How LPG industry Operates its Marketing Operations

In an industry, where Distributors & Retailers are integral parts of marketing activities of the
business, major attention must be given on building strong distribution channel. The LPG
industry operates in such a B2B market. So, how does the channel work & what strategies
should companies take to do well in a competitive market?

The answer should be through maintaining a strong relationship with the Distributors &
Retailers. Because, they are bridge through which an LPG industry reaches its’ customers.
For B2B companies, the potential buyer pool is typically smaller and less urgently looking to
buy. Everyone needs toilet paper and (almost) everyone wants new shoes, but far fewer
people will rush out to buy surface drills, ultrasound machines or a brand new customer
support software on a whim.

In other words, if your approach to marketing is “sit back and hope our customers break
down the door to throw money at us” — you’re probably going to be waiting for a while.

A B2B marketing strategy dictates how an organization will be proactive in attracting

customers, closing sales and remaining on the road to continued financial success.

LPG Industry in Bangladesh

The 450 million LPG industry is at a growth stage. Since the industry is largely import
oriented (95% of the total LPG is imported), the import forecast gives us the idea about the
growth of the market.

Source: LightCastle Primary Research

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The industry consists of a number of players in the market among which only one is public
company (state owned). Although the industry is generally import based, there are a few
companies that have their own production facility (e.g. Bashundhara and Kleanheat Gas),
each has production capacity of one lakh tonnes. More brands are expected to enter the
market as the government has granted more than thirty more licenses to private operators.

The LPG industry consists of local players like Basundhara, Jamuna, Omera, TK Gas and
foreign companies like TotalGaz and Laugfs Gas (corporate brand name Kleanheat gas).
Omera has yearly sales volume of 140,000 MT/year. The main plant of Omera LPG is in
Mongla with 3,800 MT capacity. Bashundhara LPG has state-of-the-art LP Gas plant in
Mongla having capacity of 3,000 Metric ton with daily refill capacity of 50,000 units of gas
cylinders. The LPG market is led by Bashundhara (24%) followed by Omera (20%), Jamuna
(17%) and BM (11%).

Source: LightCastle Primary Research

The Market Laeder: Bashundhara LP Gas Limited

The beginning, in the year of 1999, Bashundhara LP Gas Limited, started off as the First
Private LP Gas importing, bottling and marketing company in Bangladesh. The company has
a state-of-the-art LP Gas plant in Mongla Port Industrial Area. Being a subsidiary of country's
eminent business conglomerate Bashundhara Group, the company embarked on a journey to
meet the growing demand for cooking gas and give end users the relief they have long been
looking forward to. In 2011, the company saw its establishment of world class cylinder
manufacturing plant in the name of Sundarban Industrial Complex Ltd. situated in Mongla
Port Industrial Area on the bank of river Pashur. Considering the growing demand as well as
for timely product distribution Bashundhara LP Gas expand its unit gradually in Chittagong
and Bogra. In addition, Bashundhara LP Gas set up South East Asia's second largest LPG
filling plant in Keraniganj, Dhaka which will start its operation soon.

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It now runs country's widest LPG distribution chain, thanks to its strong business bond with
distributors countrywide. The biggest storage facility, highest production capacity, satellite
plants, sales depot in key districts of the country and its inimitable ability to maintain the
supreme product quality ensured by its well-equipped lab have already put the brand in
leading position with the largest market share.

The Journey of a Market Leader

Bashundhara LPG started its journey as a leader in the field of LPG sector in Bangladesh and
it is continuing its legacy since then. We were interested in knowing their strategies that they
follow for sustaining in this competitive market.

Firstly, we wanted to know whether there is any scope of being complacent in any course of
their journey and what we found is way much interesting. The answer to the question is a
straightforward NO. Nothing can be taken for granted in this competitive market. To come up
with innovative ideas is a must for a business leader in this prospect. Otherwise a lot of
parties are waiting in the race to replace the leader within no time. So we were eager to know
how the organization plan their marketing strategy. Our findings are as follows.

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Moving on to the next phase, we tried to know which point the organization is now focusing
on for ensuring their sustainability. We got to know that it is now marketing its maturity stage
using the tag line, “ভরসা রাখুন, স্বাচ্ছন্দে থাকু ন।“ And it proves to be very much effective according
to the management’s end.

In addition to this, we got to know that the organization is engaged in many CSR activities.
And such activities play a vital role in its marketing. As their business is mainly B2B one, it
heavily depends on its distributors. Bashundhara LPG cannot direct sell its product to the
customers. It needs to maintain a channel. The channel is given below.

Importer Distributor Retailer Customer

So, if Bashundhara LPG wants to increase their sales it needs to keep its distributors satisfied.
For this reason, the organization arranges some CSR activities which include their
distributors. For example, few days ago the organization arranged a program where it gave
scholarship to the children of its distributors. The aftermath of this event was overwhelming.
The distributors were elated & it gave them a lot of motivations which eventually led to
increase in the sales.

