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Petro Retail Mix Elements: A Study of Indian Market

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 PETRO RETAIL MIX ELEMENTS: A STUDY OF INDIAN MARKET

Sudhir Yadav, Pandit Deendayal Petroleum University, Gandhinagar, Gujarat, India

Sanjay Sakariya, Pandit Deendayal Petroleum University, Gandhinagar, Gujarat India
Manish Thaker, M G Science Institute, Gujarat University, Ahmedabad, Gujarat, India

ABSTRACT

With the entry of private and foreign players, the scenario of petro-retailing in India has been changing
considerably. India’s public sector Oil Marketing Companies (OMCs) are undertaking massive image
improvement programmes and differentiating delivery of their products and services. Earlier petrol retail
outlets were simply used for filling the fuel, but now public sector OMCs are aggressively marketing their
products to cope up with the competition from private sector OMCs. We have carried out the survey of
customers and retail outlet owners / company representatives to understand their preferences of Petro
Retail Mix Elements. Analysis identifies that there is a significant difference in the preferences for retail
mix elements among customers and OMCs. The paper also identifies the gap between current petro-
retailing practices of OMCs and customer preferences and its implications to the OMCs. Qualitative
analysis presents additional insight into retail mix elements. This paper also compares the retail mix
elements of various OMCs operating in Indian market.

Keywords: Petro-Retailing, Retail Mix Elements, Preferences for Retail Mix Elements, Customers
preferences and Oil Marketing Companies Preferences

1. INTRODUCTION capital plus” formula. In such situation OMCs

India is the fifth largest energy consumer and
amongst the largest oil importer country in the
world. Like many other industries, Indian
petroleum industry has been strictly regulated
since independence in 1947. Until 2002, retailing
of petroleum products in India was protected
and dominated by four state owned petroleum
companies. In-short, petro-retailing was the
monopolistic business of government regulated
petroleum companies and because of protected
environment, ‘marketing’ was never an issue.
The role of petroleum companies was just to sell
and distribute petroleum products to the end
users. The government had set an objective that
the state owned petroleum companies popularly
referred to as public sector OMCs carry out
business with social objective. Therefore
competition was not allowed among them by
government. Also, the prices of most petroleum
products were fixed under the Administered
Pricing Mechanism (APM) by Government of
India. Under the APM, product prices were
directly administered by government based on
an opaque and complex “cost of operating
were not required to understand consumer
needs and therefore branding, loyalty or any
kind promotional activities were not undertaken
by OMCs. Until few years ago, petro retailing in
India was a staid, even boring business (IBEF,
2004).
The petro retailing scenario has suddenly
changed when government declared that it
would opt out of regulating the OMCs and the
petrol market in India. In April 2002, Indian
government deregulated the oil sector and
abolished the APM which controlled the price of
petroleum products and allowed private sector
companies to set up their petro retail outlets to
market petroleum products at the market-
determined prices (Clarke Kieran, 2010). Under
new regime, OMCs are free to set retail product
prices based on an import parity pricing formula.
With liberalization, monopolistic business of
petro-retailing no more remained with state
owned OMCs. New regime opened doors for
private sector players. The entry of private
sector players in the Indian market witnessed

