Shared costs: if the petrol discount brings new customers to the petrol

retailer, that retailer is likely to want to share the costs of the discount
with the supermarket. From the supermarket‟s perspective, this means
that they receive all of the benefits of a discount on their own goods at
only a fraction of the cost.

Introduction

Project Title

Effectiveness of Branding Petrol.

Research Objective

To know whether there is a consumer shift from unbranded petrol to

branded petrol.

To find out loopholes, if any, in promotion strategy of Branded petrol

and to suggest appropriate communication strategy.

The Indian Petroleum Industry

The origin of the petroleum industry can be tracked back to the end of
the 19

th

century, when petroleum was discovered in Digboi, Assam (North East

India). The industry was initially opened for international players and
global oil majors such as Caltex, Esso and Burmah Shell were operating
in the country. However, after the oil crisis of the 1970s, the
government nationalized the Indian division of the international oil
companies and the industry became one of the most strictly regulated
industries in the country. The government nationalized the refining and
marketing sectors and subsequently, introduced regulatory controls on
the production, import, distribution and pricing of crude oil and
petroleum products by establishing the Oil Coordination Committee
(OCC). Through the OCC, the government administered the prices of
petroleum products after establishing a complex oil pool account
system. Producers, refiners and marketers were compensated for
operating cost and were also assured of a fair return on their assets
through the Administered Price Mechanism (APM). Prices of petroleum
products at all refineries were equalized. During this period,
government controlled entities accounted for 90% of the market
share.Major players like IOC, BPCL and HPCL dominated the market in
the downstream sector, while the upstream sector was dominated by
Oil and Natural Gas Corporation and Oil India claiming approximately
84% of the share of the total market. After the liberalization of the
Indian economy in 1990s, the industry witnessed some fundamental
changes. The policy makers realized that APM would no longer work
successfully as it had in the past and that the sector would have to be
opened completely. Thus, the government initiated the
deregulationprocess in 1995, wherein the APM was replaced with a
Market Determined Pricing Mechanism (MDPM).With the introduction of
MDPM and deregulation of the marketing and refining sectors, the
industry was opened completely to private and foreign
participation.The government allowed four companies Reliance
Petroleum, ONGC, Essar and Numaligarh Refineries to market
petroleum products through their retail outlets. With the entry of these
new players, competition intensified and posed a serious threat for the
existing players.Though the demand for petroleum products had been
witnessing a downturn for some time, future projections indicated a
strong growth potential. Private sector players like Reliance Petroleum
and International players like Shell were expected to become major
forces in future. Madan B Lal (Lal), Chairman and Managing Director,
HPCL , said, “In a deregulated scenario, the industry is going to be
more competitive, more responsive and consequently, more efficient.”
By 2002, India had become the fourth largest oil consumer in the Asia
Pacific region after Japan, China and South Korea. Estimated to increase
at the rate of 7% a year, the demand for petroleum products was
expected to more than double from 96 million tons to 195 million tons
per annum by 2011-12. Commenting on the post APM scenario, Lal
said, “What is sure is that, the number of players will change as private
sector players enter the market and companies take up the route of
mergers and alliances.” With the deregulation of the sector, companies
are allowed to set their own domestic petroleum product prices.
However, the government still controlled most of the prices and the oil
companies were forced to explore the other segments of the market
where they could increase prices without waiting for the government’s
approval. Hence, the decision to introduce branded fuels. During the
APM regime, public sector companies ‘owned’ the market and hence
they never felt the need to pay attention towards brand building and
customer loyalty. Branding initiatives have been limited only to the
lubricants market. However, analysts said that a strong, widespread,
integrated marketing network, pricing strategies and brand building
efforts would play a key role in determining the success of players in
the future. Thus, companies realized the importance of becoming
customer and market oriented.

