Loyalty program

IndianOil Corporation Ltd

University of Petroleum and Energy Studies

Nitish Kothiyal
 PROJECT REPORT

COMPANY PROFILE

INDIAN OIL CORPORATION Ltd was formed in 1964 with the merger of Indian
refineries ltd( est. 1958). Actually it begins as Indian oil company Ltd in 1959. IOCL and it
subsidiaries account for 48% petroleum products market share, refining capacity of 34% &
downstream pipelines capacity of 71% in India. IOCL is the India’s largest oil marketing
company with a gross turnover of Rs 259360.34 Crores and profits of 10998.68 Crores..
Indian oil network consist of 35,600 sales point & 89 indane bottling plants. Also 99
aviation fuel stations ( defence & civil) are serving to aviation industry. IndianOil has the
largest network in the country having 18,643 petrol and diesel stations comprising 2947
Kisan Seva Kendras (KSK) in rural market. Indane, a super brand in LPGas market
supplied through 5,096 indane distributors’ across the nation. IndianOil commands around
63% market share in aviation fuel business and 65% of bulk consumer business including
Railways, agriculture and Marine sectors. IndianOil’s Research and Development Centre
has been engaged in world-class research in tribology (lubricants formulation), refinery
processes and pipeline transportation. Also, India’s first Hydrogen-CNG station is
operating at IndianOil retail outlet in New Delhi. IndianOil also developing in-house
technologies and catalyst, like Olivorus-S bio remediation technology (marine applications),
DHDS catalyst, indVi catalyst for improving yield. Govt. of India awarded prestigious
Technology Day Award 2010 to IndianOil for successful development and
commercialization of multifunctional additives for premium grade diesel and lubricity
additives for ultra low sulphur diesel. IndianOil is proactively identifying and developing
business opportunities in Exploration & Production (E&P), Gas and Gas-to-Liquid,
Petrochemicals, Power, Information Technology & Communications, Collaborative R&D,
Exports, Shipping, Training & Consultancy, Engineering & Construction, and
Transnational Operations. Twelve joint Ventures are now operational in partnership with
some of the leading international and Indian companies. For the past two decades,
IndianOil has been lending its expertise to several countries in areas of refining, marketing,
transportation, training and R&D. These include Sri Lanka, Kuwait, Bahrain, Iraq,
AbuDhabi, Tanzania, Ethiopias, Algeria, Nigeria, Nepal, Bhutan, Maldives, Malaysia and
Zambia.

Vision

Group companies
 IndianOil technologies ltd, it a marketing arm of IndiaOil, launched in 2003. It
markets all the technologies & products developed at IndianOil R&D centre.
 IndianOil (Mauritius) Ltd (IOML), it is a wholly owned subsidiary of IOCL, started
its operstions in 2004. It is 3rd largest company in Mauritius capturing 24% overall
market share and 42% in aviation fuelling & bunkering business. IOML has 1st ISO
9001-2008 certified product testing laboratory.
 Lanka IOC Plc, ranked no. 1 among island nation’s listed companies’ operating 150
petrol and diesel stations in Sri Lanka. It is listed in Colombo Stock Exchange. It
holds 43% of overall market share. Also, it supplies lubricants and greases to three
arms of Defence services of Sri Lanka.
 IndianOil Middle East FZE, oversees business expansion in middle east. It is mainly
for marketing of SERVO lubricants & petroleum products in Middle East, Africa
and CIS countries. It also exports finished lubes to Oman, Yemen, Bahrain, UAE
and Nepal.
 Chennai Petroleum Corporation Ltd (CPCL) formerly it was known as Madras
Refineries Ltd (MRL). IndianOil acquired equity in CPCL from Government of
India in 2001. Currently, IOC holds 51.89 % of equity while National Iranian Oil
Company (NIOC) holds 15.40%. CPCL mainly deals in LPG, Motor Spirit,
Kerosene, Aviation Turbine Fuel, high speed diesel, Paraffin Wax etc.
  Bongaigoan Refinery and petrochemicals Ltd, incorporated on 20 February 1974
owned by Government of India. Government disinvested 25.54 % of its share to
public in 19993. On march 29, 2001 IndianOil acquired remaining 74.46 % equtity
of BRPL. It is in the business of petroleum refining, value added petrochemicals and
PSF product.
 Assam oil company Ltd. It is the world’s earliest enterprise engaged in exploration &
production of oil. The Digboi refinery, which is the birthplace of Indian petroleum
industry, is operated by Assam oil division. On 14th October 1981, by an Act of
parliament Assam Oil company came in fold of IOCL and became Assam oil divison
of IndianOil.