JOURNAL OF INTERNATIONAL BUSINESS AND ECONOMICS, Volume 12, Number 2, 2012 34

the forces of marketing and competition in petro
retailing.
Davar R. (2007) observed that the policy shift
sparked a rush for opening the petro retail
outlets, as both private and public sector
companies wished to position themselves to sell
to the nation’s growing and increasing mobile
middle class. Old players i.e. public sector
OMCs found themselves amidst cut throat
competition. The newly entered private players
including Reliance, Essar and Shell started
retailing of petroleum products with more
professional and aggressive approach. They
also adopted skilled marketing practices. The
public sector OMCs (including Indian Oil
Corporation Ltd. (IOCL), Bharat Petroleum
Corporation Ltd. (BPCL), Hindustan Petroleum
Corporation Ltd. (HPCL) and Indo-Burma
Petroleum Company Limited (IBP, now merged
with IOCL)) did not have marketing strength but
they had an advantage of vast experience,
understanding and knowledge of the Indian
petro retail market and its operations. Their most
important strength was extensive distribution
network covering all important locations in India.
The competition with private sector players
forced public sector OMCs to convert their
business from ‘very low involvement commodity’
into ‘high involvement brands’.
Both private and public sector players are now
focusing their efforts to increase their market
share. They are trying to understand the
consumer needs and accordingly adopting
different retail marketing practices like branding,
positioning, advertising, sales promotions,
delivery of services, etc. The petrol retail outlets
are quickly getting converted into multi-facility
centers with change in signage’s, logos and
canopies, clean floors, channel music, lightings,
attendants with uniform, convenience stores,
ATMs (Automatic Teller Machines), internet
browsing facilities, video parlors, entertainment,
supermarkets, auto/truck repair services and
promotion schemes. The public sector OMCs
are working towards delivering a new
experience to the Indian consumers. New and
attractive petro retail outlet designs, use of credit
cards, lady attendants and carwashes have
JOURNAL OF INTERNATIONAL BUSINESS AND ECONOMICS, Volume 12, Number 2, 2012
become an essential part of the petroleum
retailing makeup, especially in big cities and
urban areas in India.
In the above context the issues to be looked into
are (i) what are the preferences of Indian
customers for various retail mix elements in
terms of its importance (ii) what are the
preferences of OMCs for their application of
retail mix elements to compete in market (iii) is
there a gap in the retail mix preferences of
customers and OMCs?
2. LITERATURE REVIEW
The study of Dugar A. (2007) revealed that
public sector OMCs are trying to take obvious
first mover advantage to grab the opportunities
through establishing their brands and
differentiating their services as quick as possible
to attract the larger target audience. Anirvinna C.
and Ravi N.V. (2011) also argued that the key to
success in petro retailing depends on oil
marketing company’s increased focus on
establishing a brand identity so as to capture the
market share. Consequently public sector OMCs
are investing in renovation and upgrading their
retail outlets besides offering higher value added
service mix. However, Cohen M. and Bradfield
E. (2001) studied that today’s sophisticated
consumer do not believe that one brand of petrol
is superior to the other.
Anirvinna C. and Ravi N.V. (2011) further found
that OMCs focus is to adopt global standard
retail marketing practices in India. OMCs
marketing strategies are thus aimed at
differentiating services, improving visibility and
enhancing customer satisfaction. Manish
Kotwala (Cedar View) has opined that the OMCs
are focusing on the both product and services
for differentiation. Onion R (2010) identified two
major challenges faced by OMCs to shape the
secure future for them. The challenges are (i)
need to increase revenue as the margin on fuel
reduces (ii) need to meet changing consumer
needs such as new demand for alternative fuels
and the customer need for faster, more
convenient ways to shop. These challenges will
35
force fuel retailers to react and reassess how
petro retailing outlets are operated, used and
branded. Competition is further forcing fuel
retailers to increase revenue opportunities by
exploiting their sites. Manish Kotwala (Cedar
Consulting) found that non-fuel part of retailing is
developing with the facilities like convenience
stores, auto care services, ancillary services,
customer loyalty programmes etc. OMCs are
trying to shift perceptions of Indian consumers
i.e. moving them away from the ‘distress
purchase’ to make it as ‘positive purchase’. The
study of Onion R (2010) showed that consumers
could be attracted or are made loyal towards the
petro retail outlets through a well-respected
grocery chain, a great coffee or food-to-go offer,
a joint venture with a fast-food chain brand or
vehicle service chain. Even a cinema or bank
on-site gives customers reason to choose the
retail site. Thus the consumers’ perception can
be changed if one focuses from ‘just fuel’ to ‘fuel
plus’.
3. PETRO RETAILING – A PERSPECTIVE
Marcel Cohen and Edward Bradfield in their
book on Petrol Retailing – Within a Global
Context have identified and discussed some of
the retail mix elements for oil firms engaged in
petro retailing. A brief discussion on retail mix
elements is as below.
3.1 Fuel Quality
Fuel could be petrol, diesel, LPG, CNG for
consumers in India. While the fuel quality
standards have been privately enhanced over
many years by oil companies in response to
demands of the engine manufacturers, the
scrutiny and enforcement of such standards has
gradually invaded the public domain. Recent
years have seen a growing degree of official
regulation of motor fuel product quality and