Launch of branded fuels

In July 2002, Bharat Petroleum Corporation Limited (BPCL), one of the

leading players in the petroleum industry, launched premium grade
petrol under the brand name,

Speed
.This was the first instance of an company launching branded fuel in
the market. Soon, the two other leading oil companies, Indian Oil
Corporation (IOC) and Hindustan Petroleum Corporation Limited (HPCL),
also launched their own ‘new generation’ fuels.While IOC’s branded
petrol was called ‘Premium’, HPCL called it ‘Power’. In December 2002,
another company, IBP, launched a new brand of premium grade petrol
‘Josh’. Within a short span of time, the country had seed the emergence
of an entirely new market category.According to the industry observers,
this trend was in line with the global trends wherein petroleum
companies tried to build a loyal customer base by branding petroleum
products. As petrol had traditionally not been seen as categories with
much scope for product differentiation, branding of this product came
as a welcome change. It was conscious and proactive effort of the
companies towards brand building, in the wake of the radical change
taking place in the industry since the beginning of the country’s
economic liberalization in the early 1990s.As the industry became more
competitive and customer driven, companies needed to focus like
never before on marketing strategies. The first significant development
in this direction was the ‘conversion’ of petrol pumps (gas stations) into
retailing outlets. The launch of branded fuel seemed to be the next
logical step for the companiesThe new brands were being extensively
promoted through the print, electronic and outdoor media. Since this
new fuels were priced higher than the conventionally sold petrol, BPCL,
HPCL, IOC and IBP were working hard to communicate the benefits of
using their products and justify the higher prices. However, analysts
expressed their reservations as to whether the extremely price
conscious Indian customer would be willing to pay more even though
these brands were supposed to be technically superior.

Need for Branding Petroleum Products

BPCL pioneered the petrol pump retailing revolution in the country and
was the first company to establish retail outlets in a major way. HPCL
and IOC also opened stores within their outlets and positioned them as
a ‘one stop retail shop’. While BPCL used their brands ‘In and Out’ and
‘Pure for Sure’, HPCL and IOC named their outlets, ‘Club HP’ and
‘Convenio’ respectively.BPCL launched the ‘Pure for Sure’ program in
August 2001 to ensure that petroleum products were delivered properly
both in terms of quantity as well as quality. The campaign was aimed at
stringent certification of quality and quantity, ensuring courteous,
personalized services and efficient fuelling. Around 1500 retail outlets
(of the company’s 4582 outlets) were covered under the ‘Pure for Sure’
campaign. Similar measures were taken by IOC and HPCL. Both the
companies expanded their retail initiatives rapidly. The companies
promoted the retail outlets aggressively and their media campaigns
mainly focused on providing convenience, modern facilities, cleanliness
and pure (unadulterated) fuel.By 2003, HPCL had emerged as the most
visible brand because of its high decibel media campaign for Club HP.
However BPCL’s outlets had the highest brand recall. This was largely
due to company’s focused marketing efforts overthe years. IBP’s
marketing initiatives had been comparatively low key; its ‘Q & Q
Assurance Program’, started in 1997, was relaunched as the ‘Pure Bhi
Poora Bhi’ (pure as well as complete) program in 2003. But it was yet to
reach the decibel level of the marketing initiatives of the other
companies. The company was reportedly planning to focus strongly on
the retailing and marketing initiatives in the future.Industry observers
adopted that with all companies adopting almost similar strategies for
the retail efforts, there was little differentiation. In December 2002, Joy
Bannerjee, Director and Executive Vice President of IOC’s Advertising
agency, R K Swamy said, “So far, the need for advertising was not felt
because the environment was not competitive. But with other players
in the market there is a need for brand building.” However, even the
new players would in all probability not offer anything radically different
from the other products. Thus, though the companies involved
considered the retail initiatives as a tool for deriving competitive
advantage, analyst remarked that this would hold true only in the short
run.As competition was bound to intensify in the future and the
industry was moving towards deregulation being completely
implemented, it was expected that companies could even undercut
their prices. Moreover, given the similarity of refining facilities and raw
material and distribution costs, production costs of companies would be
more or less similar. As a result, the retail prices of different companies
were also expected to be more or less similar, varying at the rate by 1-
2%. The need for greater product/price differentiation was expected to
become stronger.The brand building initiatives undertaken by the
Indian Oil Companies were also influenced by the global trend of
petroleum companies. Companies such as Shell, BP, Exxon Mobil and
Chevron Texaco had for long been offering value added fuels that
claimed to lower exhaust emissions. The fuels they offered were
environment friendly and helped vehicles comply with the emission
norms (regarding pollution control) prescribed by the concerned
authorities.Some companies even went beyond these requirements. BP,
for instance, introduced a new premium blend, which lowered sulfur
emissions to levels that would become applicable only after 2008. The
modified fuel was also supposed to improve the performance of
automobiles. Shell also launched a new additive that reportedly
protected the engine of cars.Considering the increasing awareness for
environment friendly products among Indian consumers, the
introduction of branded fuels seemed to be a timely move. Moreover,
since the emission norms regarding automobile pollution were being
tightened in the country, environment friendly fuels were expected to
generate sufficient interest in the market. What Do Branded Fuels
Do?

