Castrol India Limited: An Innovative Distribution

Channel
 How do consumers buy MCO? What are the
Q1  
various segments ?

BUYING PROCESS OF CONSUMERS CONSUMER SEGMENTS:- PSYCHOGRAPHIC

( largely) + BEHAVIOURAL

 During warranty period consumer visits  Minimalist: Do the right thing

motorcycle dealerships or FWs

 Appreciators: Hold my hand (inspire freedom and

 After warranty period consumer visits NFW and confidence)
they either trust the mechanic to use the right oil
or buy oil and give it to the mechanic
 Enthusiasts: Get the most out of my engine
 What is the implication of consumer behavior of these segments on
Q1   developing various channels? Evaluate current distribution channel of
Castrol and suggest potential areas for sales growth.

IMPLICATION ON DEVELOPMENT OF CURRENT DISTRIBUTION STRATEGY AND

VARIOUS CHANNELS POTENTIAL AREAS FOR SALES GROWTH

 Our target group includes Appreciators and
Enthusiasts not Minimalists
 For targeting Enthusiasts we have to tap spare-
part outlets and stock-and-sell mechanics by
asking larger shelf space and giving incentives on
over achieving sales target
 The Appreciators will be tapped by the mechanics
who worked at FW for this we can start giving
scratch and win on each products and this will be
an incentive for them
 With a company like Castrol they have less tie-ups
with OEM’s , in order to grow in FW’s they need to
have more tie-ups
 With mechanics playing major role we need to tap
spare parts outlets and stock-and-sell to have a
bigger market share
 They should organize a knowledge workshops for
mechanics(small), this will make them feel important
for a company and hence they will sell it more
 Educating DSR’s for the technical knowledge of bikes
and how to maintain relationships with mechanics
 What Can Be Done To Tap The Market
Q2  
Potential And Achieve Sales Growth?

OPTION #1 OPTION #2

 Huge Untapped Market Potential for the Sale of 4-
stroke oil can be tapped by opening Bike Zones on
Highways and in rural areas where there is a big
possibility of bike breakdown and there is paucity
of mechanics.
 Castrol can keep their own mechanics in place for
the first couple of months. When these mechanics
become self sufficient, they can buy the Bike Zone
from Castrol itself.
 NFW Mechanics can be tapped by Castrol itself
and be formed as a Castrol Authorized NFW
Network
 These Mechanics will be authorized after due
diligence and investigation and 4-5 days credit will
be granted to them.
 Best performers will be awarded with a bonus and
higher margins.
 What are the characteristics of different
Q2 mechanics?

#1 Ustaads or Stock #2 Franchised

Workshop Mechanics
and Sell Mechanics #3 Small Job
• Young mechanics Mechanics
• Small segment but
lacking financial
contributed 30% of
support, but having • Consumers trusted
oil changes.
entrepreneurial mind them for small issues
• Highly respected and
• Able to garner credit • Comprised 50% of
considered to be the
for spare parts, but mechanic base
best in their trade. 
settled on daily basis. • Struggled to build
• These mechanics
• Accounted for 50% of clientele  
commanded a
oil changes and 40%
premium price
of mechanics
 What are the various options for Castrol to expand
Q3 its distribution channel? 

#2 Create parallel #3 An innovative and

#1 Distributors differentiated  distribution 
set of exclusive
should supply channel of Castrol’s
Motorcycle oil Authorized service
directly to NFW  
(MCO) distributors associates  (CASA)  
#1   Distributors should supply directly to NFW

PROS CONS

 NFW Mechanics lack understanding of Cash Flows

 Huge Untapped Market Potential for the Sale of 4-
and Payment Cycles and since they used to buy on
stroke oil via NFW Mechanics (89.4%) and growing
credit so Huge Financial Risk
at a CAGR of 30%.
 Annoyed Spare Part sellers or Oil shop owners
may promote competitor products.
 Results in Unethical exploitation
 Direct Supply would ensure NFW Mechanics don’t
 Most of the NFW mechanics were unauthorized
have to buy MCOs from Spare Parts shops and
and could close shops any day.
thus would be able to cater to the erratic
 NFW Mechanics were highly scattered in remote
customer demand of lubricant oil more
locations so Distribution Costs will rise.
effectively.
 Resentment of Loyal dealers
 Create parallel set of exclusive Motorcycle oil
#2  
(MCO) distributors

PROS CONS

 Increased Distribution Costs in this Route to

Market (RTM) plan of maintaining exclusive MCO
 Huge Untapped Market Potential for the Sale of 4-
distributors in parallel.
stroke oil via NFW Mechanics (89.4%) and growing
 It might result into Territorial wars between
at a CAGR of 30%.
Distributors.
 Maintenance of Trade Channels will be a calamity.
 Increased Complexity in the Distribution Channel
structure of Castrol Lubricants due to separate
 Exclusive set of MCO 4-Stroke Oil distributors
“Exclusive MCO distributors” will add to the need
would ensure better supply of oil through various
for increased coordination and span of control due
intermediary channels to the end-consumers
to increased confusions.
#3   Castrol’s Authorized Service Associates  (CASA)
PROS
 Castrol authorized Service Associates (CASA) enable
Castrol to reach out to smaller independent mechanics
mainly in remote locations and rural areas.
 Branding Opportunity
 Drives Entrepreneurial spirit among young people.
 Maintenance of other channel partners
 Minimum conflicts
 Additional Increment for Distributor
 Easy and quick replenishment of Stocks at NFWs by CASA
since he will be able to get to know of rise in demand.
 CASA also help Castrol to implement and manage Trade
Promotions and Incentives plans at all levels and thus
expand the market share.
CONS
 Since CASA is a new innovative set of
entrepreneurial  team of sales reps operating
within the distributor channel sharing the 4.3%
distributors margin so it may annoy some
Distributors.
 Recruitment Constraint that CASA rep. should
have good Numeric Aptitude
 Exploitative CASA may destroy the whole purpose
 Retention challenges of CASA rep.
 CASA representatives have to be trained and
controlled by Distributor and there may be many
CASA representatives under single distributor.
 Grid-Based Comparison of the above options
S. Parameter\Option Distributor Direct Supply
No. of Oil
1 Product Availability and Product will be Easily
Consumer Accessibility available but Not in
Remote areas.
2 Monitoring and supervision Increased Monitoring as
of NFW Mechanics under the direct control
of Distributor.
3 Cost of implementing this Financial Risk of providing
Distribution channel credit to the
Expansion strategy unauthorized NFW
Mechanics
Exclusive MCO CASA
Distributors
Supply of Oil would Product will be
be more but available with NFW
Inaccessible in Mechanics even in
Remote regions Remote Areas.
Limited Supervision As CASA rep. will
by Distributors personally visit each
NFW Mechanic so
Best Monitoring.
Complexity in the Since CASA rep. has
Structure would to be trained by
lead to need for distributor and will
increased share his margin.
Coordination
#4   Implementation of CASA distribution strategy

Strategy 1 Strategy 2
 Option 2: Young entrepreneurs are trained in tier 1
 Option 1: Start as a CSR program (HUL’s Shakti).
or tier 2 cities, since the distributors will have
Brand gets recognized among the local people and
training and support staff.
NFWs. Give the entrepreneurs a hands on. Best
are retained.
 They would cater to NFW in those cities for few
weeks. This increases the reach of Castrol
 Credit to NFWs can be extended for a day since
products and they can be tapped further by the
the CASA associate would know the localities well.
main distributor.
 Distributors in upcountry areas may not have
 Best are retained and associated with the
proper training and support staff.
distributor in their home locality.
THANK YOU