standards usually on grounds of public health
and environmental concerns. Today, the fuels
refined from the original crude vary greatly in
their technical characteristics. Retailing
companies have been charging extra cost for
providing premium quality and consumers
willingly pay for it.
JOURNAL OF INTERNATIONAL BUSINESS AND ECONOMICS, Volume 12, Number 2, 2012
3.2 Forecourt Design
The designing part of the retail outlets is based
on the RVI (Retail Visual Identity) which includes
the factors like under canopy lighting system,
readable graphics, signage and orderly outlets.
The emotionality part of it includes use of color,
architectural elements and form which is meant
to make the environment pleasant and
comfortable. The designing starts from
designing the logo of the company for creating a
unique brand. Designing retail outlet lay out,
which includes number of filling machines
(dispensers), entry and exit ways are the most
important aspect of forecourt design. Other
services to be offered are also the part of the
retail outlet designing, which should be taken
into consideration while designing the retail
outlet.
A simple change in the planning and designing
of a forecourt at retail outlets could dramatically
change the way customers think about the retail
outlet / brand.
3.3 Pump Design
What customers see at the retail outlet is not the
‘pump’ but a dispenser which is in effect a
package. The real pump mechanism is often in
the ground. With the adoption of technological
advancement consumer can see the currency in
terms of amount as well as the volume of fuel in
the dispenser. Pumps now operate with electric
motor, digital display, remote controlled
operations etc.
Tim Beercroft of Dresser Wayne, the oldest and
most respected pump maker tried to introduce
automatic pump. In this type of pump, customer
is not required to come in touch of fuel. The
robotic nozzle will fill the car when it is ordered
by the customer who would be sitting in air-
conditioned room and filling the data at visual
display unit (VDU). In Japan, these types of
pumps are in use, but they are very costly and
oil companies are reluctant to introduce them.
To avoid mis-fuelling i.e. putting diesel in a
petrol car or vice versa oil companies use colour
coding for example black for diesel.
36
3.4 Shop and Other Facilities
The shops along with pump is planned (i) to
subsidize the poor returns from fuel, since shop
can be an important profit source (ii) to promote
higher petrol sales by attracting customers to the
filling station/retail outlet. Shops may be in the
form of utilities like ATM, restaurant, In and Out
stores. Apart from shop, petro-retailing
companies also provide air check, small garage
/ mechanic service station. The other facilities
offered at petro-retail outlets in India are water
cooler, wash rooms and windscreen wipe.
3.5 Payment Facility
The payment process is often in the form of
cash in all the countries. It amounts roughly for a
third of total time spent on a filling station. The
speed and ease of payment are the essence for
the majority of customers.
For the oil companies, cards provide a much
cheaper and more secure form of mode of
payment. The cost of handling payments by
cards is lower than that of cash, even if the
merchant fees is to be paid to the bank for each
transaction. It avoids the operator storing large
amount of cash on the premises and hazards of
bringing such cash to the bank. It enables the
customer faster exit. It also helps in having
completely unmanned automated pumps.
The oil companies can get involved in focusing
on capturing and analyzing the data of customer
information. The analyzed information can be
extremely valuable in understanding customer
purchase patterns and the potential for
associated sales. There is scope to move from
‘transactional marketing’ to ‘relationship
marketing’. Through the issue of payment cards
OMCs can bind customers to a particular brand
of fuel and boost brand as well as customer
loyalty.
3.6 Petrol Prices
Consumers regard the price of petro-products as
a tax on their personal right to mobility. They are
totally intolerant of any price difference between
various brands. Price sensitivity expressed in
terms of cross elasticity is between minus 10 to
JOURNAL OF INTERNATIONAL BUSINESS AND ECONOMICS, Volume 12, Number 2, 2012
minus 30. It means change in volume as a result
of being 1% above or below a competitor’s price
will cause a drop or increase in volume by 10%
to 30%.
3.7 Promotion
It is observed that attention to the promotion of
product or service is a critical element of
marketing mix. Other marketing mix elements
cannot operate successfully without successful
promotion. Promotion mix has two popular
meanings. One is in the sense of free give-
aways. Other broader meaning given to
promotion is in the sense of communication.
Give-always: The petrol industry has a long
history of promotion at retail outlets. About 40
years ago whiskey bottles were offered as a free
give-away on certain quantity (gallons) of petrol.
During 1980s, in some countries collectible sets
of coffee mugs, soup bowls, and towel
collections were given away. Some times the
give-away was in the form of an opportunity to
play in a game of chance with cash prize.
Scratch cards, catalogues of gifts redeemable
through coupons, electronic points etc. are also
some of the give-aways as promotion.
Communication: It is in the form of branding,
advertising, direct mailing, press and public
relations and so on. Direct mailing is not
appropriate for mass-market product such as
petrol except for local site opening.
Branding: Branding as explained by Cohen and
Bradfield is a shorthand communication. For
petro-retailing companies, the choice of brand
name suggests combination of attributes and
personality of that company. It is vital for fuel
marketing companies to make brand and logo
easily recognizable. Logos are used often in
expression of brand names and sometimes