The term ‘branded fuel’ essentially refers to fuel that has been modified
by adding certain multi functional performance additives. The additives
in these branded fuels play the role of detergent for the fuel feed
system of a vehicle.In a new vehicle, the carburetor, fuel injectors, fuel
intake valve and ports, and the combustion chamber are free from
deposits. However, overtime, carbon deposits tend to accumulate on
these parts, impeding the vehicle’s performance. Moreover, as all new
generation cars are fitted with MPFI (Multi Port Fuel Injectors- to
accurately deliver deliver petrol in the form of fine droplets for clean
burning), MPFI deposits are formed when the engine is turned off. This
is because the trapped fuel in the injector is exposed to higher
temperature for a longer time than the flowing fuel. Because of narrow
fuel passages, injectors become highly sensitive to the smallest amount
of deposits in the critical regions, where the fuel is metered. Heat
degrades the fuel and initiates the deposit formation. Intake valves and
ports are subject to more deposits than fuel injectors, as they operate
at higher temperatures. These deposits can alter the spray pattern and
reduce the fuel flow, reducing drivability, decreasing power and fuel
economy, and increasing emission levels.The additives in branded fuels
effectively remove harmful deposits from all components. They clean
up fuel injectors, valves and combustion chambers along with the fuel
tank and fuel lines. The additives also constantly clean deposits and
prevent gum formation in the engine. Branded fuel, thus, help restore
the original engine performance, ensures easy startups and increase
fuel efficiency, leading to lower emissions. Traditionally, these additives
were added separately to the fuel. Branded fuels eliminate the need for
purchasing additives at the time of every filling.

Building New Fuel Brands

Having realized the need for brand building, oil companies invested
heavily in product development and R & D to come out with fuels that
would suit the requirements of Indian roads as well as comply with the
emission norms. BPCL’s Speed was blended with multifunction
additives sourced from Chevron Oronite Company LLC, a Cheron
Texaco Company. Commenting on this, S Ramesh General Manager
(Brand Management), BPCL, said, “With more cars running on the MPFI
technology, the new variant will help remove carbon deposits from the
fuel tanks and cleanse the engine, thereby giving the consumers better
mileage and protection to cars.”HPCL’s ‘Power’ was also blended with a
specially imported multi functional additives package that was
formulated to remove deposits from the engine, thereby, ensuring
optimum burning of petrol. While Power benefited the new generation
of MPFI engines, it also helped in getting optimum performance in
traditional carbureted engines as well as two wheelers. An
internationally accredited fuel testing laboratory in Gremany ranked
power among the world’s top petrol brands.IOC’s ‘Premium’ was
reportedly India’s first and only high octane petrol that was reinforced
with world class anti knocking additives. Its engine cleansing qualities
reportedly improved mileage and lowered emissions. According to
company sources, adding an extra dosage of this additive over and
above the normal dosage helped removed gummy deposits already
formed in the system. By keeping the intake system and the injectors in
MPFI engines clean, ‘Premium’ ensured a proper air fuel mixture and
therefore, better combustion and reduced emission level. IBP’s ‘Josh’
claimed to have special additives that improved fuel efficiency.

Speed was initially made available exclusively through 16 ‘Pure for

Sure’ retail outlets located in different parts of Delhi. BPCL’s retail base
was gradually expanded to cover the rest of the country, emphasizing
on penetrations in rural markets and convenience retailing in semi
urban markets. IOC also test marketed its fuel in Delhi for three
months in mid 2002, and in Hyderabad (Andhra Pradesh), before
launching them on national level.HPCL also decided to retail its fuels
from the Club HP outlets. IBP marketed its fuel in six major cities at 34
retail outlets. By March 2003, all the companies were at various stages
of increasing the availability of their respective brands in different parts
of the country.

