Strategic Marketing & Planning - Pakistan State Oil

STRATEGIC MARKETING AND PLANNING PAKISTAN STATE OIL
Automotive Lubricants
BACKGROUND REPORT
Pakistan State Oil Company Limited is one of Pakistan’s largest companies which
posted an after tax profit of Rs. 4.2 billion this year.
For nearly two decades PSO had held the reigns of market leadership when it
came to lubricants. Yet in 1994, when the government announced a new petroleum
policy in which lubricants were deregulated, PSO failed to react and manage the
challenges of the free market conditions. It did not expand its stagnant product lines, and
the growing consumer needs were met instead by its closest competitors, Shell and
Caltex.
In 2000, PSO underwent a corporate restructuring, and thus began its
transformation process that has seen it restored as market leader in POL products, and has
regained significant confidence in its lubricants division. The following highlight the
changes brought on for lubricants during the transformation process:
1. The formation of a complete value chain under the new business unit
concept.
2. Extension of product line.
3. Technical seminars conducted for dealers.
4. Improved customer services.
PSO’s extensive progress in such short time warranted it a proposal for

privatization in 2003. Yet time passed, and the prospect of privatization kept being
delayed. Finally, with the completion of PTCL’s privatization process this year, PSO is
now scheduled to be next in line with the date set for the end of 2005.
1
1. BUSINESS SCOPE
Business we are in:

• The provision of the highest quality petroleum products and services to
customers.
Specific Region:
• 3,800 retail outlets (stations) scattered all over Pakistan’s geography
• Lubricants manufacturing plants in Korangi and Kemari
Who are we serving?

• Automobile owners
• High-Street distributors
What are we offering?

• High quality grades of lubricants
• The world’s leading brand of motor oils: “Castrol”
How are we achieving our goals?

• Integrated value chain
• Strong marketing capabilities
• Largest retail network
Business we are not in:

• Engine parts manufacturing
2
2. EXTERNAL ENVIRONMENT
2.1 Market Structure
End-Customer Brackets
BRAND LOYAL CONVENIENCE
• Will buy lubricants based on perceived • Will purchase lubricants from vendor
quality and from preferred vendor that is most convenient
• Will buy lubricants from that station • Purchases from station closest to
that has shown best service or quality home/work
PRICE CONSCIOUS IMPULSE

• Purchases based on lower price • Will buy lubricants on impulse
• The loudest customer type, will buy • While filling petrol at station, will
that lubricant that fits desired quality suddenly realize the need for lubricant
and fits the wallet
•PSO has the most retail outlets, thus a good portion of its customers fall under the
Convenience and Impulse brackets.
•However, the majority of PSO’s customers fall under the Brand Loyal brackets
because of Castrol’s higher quality offering.
3
2.2 Competitive Sales Analysis
Industry Sales
(Litres)
Industry 2004/05
2001/02 2002/03 2003/04
Player
PSO 39,953,740.00 40,257,985.94 39,843,800.44 46,256,954.85
Shell 44,273,063.24 46,967,650.26 50,390,688.79 53,966,447.33
Caltex 19,436,954.59 22,365,547.74 23,437,529.67 25,698,308.25
Others 4,319,323.24 2,236,554.77 3,515,629.45 2,569,830.83
Total 107,983,081.07 111,827,738.71 117,187,648.35 128,491,541.26
Yearly Sales
(Litres)
60,000,000
50,000,000
40,000,000
Litres 30,000,000 PSO

Shell
20,000,000
Caltex
10,000,000 Others
-
2001/02 2002/03 2003/04 2004/05
Fiscal Year
4
Total Industry Sales

(Litres)
135,000,000
130,000,000
125,000,000
120,000,000
115,000,000
110,000,000
105,000,000
100,000,000
95,000,000
2001/02 2002/03 2003/04 2004/05
Sales Growth Over Four Year Period

2001/02
2002/03
2003/04
2004/05
60,000,000
50,000,000
40,000,000
Litres 30,000,000
20,000,000
10,000,000
-
PSO Shell Caltex Others
Industry Players
5
2.3 Competitive Market Share Analysis
Market Share in Lubricants Category