instead of brand names. Shell’s pecten logo is in
fact a stylized seashell, which need not carry the
Shell brand name.
Advertising: Early advertising among oil
companies focused on the problems of those
times. In 1960s, users did have concerns about
the efficiency of petrol in terms of its mileage.
The consumers also were concerned about the
harmful effect of petrol to their cars.
Advertisement during those days responded to
37
those concerns by providing reassurance. It also
may be noted that some of the advertisement is
to support give-away promotions. However the
proportion of budget dedicated to building and
maintaining the brand is still significant.
Public Relations: It is observed that the public’s
opinion of oil companies is fairly negative in
most countries. Oil companies are regarded by
public with suspicion and they are considered as
being exploitative, profiteering and manipulative.
Such public opinion is formed based on various
media reports. A strong public relations
campaign is required to counter this opinion.
3.8 People
The first point of contact of customer with the oil
company is with cashier/attendant at the filling
station. They are in fact not an employee of
OMCs but rather an employee of the site
operator. Therefore they have no obligation
towards the oil company or have any desire to
further OMC’s interest. The operator is an
independent businessman who pays them as
little as possible, mostly minimum wage. With
such poor wages, the quality skills of the
attendant and cashier are compromised. Their
self-esteem is extremely low and they show little
or no pride in their job. Therefore the filling
stations are renowned for the unfriendliness of
their staff. The standard of service they offer is
sometime very poor.
OMCs in India have started using above retail
mix elements to differentiate their products and
services in the business environment wherein
now private companies have entered. We have
in this research paper have tried to understand
the customer preferences and OMCs
preferences for various retail mix elements.
Then preferences of customers and OMCs are
compared to identify the differences.
The next section delineates the research
objectives and discusses the research
methodology.
4. RESEARCH OBJECTIVES AND
METHODOLOGY
JOURNAL OF INTERNATIONAL BUSINESS AND ECONOMICS, Volume 12, Number 2, 2012
4.1 Research Objectives
a) To understand the customer
preferences for Petro retail mix
elements
b) To understand the OMCs
preferences for Petro retail mix
elements
c) To identify the differences in
customer preferences and OMCs
preferences for petro-retail mix
elements
4.2 Research Methodology
We followed survey research approach to
understand the preferences for retail mix
elements. Since the nature of research is
descriptive survey research approach is the
most suitable approach. To carry out survey
research, questionnaire with both open ended
and close ended questions was used as a
research instrument. Responses on preferences
for following 14 retail mix elements for selection
of petro-retail outlet were sought on five point
rating scale.
1. Forecourt Design 2. Availability of various
types of fuel 3. People behaviour 4. Fuel quality
5. Number of refill machines at retail outlet 6.
The pump design 7. Marketing and promotional
scheme 8. Air check, small garage / mechanic
service station 9. Water cooler, wash room,
windscreen wipes 10. Utilities (ATM, Restaurant,
In and Out Stores) 11. Easy mode of Payment
12. Fuel Prices 13. Brand 14. HSE (Health,
Safety and Environment) Measures
Five point scale used to find the preferences of
above mentioned retail mix elements is as
under. Extremely important- 5, Very Important-
4, Some what important- 3, Not very important -
2, Not at all important – 1.
The research was carried out in three metro
cities of Gujarat State in India. The cities
selected were Ahmedabad, Vadodara and
Surat. To address the above objectives we
collected the responses from customers and
OMCs. In case of OMCs the responses were
collected either from company representative or
38
from dealers’ representative. The response
sample had an equal proportion from all three
cities. We covered almost all areas of all three
cities to ensure that the responses represent the
whole city. To further control the customer’s
responses we collected 200 valid responses
from customers with an age group of 30 – 45
years of age who visited the outlet with four
wheel vehicle i.e. Light Motor Vehicles (LMV).
100 valid responses were collected from OMCs.
More or less equal number of responses was
collected from public sector OMCs. Since
presence of private sector OMCs is limited in
Indian market, in our sample also very limited
number of responses (about 10) were from
private sector OMCs i.e. Essar Ltd., Reliance
Industries Ltd., and Shell India Ltd.
An excel sheet was prepared for the responses
of preferences for retail mix elements. To
analyze the data MetLab software was used. We
conducted Krussal-Wallis test for customer and
OMCs responses to identify which retail mix
elements are significantly different in terms of
preferences. Mean ranks of preferences was
also found for all retail mix elements for both the
data i.e. customers and OMCs. Further analysis
was carried out to identify significant difference
in the mean ranks of preferences for retail mix
elements of customers and OMCs. We also
used our observation and qualitative discussion
we had with customers and OMCs to analyze
their preferences for retail mix elements during
our visits to market for data collection.
To compare the differences in the OMCs retail
mix elements we collected the information
through the secondary source like organizational
documents, internet, newsletters, magazine, etc.
5. FINDINGS AND ANALYSIS
5.1 Quantitative Analysis
A mean rank of all preferences of customers and
OMCs for retail mix elements has been worked
out which is shown in exhibit 1.