Later on, we tried to know how LPG sector is doing currently. We were given a superficial
idea. In 2013, the industry produced 80,000 tonnes of LPG. In 2019, the industry reached one
million tonnes. From 2014 to 2015, and 2016 to 2017, the growth of the industry was 100
percent. But from 2018 to 2019, the growth of the industry was merely 10 to 12 percent. This
dip in growth was because the product had overcome exponential growth and entered the
organic growth phase.

During the time of exponential growth, the demand for local LPG products was 700 units, but
the local market produced about 200 units. In recent years, the demand is still 700 units, but

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the local market produces 1200 units, which means Bangladesh is oversupplying local LPG-
related products.

The sourcing of the LPG is built in Mongla and does not allow the entry of big vessels. To
tackle future demands, we need more channels. Also, the VAT on the product needs to be
lowered in order to reach out to 70 percent of the country’s people.

The ‘Retailer Club’ Campaign:

Bashundhara LPG once started a marketing campaign named ‘Retailer Club’ with an aim to
build a strong tie with the retailers. Normally, Bashundhara LPG does business only with the
distributors. The distributors supply products to the retailers. Finally, retailers’ sale LPG to
customers. So, the end sales depend a lot on the retailers. Through the campaign Bashundhara
LPG wanted to strengthen tie with the retailers and boost up sales. The company registered
about twenty seven to twenty eight thousand retailers across the country throughout the
campaign. However the program was not successful for a number of reasons. Those were:

Fluctuation of price in the international market:

LPG business in Bangladesh is an import oriented business. Companies like Bashundhara
LPG buy LPG from international market and sell them to domestic market. During the time
of the campaign Iranian Military General Kashem Solaymani was killed by US military
forces. After the death of Iranian Military General Kashem Solaymani, the price of LPG
increased in the international market. Then Bashundhara LPG had to buy LPG at higher
price. This created a problem in the overall marketing campaign.

Non-cooperation of distributors:
Through the campaign, Bashundhara LPG tried to build a relationship with the retailers by
directly registering the retailers. There was no incentive for the distributors in this campaign,
so the distributors were dissatisfied and did not help Bashundhara LPG.

Delay in rolling out the campaign:

Bashundhara LPG hired a third party to run the campaign. The third party made some delay
in rolling out the campaign. Due to the delay, Bashundhara LPG could not sell expected
amount of products which caused 15% of the failure of the campaign.

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The Scratch Card Disaster:
In the campaign Bashundhara LPG gave sales bonus to the retailers for each cylinder sold. In
addition the company gave a scratch card to the retailers with each cylinder. The retailers had
chances of winning big prizes but most of the scratch cards did not have any prize. So, after
trying many scratch cards most retailers did not find any prize. This disappointed the retailers
and they became agitated. The company officials thought that scratch card prizes would be an
additional benefit and the sales bonus would be the main incentive to the retailers. However,
retailer became unhappy after failing to get any prize from and they demanded to give them
prizes whether it is small or big. So, the company recalled the initially printed scratch cards
and distributed reprinted scratch card which had prizes more frequently. In the later scratch
cards the number of big prizes was very low but every scratch card had small prizes. Now,
the retailers were happy to get prizes. There is psychological reason behind this behavior of
the retailers. Getting something from scratch cards created a feeling of getting something
among the retailers however small it is. So the small prizes from scratch card helped the
company to mitigate retailer dissatisfaction.

Another scratch card problem:

Initially during the campaign, a retailer bought 15 cylinders and won a motorbike from
scratch card. Suddenly after getting the motorbike, the retailer stopped selling the company’s
products. When the company tried to find out the reason it found that the retailer understood
that he would not get anything. So the retailer stopped selling the company’s products. So, to
avoid this kind of situation, the company introduced more small prizes instead of some big
prizes.

Lessons

In a B2B business, marketing should be treated as a collaborative effort between supplier and
distributor. By doing so, a company can actually create an excellent opportunity to improve
distributor motivation over a long time frame. By providing marketing support to the
distributors you will both achieve more holistic and better integrated marketing campaigns
and also demonstrate that the company is committed to the success of your distributors.

Another often overlooked tool for motivating the distributors is fostering relationships
between them. Highlighting the success of some distributors will demonstrate that
distributors can successfully sell your products, and creating and fostering channels of

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communication between them will help them learn from each other, increasing the
effectiveness of your entire distribution network.

Every organization is chasing success. But what “success” actually looks like varies wildly
from one company to the next, and how “success” is measured varies just as much.

The same is true for B2B marketing strategies—a successful strategy could be one that
increases sales, or generates awareness, or attracts more leads, or increases customer
referrals, and the list can go on & on. So, while planning the marketing strategies companies
should look into what motivates the customers, dealers & distributors and what offerings can
backfire & ruin relationship between the channel.

A company can be the market leader, but it must not be complacent. Once, a company
becomes complacent competitors take advantage and the complacency causes loss in market
share. So, once a company reaches the top it should rethink & reinvent its’ marketing
strategies. Constant improvement & invention is necessary to maintain the top position at the
market.