Major competitors

IndianOil is a leading ahead in downstream sector. Also there are some major rivals for
IndianOil in oil & gas industry of India.
Downstream (Refining, Marketing & Pipelines)
 Hindustan petroleum Corporation Ltd. (HPCL)
 Bharat Petroleum Corporation Ltd. (BPCL)
 Mangalore Refinery & Petroleum Ltd. (MRPL), a subsidiary of ONGC.
 Reliance Industries Ltd. (RIL)
 Esaar Oil Ltd.
Gas (Transportation & distribution)

 Gas Authority Of India Ltd (GAIL)

 Petronet India Ltd (PIL)
Dominance in Downstream sector

REFINING SHARE

Industr
y capacity- 177.97MMT

Petroleum products market share- Industry size- 133.40 MMT

Recognitions
Leading the Indian companies in Fortune 500 list, IndianOil is ranked 105 in
fortune 500 companies.
 Trusted Brand Gold Award, based upon the survey conducted by Reader’s Digest
association with a global marketing & advertising research firm, Neilson Company.
This award is given in category of petrol station for the products and services offered
by IndianOil retail outlets (ROs).
IndianOil in ‘TOP 50’ BEST companies to work for
Ranked 33 in top 250 Global Energy Rankings 2009
Ranked 1 in Business World 500 Rankings.
Ranked no. 1 in Economic Times list of India’s corporate giants 2009.
World Petroleum Congress Excellence Award 2008 for research& development work
in hydrocarbon processing technology for green fuels.
Objectives of IOCL

 Serve the nation’s interests in oil and related sectors in consistent with Government
policies.
 Ensure continuous and smooth supplies of petroleum products by way of crude oil
refining, transportation and marketing activities.
 Provide appropriate assistance to consumers to conserve and use petroleum products
efficiently.
 Enhance the country's self-sufficiency in crude oil refining and build expertise in
laying of crude oil and petroleum product pipelines.
 Enhance marketing infrastructure and reseller network for providing assured service
to customers throughout the country.
 Create a strong research & development base in refinery processes, product
formulations, pipeline transportation and alternative fuels with a view to
minimizing/eliminating imports and to have next generation products.
 Optimize utilization of refining capacity and maximize distillate yield and gross
refining margin.
  Maximize utilization of the existing facilities for improving efficiency and increasing
productivity.
 Minimize fuel consumption and hydrocarbon loss in refineries and stock loss in
marketing operations to effect energy conservation.
 Earn a reasonable rate of return on investment.
 Avail of all viable opportunities, both national and global, arising out of the
Government of India’s policy of liberalization and reforms.
 Achieve higher growth through mergers, acquisitions, integration and
diversification by harnessing new business opportunities in oil
exploration&production, petrochemicals, natural gas and downstream opportunities
overseas.
 Inculcate strong ‘core values’ among the employees and continuously update skill
sets for full exploitation of the new business opportunities.
 Develop operational synergies with subsidiaries and joint ventures and continuously
engage across the hydrocarbon value chain for the benefit of society at large.

Financial Objectives
 To ensure adequate return on the capital employed and maintain a
reasonable annual dividend on equity capital.
 To ensure maximum economy in expenditure.
 To manage and operate all facilities in an efficient manner so as to
generate adequate internal resources to meet revenue cost and
requirements for project investment, without budgetary support.
 To develop long-term corporate plans to provide for adequate growth of
the Corporation’s business.
 To reduce the cost of production of petroleum products by means of
systematic cost control measures and thereby sustain market leadership
through cost competitiveness.
  To complete all planned projects within the scheduled time and approved
cost.

Obligations

 Towards customers and dealers:- To provide prompt, courteous and

efficient service and quality products at competitive prices.

 Towards suppliers:- To ensure prompt dealings with integrity,

impartiality and courtesy and help promote ancillary industries.

