reliable technical performance in an affordable price. It will target both industrial and consumer buyers with the help of advertisements, promotions and sales contest. On the other hand, sales team of Rainchem motor oils will always be present for regular feedback communication, constant support and timely delivery for a win-win relationship with its small or big customers. Customer and staff communication will never be a hassle that¶s why solution will always be the answer. The accounting, marketing and
27 manufacturing department will work hand-in±hand to improve better the personnel¶s performance for a better customer service. 3. Product/ Product Line Rainchem International offers motor oils under the product line of Engine Oils. Rainchem International will position motor oils with a brand name ³RenOil´ coming from the word ³Rain´ and ³Oil´. This will be the recognized identity of Rainchem Motorcycle Oils with trademark licensed to Rainchem. Licensing budget will be P 540, 000. Logo of RenOilTM Brand is shown on the figure below.
Figure 5 RenOilTM Brand Logo This product brand will be shown on all available containers of Rainchem motorcycle oils. Products under this line are 2T and 4T which will be described below. RenOilTM 4T Dash This product is premium grade engine oil designed developed to provide excellent lubrication for all four-stroke
28 engines. It is formulated from high viscosity mineral oils blended with superior performance additives to provide high oxidation resistance, and thermal stability to meet the stringent requirements of modern four-stroke motorcycle engines. It also protects and ensures dependable transmission & clutch operation. It is offered in 200L and 20L for industrial consumers and 1L and 200ml for retailers and wholesalers. The packaging for 1 Liter RenOilTM 4T Dash will be a red container with the brand logo and tagline speed as shown on the figure below. 200 ml retail container has the same color, style and sticker.
Figure 6 RenOilTM 4T Dash Packaging
29 y RenOilTM 2T Flash This product is premium or high-quality two-stroke motorcycle oil designed for the lubrication of all two-stroke gasoline engines fortified with additives to help control engine wear, deposit formation and exhaust smoking tendencies. It is offered in 200L and 20L for industrial consumers and 1L and 200ml for retailers and wholesalers. As we all know, packaging plays an important role for the promotion of the product itself. Improved product packaging for RenOilTM 2T Flash is shown on the figure below.
Figure 7 RenOilTM 2T Flash Packaging
30 The packaging design would also showcase handy container for the 1L and 200ml, made of recycled and reusable plastic material. In such way we could help lessen waste products. The color of the container will be red, which will be accentuated by a sticker for its packaging design. 4. Price Rainchem will make use of penetration pricing as their strategy to maximize the quantity demand while upholding the position as a company that produce cheaper product of lubricants and oils in the industry. The company will also make use of Discount Pricing for bundle orders as a part of their promotional strategy. Table 2 Variable Costs for RenOilTM
RenOil Variable Cost
4T Dash 20W40 XP GEO 20W40 SL 2T Flash 20W50 XM GEO 20W50 SL
31 Rainchem will maintain lower price than competitors. Cross-subsidization among products may no longer be possible as petroleum product pricing will now be linked to the prevailing national price levels. This has lead to expectations of improved price realizations for lubricant companies as there could be no undercutting. The fact is that the public sector oil companies can still afford to compete on price if they choose to do so give their bigger balance-sheets and larger resources. This is the reason why Rainchem still manage to maintain affordable price for buyers. Mark-up pricing wil alsol also be applied to compensate the strategies that will be implemented by Rainchem for the fiscal years 2010 to 2013. The margin applied is 30 percent which is still 10 percent lower than the market leader¶s pricing. For 1L, bulk orders would be 10 percent lower than its retail price. The list of product price is shown on table 3. Table 3 Pricing of RenOilTM
RenOil with 30 % Mark-up FLASH 4T 20W40 XPremium GEO 20W40 SL Speed 2T 20W50 XM GEO 20W50 SL
5. Distribution Outlet One of the firm¶s objectives is to increase its sell and product awareness of people, because of this Rainchem will make use of intensive distribution as their strategy. 4T and 2T products will be distributed to authorized merchant wholesalers and retailers who will be the main channel to deliver the products directly to customers. Building partnership to motorcycle manufacturers and distributors will benefit Rainchem in many ways.