(Percentage of Total)
Industry
2001/02 2002/03 2003/04 2004/05
Player
PSO 37% 36% 34% 36%
Shell 41% 42% 43% 42%
Caltex 18% 20% 20% 20%
Others 4% 2% 3% 2%
Total 100% 100% 100% 100%
• PSO is currently number two in the industry with a market share in 2005 of 36%.
• Shell continues to be the market leader.
• Caltex has consistently maintained its position in the market.
• Oil marketing giant Total has recently entered the Pakistani market, yet still has
not afforded marketing efforts towards their lubricants.
• There was a dip in PSO’s sales at the end of 2004.
• PSO has shown the largest jump in sales from 2004 to 2005.
6
Market Share
Fiscal Year 2001/02
4%
18%
37% PSO
Shell
Caltex
Others
41%
Market Share
Fiscal Year 2002/03
2%
20%
36% PSO
Shell
Caltex
Others
42%
7
Market Share
Fiscal Year 2003/04
3%
20%
34% PSO
Shell
Caltex
Others
43%
Market Share
Fiscal Year 2004/05
2%
20%
36% PSO
Shell
Caltex
Others
42%
8
2.4 Competitive Market Growth Model
Sales Forecast
80,000,000
70,000,000
60,000,000
50,000,000 PSO
Shell
40,000,000
Ca lte x
30,000,000 Others
20,000,000
10,000,000
0
2004/05 2005/06 2006/07 2007/08 2008/09
PSO 46,256,954.85 46,201,985.07 48,051,530.98 49,901,076.88 51,750,622.79
Shell 53,966,447.33 57,025,260.11 60,275,579.19 63,525,898.27 66,776,217.35
Caltex 25,698,308.25 27,698,595.79 29,684,200.08 31,669,804.37 33,655,408.66
Others 2,569,830.83 2,167,983.94 1,771,043.68 1,374,103.43 977,163.17
•PSO shows the slowest growth rate among the industry players.
Forecast
•A dip
ofis
in sales Total PSO Sales
forecasted for fiscal year 2005 – 2006.
60,000,000
50,000,000
40,000,000
30,000,000 Total
20,000,000
10,000,000
0
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
9
2.5 Customer Buying Criteria
QUALITY AND PRICE PSO Shell Caltex

Non-Price Attributes
%
Affecting Customer
Weight
Choice
Product – Related 94%
1. Engine Maintenance 36 14 10 12
2. Performance 30 10 9 11
3. Brand Image 12 2 7 3
4. Quality 9 2 5 2
5. Longevity 5 3 1 1
6. Color of oil 2 1 0 1
Service – Related 6%
1. Attendants’
3 0 1 2
Responsiveness
2. Efficiency of Free
3 1 2 0
Oil Change Service
Total 100% 33% 35% 32%
Has Quality gone up/down (+/–) in
+ + +
past 4 years
Relative price today Higher Higher Higher
Relative price 4 years ago Lower Lower Lower
PSO’s Relative Performance Rating
QUESTION ITS COST KEEP IT UP
Engine Maintenance
Better
Same Quality
Worse Attendant’s Brand Image

Responsiveness
DO NOT SWEAT Least 10% 20% Most IMPROVE FAST
10
3. INTERNAL ANALYSIS
3.1 Profitability
STRATEGIC VIEWPOINT ACCOUNTING VIEWPOINT
Relative
Product Relative
Quality Price
(High)
Margin
Relative Relative cost

market share (low)
Relative
Productivity ROI
OPERATIONS VIEWPOINT
Relative
- capacity utilized
Relative
- capital intensity
turnover on
- age of capital
fixed capital
Turnover
Relative Relative
- product availability turnover on
- product variety working
- collection time capital
- plant layout
•PSO operates with a lowest cost operations policy.

•It is closing the gap in market share with leader Shell.
•It offers the highest quality lubricants in the market.
•It has a significantly high turnover.
•Lubricants have very high profit margins; an average of Rs. 20 profit per litre sold.
11
• Castrol CR is PSO’s best performing lubricant.