 Towards employees:- To develop their capabilities and facilitate their

advancement through appropriate training and career planning. To have
fair dealings with recognized representatives of employees in pursuance of
healthy industrial relations practices and sound personnel policies.

 Towards community:- To develop techno-economically viable and

environment-friendly products. To maintain the highest standards in
respect of safety, environment protection and occupational health at all
production units.

 Towards Defence Services:- To maintain adequate supplies to Defence

and other Para-military services during normal as well as emergency
situations

Loyalty program
What is a Loyalty ?

Loyalty demonstrates person’s disposition to brand of goods (service), supermarket,

category of goods, and a certain activity. An enterprise seeks loyalty of investors, employees
and customers in order to consolidate its position in the market. There is a linkage between
these participants of the business. The growth of revenues and share of the market enables
to attract potential customers or customers of competitors. The growth of the market share
stimulates more rapid expansion of the enterprise and its competitive advantage. It makes
attracting of investors & customers easier. Appreciated and well-paid employees better serve
customers, strengthen relations with them eventually. Such relations increase perceptible
value of goods and (or) services to customers and positively affects their loyalty. Customer
loyalty leads to increased profitability, market share, and the growth diminish costs of
attracting new customers and is essential condition to implement effective business strategy.

How it works??

Enterprises create loyalty programs in order to develop loyalty and to reward. It is effective
marketing instrument helping to create such a situation where all interested sides win.
Customer loyalty programs are more frequent. Loyalty programs allow enterprises to
understand their customers better as well as to satisfy their needs and expectations
Customer loyalty programs relate enterprise and customers, initiate permanent dialogue
between them, and increase satisfaction of customers, also they are a source of different
information about customers, they mitigate potential shift of the best customers to
competitors, and help to cooperate with partners and to keep terms with Competitors.

Customer loyalty
Customer loyalty means the trust that enterprise gains making and developing mutual
useful relationships with customer. Loyalty is customer’s voluntary decision to maintain
long-term relations with the enterprise. Successful long-term relations that lead to loyalty
help to reduce a risk and uncertainty arising from the consumption that nowadays gets
more and more complex. Customer will be loyal if he or she gains more benefit than other
enterprise can offer. If enterprise, its goods or services disappoint customer or suggestion of
other enterprise is more valuable to customer, the probability that customer will give
preference to competitor of the enterprise will increase. The source of loyalty studies was a
form of customer behavior. Hard-core loyalty is distinguished for devotion to the
enterprise, repeated purchase probability, staying with the current provider and
recommendations for the enterprise to friends, colleagues, family members, etc. customer’s
loyal attitude shows a conscious effort to evaluate competing brands, customer’s preferences
and willingness to purchase goods or services. Loyal behavior and loyal attitude influence
the enterprise in different ways. Loyalty based on customer attitude could be more
vulnerable when loyalty is based on behavior. It is necessary to estimate that behavior and
attitude are changing over time, so loyalty is changing, too. cognition-based or cognitive
loyalty as rational because customer makes decisions recognizing the processes in the
enterprise, thinking, handling information, estimating the technology, etc.
Other important dimension of loyalty is emotional loyalty. It is a result of customer
feelings, expectations, and interpersonal relationships with employees. Interpersonal
relationship and mutual trust determine social comfort, greater attention, and sometimes
growth into friendship. It becomes switching barriers to other provider of goods or services.

Determining customer loyalty

Assume that different level of satisfaction matches up to different level of loyalty. The
customers are classified into four groups considering satisfaction and loyalty relation:
loyalist/apostle (high satisfaction -high loyalty), defector/terrorist (low satisfaction - low
loyalty), mercenary (high satisfaction - low loyalty), and hostage (low satisfaction - high
loyalty). Low customer satisfaction (sometimes even dissatisfaction) not always becomes the
reason of making a break of relations with enterprise. It happens when enterprise has a
dominant position in the market; its brand of goods (services) is well-known, offering
goods (services) is a bit different, it is high switching costs to other provider, etc. often
satisfied customers are indifferent to enterprise because they purchase the same goods or
services from several possible enterprises. Lots of satisfied customers tend to change
provider of goods or services. So we cannot unambiguously assume that satisfied customer
is loyal to enterprise. Customer loyalty depends on nature of goods or services are
important. Customer and what loyalty strengthening means should be used seeking long-
term relations with customers.