Figure 8 Rainchem Distribution Strategy
33 RenOilTM products are sold through its network of retail service stations in Manila, Makati, Laguna, Batangas, Cavite and Quezon. Lubricants and oils are delivered to the client's area of operations via vans or tank trucks. For high-volume accounts, the company uses its truck for delivery of drums and pails The location of retail centers will be near motorcycle
manufacturers designed to select capable business partners for town in NCR and Region IVA. Contract carriers will remain a major part of the distribution program, but changes are underway. Moving to a dedicated carrier approach to be done in most of areas of region IVA and NCR where Rainchem operates. Rainchem will select well-established tank truck carriers with managers who have vision and a willingness to grow with Rainchem through strategic partnerships. Rainchem is offering these carriers five- to seven-year contracts. Carrier partners will also be expected to run as branded RenOilTM trailers with the spec and dedicate drivers and tractors to do the business. Partners will be expected to achieve a base safety goal of less than one accident per million miles. 6. Sales Force As part of its ongoing activities to develop Rainchem Brand awareness and visibility, Rainchem Philippines must conduct a µDirect retailer contact program¶ all over the Philippines. Here, teams of Rainchem personnel visited
34 various lubricant outlets ³en masse´ in their respective areas to raise awareness of the brand and promote the use of RenOilTM products. The program received overwhelming response wherever it went. As a further element of its regular activities, Rainchem Oil Philippines is also conducting a similar program but this time aimed directly at the end-user. Commission will be implemented upon reaching monthly quota of sales executives in peso. Commission is 5 percent of their monthly quota of 100,000 pesos. Part of the sales force strategy is to have a sales representative on the target locations. Rainchem will be assigning one managing sales representative on each city in Region IVA and NCR which most likely would be on each major branch of motorcycle distributor or dealers. Materials such as pamphlets and brochures will assist the sales team in their responsibility. 7. Advertising Rainchem will sponsor a Moto-Cross for Motor-Cycle Drivers and enthusiasts in every region, in alliance with the Motor-Cycle People. More than 50 participants should take part in the event for tremendous public response. More such events will be organized for the company to be active in its Corporate Social Responsibilities and to develop awareness and promote the brand. Joining business convention meetings and trade shows would still be part of the advertising strategies of Rainchem. These activities would create new industrial partnership; create new potential target market and increase
35 sales and demand on our product. Poster stands, flyers and brochures are the materials distributed and displayed during conventions and trade shows. Sample of this is on the figure below.
Figure 9 RenOilTM 4´x8´ back-to-back leaflet
36 Another trade show is Philconstruct trade exhibits that will be held this November 2010 at SMX Exhibition and Convention Center, Pasay City. Since other product lines sold by Rainchem will be displayed there, RenOilTM will also have leaflets distributed there. Promotional campaigns and trade shows offering gifts to their customers are methods of driving sales of automotive lubricants. Sponsorships on noontime shows with the two big networks in the country, the ABS-CBN and GMA7 will be one of the strategies of RenOilTM.. This TV ad campaign will run for twelve months. 8. Sales Promotion Gift certificates will be given to end users through a cap papremyo. A poster showing the promo guidelines and period will be distributed to gas stations, motor cycle dealers and accesory suppliers. Sample of the promotion is shown below.
Figure 10 RenOilTM Cap Sales Promo
37 Through this promo, end-users will look for the RenOilTM product, and retailers and wholesalers will continue to order RenOilTM. Aside from this, calendar freebie will be given to distributors for customers who will use RenOilTM 2T and 4T products. 9. Sales Contest "Moto-paint". This event will be sponsored by Rainchem International Inc. wherein the focus is to look for individual who has a unique talent to set-up his motorcycle with his unique concept in a given time period. Winner will get one year supply of either 2T or 4T RenOilTM as prizes. The objective of this will basically to create wider brand awareness, obtain new customers, secure larger orders of 2T and 4T 200 ml, get higher rates, sell special inventory, sell a higher percentage of retail and lastly to improve customer satisfaction. Posters of this contest will be distributed to retailers from motorcycle dealers and accessory suppliers. 10. Research and Development Research and development will be included in the strategy since to attain customers¶ best expectation is one of the visions of the company. Customer survey questionnaire will be yearly distributed to measure and evaluate the efficiency of each strategy. Also, sales representatives will do census research on competitors¶ market sales and clients¶ current demand since the sales force are usually in the field.