• Castrol CR is a diesel lubricant, and the largest market is in the diesel engine
vehicles category.
• PSO’s in-house brands, Carient, DEO and Blaze 7 all show signs of continuous
progress over the next four years.
• However, there has been no significant effort in the marketing of GTX
Magnatec, which is in fact the highest grade of lubricants worldwide.
• Unbranded lubricants account a high contribution toward sales, yet is showing a
steady decline in the years to come.
12
3.2 Driving Forces
1. Global rise in petrol prices.

As the price of an oil barrel reaches $60, Oil Marketing Companies (OMCs) are
forced to increase their prices of petrol. This in turn leads to consumers limiting their
petrol consumption which accounts for a lower frequency of visits to petrol stations. This
would hurt lubricant sales from both convenience and impulse buyers.
Shell Pakistan has been able to sustain lower prices due to backing from their
worldwide operations. Thus price conscious consumers would also be swayed from
purchasing at PSO outlets.
2. Economic Situation.
The economic situation of Pakistan serves as a major driving force in this
industry. Since a large part of economic wellbeing for any society depends heavily on the
petroleum industry, a global rise in petrol prices would impact the economic situation of
Pakistan negatively. Similar to the first driving force, economic instability would lead to
a lower emphasis on consumption nationwide, and would inhibit lubricant sales.
Conversely, positive economic conditions would lead to higher overall
consumption rates, which would promote sales in this industry.
3. Government Regulation.
Government regulations serve as a major driving force in this industry. Tariffs on
imports, lower duties, and entry barriers, all play a part in the wellbeing on the industry.
The Pakistani government provides incentives to OMCs as they contribute significantly
towards the economy.
PSO, being a government organization, has to adhere to government regulations
in several forays of their marketing activities. This has both positive and negative
implications on business efforts.
13
4. Car Financing.
More and more banks are offering low rebate rates on car financing. This leasing
phenomenon has led to an influx of sales in the motor vehicles industry. The automobile
industry and motor oil industry have a positive relationship, the more cars on the road,
the more demand for lubricants.
3.3 Key Success Factors
• PSO’s Sustainable Competitive Advantage is their association with Castrol.

Castrol is the world’s leading manufacturer of the highest quality grade of
motor oils, and PSO has garnered the license to solely mix and market their
lubricants under the Pakistan State Oil mantle.
• Lead time in manufacturing and marketing.
• Lowest cost operator.
• Largest retail network.
• Corporate emphasis on pioneering innovation.
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3.4 SWOT Analysis
Strengths Weaknesses
• Pioneered quick oil change service: • Semi-bureaucratic system
Speedy • Slow decision making
• Sole licensee of Castrol Lubricants • Bad product positioning
• Initiated free lube delivery service • Lower perceived quality
• Mobile Quality Testing Unit • Lack of trust with dealers
• Largest retail distribution network: • Failed promotional scheme (‘Jeet
3800 retail outlets Hee Jeet’, 2004)
• Integrated Value Chain
Opportunities Threats
• Privatization prospect • Induction of new player: Total
• Use of the success of Castrol to • Global Externalities
reposition consumer perceptions of • Global rise in petrol prices
National Company offerings • All competitors have strong
• Pioneers of innovation in industry international backing from
worldwide operations
15
4. STRATEGIC MARKETING AND PLANNING
4.1 Vision
• To continually excel in the provision of unmatched value to customers by offering
the highest quality of lubricants sustainable through dynamic innovation.
4.2 Mission Statement

• To identify PSO automotive lubricants in the minds of consumers as the premier
choice for their automobiles through the following:
1. Promise of exceptional quality;
2. Integrated Value Chain;
3. Sustained growth in earnings in real terms.
4.3 Strategic Intent

• To consolidate the belief in consumers that PSO lubricants surpass those of Shell
and Caltex in terms of higher quality.
4.4 Core Competencies

• Pioneer in product and service innovation.
• Most ‘New Vision Outlets’.
4.5 Business Objectives

• To gain a market share of 45% in three years.
• To be the market leader in lubricants within five years.
• To slowly phase out Castrol XL, and invest in developing Castrol Magnatec
Advance1.
• To eradicate un-branded lubricants within ten years and consolidate a more
concise product portfolio.
1
XL customer base has high probability of switching easily to PSO brand Carient.
16
5. KEY ISSUES
1. Price sensitive market will not accept expensive Magnatec Advance.