Objectives of a loyalty program

1- To develop and strengthen loyalty of present customers. The enterprise seeks this by
undertaking to meet customers’ needs better than other participants of the market
during all period of relationship with customers.
2- To attract new customers. The company can do this in two ways, first by suggesting
attractive privileges stimulating to become a participant of the loyalty
program, and second attracting these who have heard good responses of
participating in the loyalty program.
3- To create a database of customers. Without the database customer relationship
management is impossible. In the database not only demographical data of
customers should be, but also information about their behavior should be stored, for
example, preferences of consumption, acceptance of brands, periodicity and quantity
of purchase, the change of the brand, etc.
4- To provide maintenance to departments of the enterprise implementing functions of
development and research of goods (services). The data about customers help to
communicate with them directly and to find out difficulties of consumption, what
attributes of goods (services) should be improved, to get ideas for creating new
goods (services).
5- To provide possibilities to communicate between participants of the program. It will
help a seller, service provider or agent, who initiates or controls the process of
communication, to communicate with customers regularly and directly.
 SECONDARY TASK

To improve an
To establish
image of
additional means
company’s
to maintain
brand
customers

MAIN TASK
To To attract
To help develop new
agents customer
customers To increase
loyalty
consumption of
MISSION company’s
To establish goods & services
communicati To create a
on database
To maintain To support
relations with To solve
other
community problems
department of
of
company
company

To increase To increase
visits of consumption
customer of goods &
service
Some of the different tasks for implementing the loyalty program are as follows.

1- To establish a stable turnover basis; it means that customer loyalty is like

assumption of future profit. So it is counted in the value that will be gained in the
future.
2- To calculate lifetime-value indicators.
3- To increase the customer’s value, notably through additional sales.
4- To write off costs of investing in the customer’s acquisition.
5- To cut transactional operational costs, for example, loyal customers more than
others understand their responsibilities and functions, are more tolerant to failures
etc.
6- To attract new customers through positive responds of loyal customers.

Process of Loyalty Program development

Following steps are to be taken for developing a loyalty program.

1- Spot a target group of the loyalty program like which customer is good, their
behavior, who will be valuable in future etc.

2- Settle on what kind of structure will implement the program i.e. which employees,
partners and external partners participating in program.

3- Decide how customers will be registered and what kind of the program it will be Is
the program is open that anyone can join it or closed that only desired customer can
join it. The program can be for end-customer or intermediate customer.

4- Decide how data about customers will be got and stored, loyalty card can be used to
get information about customers, their behavior, scored points etc.
 5- Choose in what way it will be communicated with participants of the program There
should be a frequent communication between the participants for sustaining long
term relations.

6- Decide what privileges will be as a reward for customer loyalty what type of benefit
will customer get from the program, Financial i.e. discounts, prizes, gifts etc. or
Non-financial like special status, additional services etc.

7- Evaluate a success of the program. Program is successful if it helps to get as much as

possible information about customers (for example, about their purchasing and
consumption habits, attitudes, emotions, etc.). The information serves for the
purpose that goods and (or) services will be adapted to specific needs of customers.

What does loyalty mean to business???

Repeat
purchases?
Retention of Create profitable
customer? customers ?

Loyalty
Acquisition of More information on
Customers? customers ?

Just another
marketing Reward loyal
program ? Customer ?
 Means of loyalty to customers

Cost incurred by customer to use

product

Price

Complete customer
Product/ “Relationship”
service experience
Customer perceived value

Brand

Relationshi
p

Missing opportunities in loyalty marketing

1- If the loyalty program doesn’t give tailor made, relevant offers, customer would
potentially defect from program.
2- The gap between what customers want and what companies are delivering in this
program.
3- Absence of communication, not proper use of social media, avoiding customer’s
behavior and preferences.
4- Lacking in recognizing and adapting the emerging customer’s trend.
 5- Rapidly changing Competitive arena in or outside the industry.

New Drivers of Loyalty Marketing

1- Managing the customer migration, not retention.