EXHIBIT 1 (MEAN RANK SCORES)

OMCS RETAIL MIX PREFERENCES VS. CUSTOMERS’ PREFERENCES
OMC’s Retail Mix Preferences Customer’s Preferences
Rank Retail Mix Mean Rank Retail Mix Mean
Rank Rank
1 Forecourt Design 884.72 1 No. of Refill Machi14ne at RO 1822.89
2 The Pump Design 833.11 2 The Pump Design 1700.23
3 People Behaviour 821.09 3 Forecourt Design 1690.83
4 Brand 797.79 4 Fuel Quality 1677.04
5 Utilities (ATM, STD, 756.67 5 Air Check, Small Garage / 1665.73
Restaurant, In & Out Store) Mechanic Service Station
6 Marketing and Promotional 754.04 6 People Behaviour 1588.07
Scheme
7 HSE Measures 728.6 7 Availability of Various types of 1462.64
Fuel
8 Fuel Quality 703.86 8 Easy Mode of Payment 1404.46
9 No. of Refill Machine at RO 700.84 9 Brand 1229.03
10 Easy Mode of Payment 666.72 10 HSE Measures 1146.47
11 Air Check, Small Garage / 665.35 11 Unities (ATM, Restaurant, In & 1128.75
Mechanic Service Station Out Store)
12 Water Cooler, Wash Room, 644.12 12 Water Cooler, Wash Room, 1122.93
Windscreen Wipes Windscreen Wipes
13 Availability of Various types of 501.28 13 Marketing and Promotional 1113.88
Fuel Scheme
14 Petrol Prices 348.85 14 Petrol Prices 845.68

JOURNAL OF INTERNATIONAL BUSINESS AND ECONOMICS, Volume 12, Number 2, 2012 39

 EXHIBIT 2(A)
CUSTOMERS RESPONSES

EXHIBIT 2(B)
OMCS RESPONSES

EXHIBIT 3
SIGNIFICANT DIFFERENCES IN THE PREFERENCES FOR RETAIL MIX ELEMENTS AMONG OMCS
AND CUSTOMERS BASED ON MEAN RANK
Significant Difference (Sr. no. of retail mix element)
Retail Mix Element OMC Customer
Lower Side Higher Side Lower Side Higher Side
1. Forecourt Design 2, 8, 9, 11, 12 - 7, 9, 10, 11, 12, -
13, 14
2. Availability of Various - 1, 3, 4, 5, 6, 7, 10, 5, 7, 9, 10, 12, 14 5
types of Fuel 13, 14
3. People Behaviour 2, 12 - 7, 9, 10, 12, 13, 14 -
2, 12 - 7, 9, 10, 11, 12, -
4. Fuel Quality
13, 14
5. No. of Refill Machine at 2, 12 - 2, 7, 9, 10, 11, 12, -
RO 13, 14
2, 9, 12 - 7, 9, 10, 11, 12, -
6. The Pump Design
13, 14
7. Marketing and 2, 12 - 12 1, 2, 3, 4, 5,
Promotional Scheme 6, 8, 11
8. Air Check, Small Garage / 12 1 7, 9, 10, 12, 13, 14 -
Mechanic Service Station
9. Water Cooler, Wash 12 1, 6 12 1, 2, 3, 4, 5,
Room, Windscreen Wipes 6, 8, 11
10. Unities (ATM, Restaurant, 2, 12 - 12 1, 2, 3, 4, 5,
In & Out Store) 6, 8, 11
11. Easy Mode of Payment 12 1 7, 9, 10, 12 1, 4, 5, 6
- 1, 3, 4, 5, 6, 7, 8, - 1, 2, 3, 4, 5,
12. Petrol Prices 9, 10, 11, 13, 14 6, 7, 8, 9, 10,
11, 12, 13, 14
13. Brand 2, 12 - 12 1, 3, 4, 5, 6, 8
2, 12 - 12 1, 2, 3, 4, 5,
14. HSE Measures
6, 8