Promotional Efforts

The maximum action in the industry was seen on the promotional front.
All the companies were adopting various media mix tools to promote
their brands. BPCL launched a promotional scheme for Speed, under
which anyone buying fuel worth Rs. 600 or more got a free BPCL
PetroCard. The company also gave its dealers better incentives to sell
the new fuel. A survey conducted by BPCL revealed that 44% of
customers were influenced by people at the petrol pumps, who
convinced them to use Speed. Keeping the importance of the dealers
role in promoting the product, the company gave a significantly higher
commission of around 80 paise per liter against the usual norm of 45
paise per liter for normal petrol. To promote Speed, BPCL also entered
into an association with the website, www.hungama.com

. A website (speed.hungama.com) was launched that focused on motor

racing event held in January 2003. BPCL also associated the brand with
latest James Bond movie, ‘Die Another Day’ by becoming a market
partner. The company paid Rs. 7.5 mn for this deal, which involved a
movie related television campaign and various promotional activities at
petrol pumps. Winners were given movie tickets.IOC earmarked an
advertising expenditure of around Rs. 50-70 mn for the promotion and
brand building of these fuels. The company even planned a set of logos
for these fuels. In order to create a synergy between product branding
and corporate branding, it used its house colours, blue and orange. This
was expected to enhance the recall value of the IOC mother brand and
create a greater association of the new products with the company.
Unlike the high profile marketing campaigns of these companies IBP did
not aggressively promote its products and services. The company
limited its promotion only to those outlets where the products were
available.On the pricing front, all the companies seemed to be following
a uniform policy; the prices had to be kept comparatively higher to
drive home the point that the fuels were technically superior to normal
petrol. However, it was also necessary not to let the per liter price
differential be very high, keeping in mind the novelty of the products as
well as the price - consciousness of Indian consumers. Thus, Speed was
priced only at Rs. 1.25 per liter more than the conventional fuel.The
company felt this was justified, since customers using packaged
additives were incurring a cost of around Rs. 1.25 per liter for petrol.
The players also adopted a similar strategy of pricing the branded fuel
marginally higher than the conventional fuels. To respond to this
‘similar price’ move of the competitors, BPCL reduced the price of the
Speed, making it around 30 paise cheaper than the branded petrol of
IOC and HPCL.
Speed

Speed is new high performance petrol from Bharat Petroleum that

enhances overall engine performance and ensures smoother drive
ability. Speed is blended with multi-functional additives that have been
sourced from Chevron Oronite Company LLC, a ChevronTexaco
company, which complies with EPA 97 (Environment Protection Agency,
USA) requirements.

Why one should use Speed?

In a new vehicle, the fuel injectors, carburetor, fuel intake valves and
ports, and the combustion chamber are free from deposits. However,
overtime, carbon deposits tend to accumulate on the above parts,
impeding the vehicle performance. Use of Speed helps in restoring the
original engine performance by removing existing deposits and further
preventing the formation of new deposits. All new generation cars are
fitted with Multi-Port Fuel Injectors (MPFI) to accurately deliver petrol in
the form of fine droplets for clean burning. Because of the narrow fuel
passages, injectors are highly sensitive to the smallest amount of
deposits in the critical regions where the fuel is metered and atomised.
These deposits can alter the spray pattern and reduce the fuel flow,
affecting driveability, decreasing power & fuel economy, and increasing
emission levels. Similar problems can occur in the case of carbureted
engines too.MPFI deposits are formed when the engine is turned off, as
the trapped fuel in the injector is exposed to higher temperature for a
longer time than the flowing fuel. The heat degrades the fuel and
initiates deposit formation. Vehicles used for short trips are more prone
to this problem. Intake valves and ports are subject to more deposits
than fuel injectors as they operate at higher temperatures. These
deposits reduce maximum engine power because they restrict airflow.

Combustion chamber deposits tend to increase the Octane Number

Requirement (ONR), resulting in knocking, thereby causing engine
damage. In the case of vehicles fitted with a knock sensor, the knocking
is suppressed by automatic alteration of the compression ratio, but
results in loss of engine power.

How Speed enhances performance of engine?

Speed is blended with multi-functional performance additives that

effectively remove harmful deposits from all fuel metering systems and
components. It not only removes the existing deposits but also ensures
that your engine remains deposit free at all times - performing as good
as a new engine - in other words, with maximum power. The deposits in
fuel Injectors, carburetor, intake valves and ports, and combustion
chamber increase engine emissions - clearly indicating the relationship
between decreased deposits and decreased emissions. Since Speed
removes deposits and keeps your engine clean, it reduces emissions
from your engine.

Benefits of Speed


Restores Peak Performance of Engine

Ensures Smoother Drive ability

Easy Starting / Smooth Idling

Maximum Power

Maximum Acceleration

Eliminates Engine Knocking

Improves Mileage

Reduces Emission levels

Extends life of Catalytic Converter

Lowers Maintenance Cost