It is directly tied to the economic value. Catch customers before they are gone for
good. Increasing product offerings and broadly focus on relationship can be done.

2- Understanding the loyalty profile of customer base.

How much loyal is the customer towards the program? How many customers who
can be defect from the program? Are the emotionally attached with the program or
just for benefits? This all should be found.

3- Picking effective tools based on customer’s loyalty profile.

Redesigning the product service, enhancing the delivery channels, developing new
marketing program etc. are the effective tools for catching the customers.
Predominant customer segment in loyalty profile provides good guide to which tools
have greatest impact.

4- Combine these tools in an Integrated program for maximum impact

An integrated approach can yield 20-20 % loyalty improvement. Combinations of
tools are important for self-reinforcing. First a pilot program can be launched for a
group of targeted customers. Then, a comprehensive program is build based upon
the learning of pilot program.
 “The opportunities of today are the loyalty drivers of tomorrow”

Loyalty program at IOCL

Due to intense competition in today’s market, it is very important to retain loyal

customers. Acquiring new customer is always more costly then retaining old
customers. IndianOil is running two loyalty programs under the name of
XTRAREWARDS and XTRAPOWER for their dedicated customers. These loyalty
programs are specially designed to give benefits to its individual customers &
corporate.

XTRAREWARDS
To retain its customers, IndianOil introduced Xtrarewards program in December
2oo7 at Ahmedabad. This program is currently active in Mumbai, Delhi, Chennai,
Ahmedabad, Bengaluru, Bhubaneshwar, Coimbatore, Mysore, Pune and
Secunderabad and planning to reach other cities also. This is India’s first online
rewards program that seeks to inculcate the habit of redeeming points. The loyalty
program rewards customers paying by cash, credit and debit cards.
Whenever a customer purchases fuel/lube, he has to swap the card. Each transaction
is confirmed online through a chare slip. Every time when customer swaps the card
on purchase of fuel/lubes at IndianOil retail outlet, he can earn points on every
purchase. These points can be redeemed for fuel/lube or other exciting gifts.
On purchase of Rs 75 of fuel or Rs 25 of lube, customers can earn 1 point. The
point earned are added in cumulative nature like if a customer purchase fuel of Rs
 5o, the transaction slip will show zero points, but next time when customer will
purchase fuel of Rs 25, the transaction slip will show 1 point.

Accumulation of XRPs

Product XRPs Awarded Unit of Purchase Rs

Petrol 1 75.00
Xtra Premium
Deisel
Xtra Mile
CNG
Auto LPG
(Petrol/Xtra Premium) +
oil mix

Loose lubes 4 75.oo

Packed lubes 8 75.oo

Alliance partners

IndianOil has tie ups with different alliance partners. By using transaction slip
generated after purchase, customers also receives discount at one of the alliance
partner’s outlet. Presently, IndianOil has tie ups with some alliance partners in
Coimbatore.
 Shanthi Social Service (pharmacy division)- 19% off on medicines & 5% on
Diagnostics.
 Classic Polo – 5% off on purchase value.
 Lotus – 10% off on optical shops
 Vasan Eye Care- 5o% off on consultation, 10% on investigation and 5% on
optical purchases.
Some other famous alliance partners are Ideal Stores, rediff shopping, Hotel
Greenfields etc.
XTRAPOWER Easy Fuel
In today’s market, everybody needs fuel. Fuel is a basic necessity for households and
corporate, whether it is LPG or petrol. A huge segment of potential customers is the
Business professionals who need daily a liter of petrol to carry on his work life. Considering
that thing IndianOil launches Xtrapower Easy Fuel Card in………………….in Coimbatore.
This card is mainly designed for the corporate who gives fuel incentive to its employees
monthly or periodically. Also this card can be given as a gift to the customers or any other
stakeholders.