JOURNAL OF INTERNATIONAL BUSINESS AND ECONOMICS, Volume 12, Number 2, 2012 40

Kruskal-Wallis ANOVA table in exhibit 2(a) of
customer responses of retail mix preferences
shows that probability value is less than 0.05. It
indicates that there is a significant difference in
the customers preferences for retail mix
elements. Similarly In case of OMCs also the
probability value in Krusal-Wallis ANOVA table
in exhibit 2(b) is less than 0.05, which indicates
the significant differences in the preferences of
OMCs for retail mix elements. Further to have
multiple comparisons each retail mix element is
compared with others and its significance is
analyzed. A summary table of comparison of
each element with the other is prepared as
shown in exhibit 3. It can be observed from the
summary table that in case of customer’s
preferences the petrol price is one of the
elements which significantly differs from all other
retail mix elements and is on the lower side of
mean ranks of preferences from almost all other
retail mix elements.
In case of OMCs preferences, two retail mix
elements i.e. availability of various types of fuel
and petrol price significantly differs from the rest
of the elements. Both of them are on the lower
side of mean rank of preferences as far as
preferences are concerned. In case of
availability of various types of fuel as retail mix
element, it can be inferred that since the
research was conducted in city areas, those who
had the availability of space may have started
offering LPG and CNG fuels, while others may
be happy with the sale of their traditional fuel.
Whereas the customer preferences for
availability of various types of fuel show that it is
one of the important retail mix element.
It can be observed from the customer and
OMCs preferences that petrol price retail mix
element is rated the least. Since in Indian
market still government intervenes in fixing the
petrol prices the respondents have given least
importance to this retail mix element. Some
difference in prices up to 0.5% is observed
between the prices of private sector OMCs and
public sector OMCs.
JOURNAL OF INTERNATIONAL BUSINESS AND ECONOMICS, Volume 12, Number 2, 2012
Brand as retail mix element is rated very high by
OMCs therefore most of the public sector OMCs
emphasis on brand while promoting their
product and services. While for customers it
does not have much importance. Similarly
regarding HSE measures OMCs preference is
higher compare to preferences of customers.
The above analysis can help OMCs to evaluate
their retail mix elements vis-à-vis customer
preferences. OMCs can develop and adopt their
retail mix plan based on the preferences for
various retail mix elements of customers.
5.2 Qualitative Analysis
As discussed earlier customer preferences show
availability of various types of fuel as an
important retail mix element. It may be because
of the research sample, wherein the three cities
selected for survey are located in Gujarat and
Gujarat has a well developed network of LPG /
CNG outlets customers prefer to buy LPG / CNG
vehicles. The operating cost of CNG and LPG
vehicle is low compared to vehicles operated by
traditional fuel i.e. petrol and diesel.
It is also found that the customers are indifferent
for some of the non-fuel services related to
utilities i.e. ATM, Restaurant and In and Out
Stores. It seems that metro-city customers may
not require such services. As far as easy mode
of payment is concern many customers prefer to
opt for card swap. Since the survey sample was
of four wheel vehicle owners, many of them
have different kind of cards which are used for
payment.
The OMCs are trying to position their branded
fuel like, Extra premium, Turbo, Speed etc. in
the minds of the customers. It was observed that
the customers are not very much quality
sensitive and are reluctant to pay extra for the
premium petrol or diesel. They either they do not
have faith in the increased quality of the fuel or
they just do not want to spend more money.
Even in case of the shortage of supply of
ordinary fuel, the customers do not refuel the
tank with the premium fuel; rather they wait for
supply or go to other outlets. Customers watch
41
the advertisements and recognize the brand.
Sometimes they do go for the brand if there is a
promotional scheme. The various promotional
schemes offered by OMCs are free gifts, holiday
tour tickets, dinner with celebrities, etc.
The interaction with the customers revealed that
they do not find much difference among the
public sector OMCs retail outlets. The major
differentiation factor among different retail
outlets is the services. Indian OMCs are
focusing on creation of attractive designs of lay
outs with appropriate amenities to attract the
customers. It has been found that private sector
OMCs are few step ahead than that of public
sector. The customer perception changes as
they enter the retail outlets of any private sector
OMCs like Reliance, ESSAR or Shell.
Customers find the difference in the look of the
outlets, the pump design, services, etc. However
they perceive that the quality of the fuel is same
across the outlets of all OMCs.
OMCs have been trying to reduce the waiting
time of consumers during peak hours by
installing more number of refill machines at retail
outlet. We have observed at the retail outlets
that the outlets are having refill machines
