CASTROL CASE

How do consumers buy MCO’S?

Discuss existing consumer segments.
• Consumers saw oil change as an important part of their bike
maintenance
• Every year 5 million vehicles are added on the road
• After the 18–24 months of the warranty period, almost all of the
bikes came into the after-market2 for their maintenance service
and consequent oil changes
• Average consumption is 3.5 liters per year
CASTROL HAS IDENTIFIED 3 DISTINCT CONSUMER SEGMENTS:

Consumer targets Needs Insights

Minimalist Need for them was to do the
thing right
Appreciators Need for them was to inspire
freedom and confidence
Enthusiasts Need for them was to get the
most out of their bike’s engine
valuing money, with reassurance
from a credible brand
bike is a means of transport for
them, and they needed
assurance that it remain reliable,
and were also ready to pay a
slight premium to avoid
breakdowns.
they wanted to be associated
with the best, as bike was their
vehicle for dreams through
which they would uncover new
opportunities
What is the specific challenge for rai and his
team?
Main challenges
• how to get Non Franchise Workshops (NFWs).
• spare parts shops to stock.
• display and sell Castrol.

Distributors had few concerns regarding the buying behaviour of this outlet such
as
• They were hesitant in supplying to the mechanics of these outlets as the latter lacked a
rudimentary understanding of cash flows and payment cycles
• Distributors were cautious in investing in extra employees or delivery units to gain access to
these workshops as each Distributor Sales Rep (DSR) would cost more than Rs.12000 a month.
• Erratic consumption pattern of consumers.
• Credit for stock
• What are Castrol's options for expanding its
distribution?
Discuss Advantages and Disadvantages of
each.
TWO OPTIONS THAT CASTROL HAS FOR
EXPANDING ITS DISTRIBUTION AND THEIR
ADVANTAGES AND DISADVANTAGES ARE
1 – After market
• Spare parts outlets, non-franchised workshops and oil shops come under the after-
market channel
• On total, there are about 77000 outlets out of which Castrol has grabbed 12578.
• They have the market share of about 16.4% in Spare part outlets, 30.4% in Oil
shops and 6.3% in Non-Franchised workshops
• By coming with a strategy like educating them about the technology and the
benefits of the product through advertisements and campaigns and converting
more outlets in this channel, Castrol can achieve a greater number of sales.
Advantages
• After the warranty period, almost all vehicles are coming to non-franchised workshops
for servicing. Through this they can also convert the old vehicle users as their customers.
• The long foot print and the good will in the market, they can boost their sales and convert
many more customers.
• They can effectively convert all the “enthusiast” as customers of Castrol when it is
easily available in the market.
Disadvantages
• The conflicts between the distributors of spare parts outlets and oil shops as a part of
their customers will be taken away from them.
• As most of the non- franchised workshops are located in remote locations, on time supply
and delivery might also be difficult.
• As many of the mechanics can’t afford for maintaining the stock, credit system should
be implemented and it will be difficult for the company as they have to employ a person for
follow up and they need to spend much more for the expansion.
2 – Franchised workshops
• There are 4500 outlets and Castrol has captured 665 out of
them. In terms of percentage, it holds 14.8% of the total market
share.
• By increasing more number of outlets, Castrol can
potentially increase their market share and this will result in
direct increase in their sales.
• Advantages
• In order not to void the warranty, the owners prefer giving their vehicles to
authorized service station during the warranty period and thus all the new vehicles
will be exposed to Castrol.
• Since the authorized service station uses Castrol, the trust on customers to buy
Castrol from outside market will also increase.
• Disadvantages
• It will be difficult to convince the franchised workshop dealers as the OEM also
supplies their own oil under their packaging.
• Castrol might be forced to reduce their profit margin to attract the authorized
dealers in buying and using their product.
• How can castrol implement its new
distribution strategy?
What resources and support will be
required?
        Four‐Stroke Oil Castrol’s Four‐  
      Market Potential Stroke Oil Sales  
Outlet Universe Outlets Selling in 2005 (in million of litres) Potential Tapped
Channel Castrol Oil Coverage (%) (in millions of
litres)

   
After Market:

             
Spare Part Outlets 38,000 6,235 16.4 22 3.6 16.4

             
Oil Shops 14,500 4,411 30.4 16 3.9 24.4

Non franchised workshop 20,000 1267 6.3 8 0.85 10.6

Franchised Workshops            
4,500 665 14.8 30 3.54 11.8

             
Total 77,000 12,578 N/A 76 11.89 N/A
Based on the projected sales:
• Franchised workshop – While this channel would have a large
part to play in future growth, Castrol had restricted access due to
limited tie-ups with original equipment manufacturers and the
influence of genuine oils.
• Oil shops – This channel was slated to have the lowest growth
rate, due to a shift in consumer behaviour.
• Spare part outlets and non-franchised workshops – These
channels were expected to be the growth drivers of the future.
THANK YOU