Exciting features
Away from paper or cash voucher, this electronic smart card makes fuel filling
better.
It is different from other cards. It has a 4 digit PIN which makes it a secure fuel
voucher. This PIN is to be punched at each transaction & cardholder can change
this PIN at any point of time in any sales point
The card can be used as single recharge and multiple recharges also. Means
corporate can incentivize its employees or customers not only single time but many
times.
A dedicated log in id is to be given to the authorized person in corporate, who has
the authority to allocate funds on the cards of the employees. That person can keep
control on card through our website. Other member would also have their own log
in id by which they can see their transaction.
 No need of making separate accounting books for recording the amount that has
given as incentives or gifts to employees or customers. All transaction will be
recorded in MIS (Management Information system).
The authorized person in the corporate has full power to allocate funds on other
cards, to keep eye on transactions, to block or unblock the cards in case of misplace
or misuse.
Corporate can also maintain their employees and customer database. This database
can help them to change their customers in to loyal customers. Sending gifts on
their anniversary or even a call can transform them in to loyal one. One loyal
customer can attract 10 new customers. This can be happen by creating database.
There are 6000 selected outlets across the country which can accept the easy fuel
card and deliver the fuel.
Also there is 24*7 toll free helpline (18004255599) to answer customer’s query or for
feedback.

Variants
IndianOil introduced two variants in Easy fuel cards.
Single Recharge
This card is specially designed for customers.
It is valid for 6 months only or the exhausting of the amount on the card. Within
that period, it can be used only one time.
 The validity time period started when the customer swaps the card at petrol bunk
first time.
It can be used as a gifting option. Like, a car dealer can gift an easy fuel card to the
customer instead of giving free petrol or something else. Also, it can gift to
insurance agents.
Multiple Recharge
As the name suggests, this card can be used multiple times in.
This card can be used for fuel payments or incentivizing the employees, partners or
other stakeholders.
This card has the validity of 3 years. The validity started from the date of issuing the
card form IndianOil.
How the card is used?
IndianOil issues the easy fuel cards to the corporate with a default PIN number. The
corporate name can be captured on the card.
Corporate can distributes the cards among its employees or stakeholders to make
fuel payments.
The employee or customers can change this default pin approaching to the selected
IndianOil bunk.
Corporate can load the money thorough a virtual account provided by the
IndianOil. This process can be repeated several times.
Transaction slip will be generated each time when an employee or a customer swaps
the card. This transaction can also recorded in MIS (management information
system) of corporate.
Objective
To enroll customers for Easy Fuel Cards.
Methodology
A prospective customer database comprising 50 corporate is created with the help of
primary and secondary resources.
Appointments are fixed with the HR manager or the concerned person in the
corporate to explain about the whole program.
After explaining the program’s features, application form is given to the HR
Manager to fill properly.
Considering the views of corporate, follow up is done after 2 days of meeting.
A fieldwork is also done to get to know about the other fuel cards in the market and
the customers’ views on them.

Benefits to the corporate

Corporate can distribute incentives or gifts through their desktop.
Corporate can top up the multiple recharge cards several times.
Relief from the expensive petrol stations or bad maintenance of company vehicles.
Reduces cash and paper vouchers handling by employees.
Corporate can keep eye on how much amount is spending on fuel and the time of
fueling up.
Easy fuel cards resist fraud in the corporate i.e. right amount of right type of fuel in
the right tank. Vehicle information ensures that fueling is permitted only in to
designated vehicle.
All transactions are automatically performed & recorded, allowing for better control
of data and spending.
 This program allows corporate to support corporate internal loyalty or member’s
benefit.
Corporate can double their profits by increasing customer retention. It is costly to
gain new customer then gaining exist one.
68% of employees leave their company because of perception of indifference. They
think that company doesn’t cares about them. This loyalty program makes
employees loyal toward corporate.
Accountant will better be able to control the fuel expenditure on the staff & no
doubt, it will save your money.
Ability to obtain different Levels of information.

Benefits to Petrol Bunk

The facility of swapping of easy fuel cards is available in selected outlets across the city.
This loyalty program also benefits the petrol bunk in following ways.
It requires minimum level of maintenance.
Automated billing on each transaction helps the petrol bunk owner to kept fast &
safe record.
Also it eliminates fuel theft by bunk attendants or customers.
This program is very much cost effective.
It also improves the turnaround time at petrol bunk.

Benefits to the customers

This card provides the features like a smart card and security through a specific PIN.
No need to carry of paper vouchers.
Large network of 6000 selected Indian outlets across the country make the fuel
purchase convenient.
A 24x7 toll free number (18004255599) is given to the customers for their queries on
card related issues.