ranging from 2 to 10 depending on the location,
population and rush of customers.
OMCs offer about 7 to 8 different types of
branded and non-branded fuels like Petrol,
Branded Petrol, Diesel, Branded Diesel,
Lubricants, CNG, LPG etc. The Indian
consumers are least aware about the technical
specifications related to quality of different fuels.
They differentiate the fuel quality based on
pricing and brands. OMCs also organize camps
to create public awareness about the Fuel
quality. According to OMCs off-late the number
of people attending the camps has increased. It
has led to increase in the awareness about
quality of fuel. The OMCs are following various
quality control measure at retail outlet for proper
measurement of quantity of Fuel, Octane level in
a fuel, adulteration etc.
JOURNAL OF INTERNATIONAL BUSINESS AND ECONOMICS, Volume 12, Number 2, 2012
Majority of retail outlets have a small garage
which provides facilities like free air service,
mending punctured wheel tyres, vehicles
washing points, wind screen wipes and other
similar kind of services. Drinking water facility is
available at almost all the outlets. The Health,
Safety and Environment measure are common
at most of the retail outlets. Basket full of sand,
water line, fire extinguisher etc. is the safety
measures available at almost all retail outlets.
The outlets also have the facility of air mask,
pollution checkup, etc.
We have observed that the behaviour of end
service provider i.e. workers’/employees’ at the
retail outlet of private sector OMCs is
comparatively better than retail outlets of public
sector OMCs. It was also observed that in recent
times public sector OMCs attendants / workers
at the retail outlet wear uniform which show
professionalism of the company and workers
and give the customers a sense of reliability.
Retail outlets also keep suggestion box with
contact details of OMC’s official. Customers can
contact the official in case of any complaints.
5.3 Comparison of Retail Mix of OMCs
We also collected information from secondary
sources and compared the retail mix elements of
six major companies which are operating in
Indian market. Out of six companies three are
public sector OMCs and three are private sector
OMCs. Out of three private sector companies
two are Indian and one is multi national
corporation (MNC). An exhibit - 4 shows the
comparative analysis of OMCs operating in
India.
It is observed from the exhibit 4 that in India as
of now the public sector OMCs are having more
than 92% market share. All public sector OMCs
are using almost all retail mix elements. It can
be seen from the exhibit 4 that two of the private
sector OMCs is not using brands to sell petrol
and diesel. These two companies follow the
practices of selling petrol and diesel as
commodities.
42
 EXHIBIT 4
COMPARATIVE ANALYSIS OF OMCS OPERATING IN INDIA
Parameters IOCL BPCL HPCL Reliance Essar Shell Others Total
No. of Retail
19057 8988 9785 1429 1391 94 75 40819
Outlets (as on
01/01/2011)
Retail Market
46.69% 22.02% 23.97% 3.5% 3.41% 0.23% 0.18% 100%
Share (as on
01/01/2011)
Branded Petrol
XTRAPRE Speed, Speed Power PUNCH
MIUM 97
Branded Diesel
XTRAMILE Hi-Speed Turbojet DDX
Diesel
Lubricants
SERVO MAK HP Racer, Relstar Castrol, BP, Shell Helix,
Super Milcy ELF, TOTAL. Shell Rimula,
Shell
Advance.
Retail Brands
XtraCare(Ur Smart Fleet, Club HP, Naya Daur,
ban), Smart fleet Vehicle and Project Better
Swagat(Hig Customer Consumer World.
hway) and service centre, Care.
Kisan Seva Sanjha Chula
Kendras(Ru for self
ral) cooking, V-
CARE
(Vehicle Care)
Additives
Friction Performance Mileage Smoothness
busters boosters
Payment
XtraPower PetroCard, Club HP Credit Cards Credit Cards Safe Fleet.
Alternatives / Ease
of Payment Fleet Card SmartFleet Smart 1
Cards, ICICI
Credit Cards
Partners / Shop
Coffee day- Mc Donalds, Coca Cola Reliance Pepsi, Coca-
Xpress, Cafe Coffee India, US Outlets on Cola, Biostad,
Skypak Day, Subway, Pizza, Fed Highways Rallis, Tata
Pizza Hut Ex, Western Indicom
Union Money
Transfer.
Services /
Promotion *(see
below)
Easy Payment
CITI Bank ICICI Bank HDFC Bank
* (Services / Promotion)
 IOCL: Bill Payment, Money Transfer, Confectionery, Toiletries, Autogas LPG, XtraPower Fleet Card, XtraRewards Cash, Customer Loyalty
Programme.
 BPCL: Auto LPG Dispensing Station (ALDS), CNG, Loyalty-cum-rewards Program, PetroBonus, Cashless Transactions, Vehicle Tracking, Credit
Option for Fleet Owners and Cash Management System, Convenience Products, ATMs, Money Transfer Facilities, Courier Services, Launderettes,
Music, Greeting Cards, Bill Payments, Movies / Entertainment Tickets.
 HPCL: Vehicle Care (Efficient & Expert Service), Quick Care Points, Digital Air Towers, ‘Good Fuel Promise’ Towers, Vehicle Finance and
Insurance Related Counsel, ATM, Bills Payments, Communication Facility, Refreshments, Water purifiers, Hygienic Restroom Facilities, Basic
Medicines, First-aid Facility, Tyres, Batteries and Accessories.
 Reliance: Vehicle Servicing, Fire Extinguishers, Purified Water, Beverages, and Refreshments.
 Essar: Vehicle Servicing, Fire Extinguishers, Purified Water, Beverages, Music, Frozen Dessert.
 Shell: Vehicle Servicing, Fire Extinguishers, Gaming, Customer Care, Hotels, Referral Rooms, Lube Match, Purified Water, Beverages,
Refreshments.
(Source: Respective company websites and other secondary sources)