2. Consumer perception of “cheating”, mixing of impure oils, low quality product
offering at PSO.
3. Consumer perception that internationally renowned competitors offer high
quality, whereas national company equals low quality.
4. Sales from un-branded lubricants account for nearly 35% of total sales.
5. PSO has the largest retail network, yet still fails to secure the highest market
share in the industry.
6. Being a semi-government organization means more bureaucracy and slow
decision making.
7. PSO does not maintain the same standards of quality for service and point of
sale at all of its stations.
8. Lack of trust with dealers.2
9. Non-effective provisional checking policies and standards.
10. There is a 70% variation in quantity sold between Karachi’s top selling site and
the average of Karachi’s top 50 sites.
2
During promotional schemes, lack of trust with dealers leads to heavy investment in provisional
checking policies.
17
6. OVERALL STRATEGIC DIRECTION
•To change customer perceptions regarding PSO’s product quality.
The majority of consumers perceive Shell’s lubricants as being of the best quality.
Yet this is far from the truth. In fact, PSO and Caltex both offer better quality lubricants,
but Shell has managed to capitalize on incredible product positioning. Through their
better service, and marketing campaigns, one of which claimed that Shell fuel gives you
better mileage, they created an image of exceptional quality and brand loyalty. This in
turn applied not only to its fuels, but to all of its product offerings, especially lubricants.
Therefore, even by offering products of lesser quality than those of its competitors, Shell
has managed to convince the buying public that it is better.
Furthermore, PSO launched a promotional scheme for lubricants in early 2004,

called Jeet Hee Jeet. Due to mismanagement and distrust between their dealers, this
campaign failed in its purpose of garnering extra sales. Prizes were not being awarded to
customers, and some dealers actually paid for them out of their own pockets and were
never compensated. This left many of PSO’s customers and several of their dealers with
a waning sense of trust in the company. In hindsight, this failed scheme only added to the
belief that was prevalent before the restructuring in 2000, that PSO was a mismanaged
and defunct government company interested only in their own gains.
Therefore, it is vital that PSO invest heavily in the long-term product positioning
and restructuring of consumer perceptions.
18
MARKETING AND PRODUCT PLAN
7.1 Segmentation Analysis
Lubricant Brand Income Bracket Vehicle Type Example of Vehicle

Castrol Magnatec 50,000+ 2000CC+ [Petrol] Honda Accord/BMW
Castrol GTX 25,000 - 50,000+ 1300CC - 1600CC [Petrol] Honda Civic/Toyota Corolla
Castrol XL 18,000 - 30,000 850CC - 1300CC [Petrol] Suzuki Cultus
Carient 24,000 - 44,000 1000CC - 1600CC [Petrol] Honda City
Carriers and 2000CC cars
Castrol CR 10,000 - 42,000+ Toyota Corolla 2.0D
[Diesel]
Pick-up trucks and Vans
Castrol RX 8,000 - 18,000 Suzuki Van
[Diesel]
Large Transport Trucks and
DEO 10,000 - 24,000 Transport Trucks
SUVs
Castrol Activ 10,000 - 35,000 4-Stroke [Motorcycles] Honda CD 125
Blaze 7 5,000 - 18,000 70CC - 125CC [Motorcycles] Yamaha
Two-Stroke Oil Under 5,000 - 15,000 2-Stroke [Motorcycles] Yamaha Royale
•PSO’s best selling lubricant is Castrol CR.