38 G. Action Program Schedule of the implementation of product, promotion and other strategies are shown in order on the table below. The strategy implementation will start from trademark licensing of RenOil on June 2010. Together with this, packaging, distribution and sales force will also start its implementation. Other promotional activities will commence at the start of different fiscal years. Agencies/ Action Plan Period Department/ Individual Involved 1. Trademark Licensing 2. New Product 3 months Packaging 3. Carriers Rental 4. Retail outlet 3 months Monthly 18 months Administration Department Marketing Department Logistics Department Administration Department Monthly Sales Executives June 2010 to P 540,000 Time Frame Budget
December 2011 June 2010 to P 30,000
August 2010 June onwards June 2011to P 2,160,000 2010 P 30,000
construction 5. Sales Commission
August 2011 Continuous P 65, 000
6. Brochures, Leaflets Displays 7. TV and
Once a year
September every year
show 12 months
to P 500,000
sponsorship 8. Sales Promo 3 months
Dec 2011 January 2012 P 30,000
9. Sales Contest
10. Research and Once a year Development
December every P 30,000 year
Hence, total budget for the implementation of the strategies will be P 3,460,000 to be budgeted for the operation and marketing of RenOilTM starting the fiscal year 2010, 2011, 2012, and 2013.
40 Appendix 1
Name of Person Completing: ___________________________________________ Title: ______________________________________________________________ Tel. Nos.: _________________________ Email: ___________________________
1. How would you rate our performance as a supplier to your organization? Order accuracy: Order filled completely: Timeliness of deliveries: Helpfulness of delivery personnel: Prompt pick-up of returns: Accurate billing: Ease of understanding invoice & statements: Prompt issuance of credits: Customer Service support: Ease of placing orders: Phone responsiveness, courtesy & listening skills: Helpfulness of Accounting Department: ___Poor ___Fair ___Good ___Excellent ___Poor ___Fair ___Good ___Excellent ___Poor ___Fair ___Good ___Excellent ___Poor ___Fair ___Good ___Excellent ___Poor ___Fair ___Good ___Excellent ___Poor ___Fair ___Good ___Excellent ___Poor ___Fair ___Good ___Excellent ___Poor ___Fair ___Good ___Excellent ___Poor ___Fair ___Good ___Excellent ___Poor ___Fair ___Good ___Excellent ___Poor ___Fair ___Good ___Excellent * * * * * * * *
___Poor ___Fair ___Good ___Excellent
41 Communication: Your overall satisfaction level: ___Poor ___Fair ___Good ___Excellent ___Poor ___Fair ___Good ___Excellent ___Yes ___No * *
Is Rainchem the only lubricant/ oil supply company with whom you deal?
In the past 6 months, how have you ordered from Rainchem?
Which method do you prefer and why? ________________________________________________________________________
2. Level that Account Representative or Sales Rep meets your expectations. Is friendly, courteous, and professional: Is knowledgeable about our products and services: Is organized regarding my account: Provides clear answers to my questions regarding my account: Calls on me enough to meet my needs Shows genuine interest in providing solutions to my needs Demonstrates "Your success is our focus" ___Poor ___Fair ___Good ___Excellent *
___Poor ___Fair ___Good ___Excellent * ___Poor ___Fair ___Good ___Excellent * ___Poor ___Fair ___Good ___Excellent *
___Poor ___Fair ___Good ___Excellent *
___Poor ___Fair ___Good ___Excellent *
___Poor ___Fair ___Good ___Excellent *
42 3. To what extent are you aware of the following value-added services we provide (1 - Did not know; 2 - Know, but haven't used; 3 - Use occasionally; 4 - Use all the time) Custodial training Website order entry Free delivery Service Department repair Labor Cost Reduction __1 __2 __3 __4 __1 __2 __3 __4 __1 __2 __3 __4 __1 __2 __3 __4 __1 __2 __3 __4 * * * * *
4. What can we start doing to improve the value you receive from Rainchem? _______________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ 5. What should we stop doing that is of no value? _______________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ 6. Suggestions for a product, product feature or service that Rainchem should consider adding to better meet your needs? _______________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ 7. Is there a person that needs special recognition for exceptional customer focus and satisfaction? If so, please provide a brief description what that person did. _______________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________