JOURNAL OF INTERNATIONAL BUSINESS AND ECONOMICS, Volume 12, Number 2, 2012 43

6. LIMITATIONS AND FUTURE SCOPE OF
RESEARCH
This research was conducted in three metro
cities of Gujarat state of India. Metro city
customers may have different preferences then
customers based in smaller cities and towns for
retail mix elements. Therefore the research can
be extended for smaller cities and towns of
Gujarat state. Further it can be extended for
other states. A national level research for metro
cities can help consolidate the research findings
so that OMCs can effectively apply the retail mix
elements to market their products and services.
We have controlled the customer responses by
choosing the sample of respondents having four
wheel vehicle i.e. LMV. Preferences of two
wheel vehicle owners i.e. scooterist / motor bike
owners may differ from that of four wheelers.
Further the bulk customers i.e. truck
owners/heavy motor vehicle owners may have
different priorities for retail mix elements. A
separate research may be conducted for above
mentioned two segments i.e. two wheel vehicle
owners and heavy motor vehicle users. Mostly
the heavy vehicle users avail petro retailing
services from the outlets located on the outskirts
of cities/towns or highways. The research results
of survey for heavy vehicle users can be helpful
to OMCs to position their products and services
for outlets located on the outskirts of the city or
national / state highways.
Further the research can be conducted to
identify the differences in the retail mix
strategies of OMCs. The differences in the
strategies adopted by public sector OMCs can
be identified. Marketing practices of public
sector OMCs and private sector OMCs can also
be compared. An in-depth study on
effectiveness of various promotion tools can be
carried out, wherein the impact of promotion on
sales or brand equity can be studied.
7. CONCLUSION
The competition from private sector OMCs has
been forcing public sector OMCs to provide
JOURNAL OF INTERNATIONAL BUSINESS AND ECONOMICS, Volume 12, Number 2, 2012
variety of services to the customers. The
strategies of OMCs have changed from just
selling the fuel to satisfying the customers
through marketing and promotional activities.
Retailing practices of petro retailing industry in
India has changed many folds and is further
improving.
OMCs are currently focusing on Forecourt
Design, the pump design, people behavior,
brand and promotion schemes. They also offer
other services like air check, small garage /
mechanic services, water cooler, wash rooms,
wind screen wipe etc. The OMCs are setting up
the utilities like ATM, restaurant and In and Out
stores to increase their non-fuel revenue. OMCs
are also trying to differentiate the petro products
through branding and promotion, which earlier
were perceived by most of the customers as
commodity.
We find significant differences in the preferences
for retail mix elements among both the set of
respondents i.e. customers and OMCs. There is
some mismatch in the preferences for retail mix
of customers and what OMCs are adopting to
market their product and services. The research
suggests that in future OMCs while setting up
retail outlet may conduct research to understand
the retail mix preferences of potential customers
who will visit retail outlet for availing their
product and services. Such action of OMCs will
help OMCs to maximize their returns on
investment.
REFERENCES:
1. Sunder (2005) ‘Building Successful
Indian Retail Brands’, Bharathidasan
Institute of Management, Trichy,
http://www.bim.edu/pdf/lead_article/Buil
ding_Successful_Indian_Retail_Brands.
pdf
2. Clarke Kieran (2010) ‘India’s
Downstream Petroleum Sector –
Refined product pricing and refinery
investment’, International Energy
Agency, 2010.
44
 3. Dugar, A. (2007) ‘Marketing of petrol in
India – transformation of an
undifferentiated low involvement
commodity into high involvement
brands’, Innovative Marketing, Volume
3, Issue 4, pp. 52-59.
4. IBEF (2004) ‘Private Players Promise
Retail Makeover in India’, www.ibef.org.
5. C. Anirvinna and N. V. Ravi (2011) ‘An
Analysis of Marketing and Consumption
Trends in Indian Oil Industry’, Indian
Journal of Commerce & Management
Studies, Vol-II, Issue-1, (ISSN-2229-
5674), pp. 33-46.
6. Cohen, M. and Bradfield, E. (2001)
Petrol Retailing - within a global context,
ISBN: 1 86156 243 8.
7. Davar, R. (2007) ‘The Future of Fuel
Retailing in India’, Shell World,
http://www-
static.shell.com/static/aboutshell/downlo
ads/swol/july_sept_2007/india_retail/indi
a_retail_en.pdf, pp.1-6.
8. Manish Kotwala, Associate Director –
Asia / Middle-East, Cedar Consulting

AUTHOR PROFILES:

Dr. Sudhir Yadav is Associate Professor at

School of Petroleum Management, Pandit
Deendayal Petroleum University, Gandhinagar,
Gujarat, India. He has received BE, MBA, PGDP
(Indian Institute of Foreign Trade, New Delhi)
and Ph.D. He has worked for about 7 years in
industry before joining academics in 1998. Since
last 13 years he is into academics. As an
industry professional he worked in marketing
and exports division of various companies as
middle level manager.

Mr. Sanjay Sakariya is Research Associate at

School of Petroleum Management, Pandit
Deendayal Petroleum University, Gandhinagar,
Gujarat, India. He has received MBA degree in
the year of 2006 from Saurashtra University,
Gujarat, India. He has about 6 years of work
experience in academic research, especially in
management case study development. On his
credit, he has published number of management
case studies and teaching notes.

Dr. Manish Thaker is a Faculty in the area of

Statistics at M G Science Institute, Gujarat
University. He has about 20 years of experience
in academics and research.

JOURNAL OF INTERNATIONAL BUSINESS AND ECONOMICS, Volume 12, Number 2, 2012 45

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