•Castrol CR falls under a broad range of customer segments.
•Its dual appeal, to both lower end truck drivers, and higher scale Corolla 2.0D
owners, allows it to capture a greater piece of the market.
•GTX Magnatec’s potential customers are not informed of its attractive features,
and thus opt for GTX Plus instead.
19
7.2 New Product Plan
Product Category
Existing New
Existing
Line Extension Brand Extension

Castrol Magnatec Advance
Brand Name
New
Multi-Brands New Brand
•Although PSO has had Castrol GTX Magnatec on the market for the last few
years, no significant effort has been made to position it in the minds of the
consumer.
Features of Magnatec Advance:

1. Best grade of lubricant worldwide
2. Manufactured with highest quality standards
3. Life of lubricant nearly three times as long as any other currently on the
market: can run for 15,000 kms without needing to be changed
•These features need to be highlighted in a heavy marketing campaign in order to

raise awareness about Magnatec, as well as build overall consumer perception
regarding PSO’s lubricants.
20
7.3 Product Portfolio Management
Lubricant (Motor Oil) Category
Passenger Car Motor Oil Diesel Engine Oil Motorcycle Oil
•Carient
•DEO •Blaze 7
PSO •Castrol GTX Magnatec
•Castrol CR •Two-Stroke Oil
(Includes •Castrol GTX
•Castrol RX •Castrol Activ
Castrol) •Castrol XL
Industry Player
•Helix Ultra
•Helix Plus
•Helix Diesel
Shell •Helix Super •Advance
•Helix Rimula
•Helix CNG
•Havoline Formula •Delo Gold

•Revtex
Caltex •Havoline Motor Oil •Delo Silver
BCG Matrix
High Market Share Low
Star Question Mark

High
Castrol CR Blaze 7
DEO
Cash Cow Dog
Castrol GTX Castrol Magnatec

Carient Castrol XL
Two-Stroke Oil Castrol RX
Castrol Activ
Market Growth
21
Low
22
Product Line Categories
Petrol Engine Oils

1. Carient
a. Ultra
b. Plus
c. Super
d. Advance
e. Extra
2. Castrol GTX
a. Magnatec
b. Magnatec Advance
c. Plus
d. GTX 20W50
3. Castrol XL
Diesel Engine Oils
4. DEO
a. 8000
b. 7000
c. 6000
d. 5000
e. 4000
f. 3000
g. 2000
h. 1000
5. Castrol CR
a. Ultra
b. Plus
c. CRD 10, 20, 30, 40, 50
d. CR 10, 20, 30, 40, 50
6. Castrol RX
a. Super Max
b. Super
Motorcycle Oils
7. Blaze 7
8. Two Stroke Oil
9. Castrol Activ
• PSO has an excessive number of product variations.
23
7.4 Pricing Strategies
API CASTROL AUTOMOTIVE PACK PRICE

LEVEL BRAND SIZE RS.
GTX MAGNATEC 10W-40
SL / CF (Advance) 4 Ltr Can 390
SJ/CF GTX MAGNATEC 4 Ltr Can 224.75
SJ/CF GTX MAGNATEC 1 Ltr Can 249
SJ/CF GTX Plus 4 Ltr Can 190

SJ/CF GTX Plus 210 Drum 164
SG/CD GTX 20W50 4 Ltr Can 170

SG/CD GTX 20W50 3 Ltr Can 171.67
SG/CD GTX 20W50 210 Drum 140
SF/CC GTX-XL 4 Ltr Can 131

SF/CC GTX-XL 3 Ltr Can 133
SF/CC GTX-XL 210 Drum 109
CH-4/SG CR Ultra 4 Ltr Can 195

CH-4/SG CR Ultra 210 Drum 180
CH-4/SG CR Ultra 10 Ltr Can 195
CF/SF CR Plus 4 Ltr Can 150
CF/SF CR Plus 210 Drum 129
CF/SF CR Plus 10 Ltr Can 150
CD/SE CRD 10, 20, 30, 40, 50 210 Drum 113
CC/SD CR10, 20, 30, 40, 50 210 Drum 110
CC/SD CR40 (Tin) 4 Ltr Tin 93.56
CC/SD CR40, CR50 4 Ltr Can 117.5
CC/SD CR40, CR50 10 Ltr Can 115
CF-4/SG RX SUPER MAX 15W40 210 Drum 160

CD/SE RX SUPER 20W50 210 Drum 114
1 Ltr
SG CASTROL ACTIV 4T 20W-50 Bottle 125
24
API PACK PRICE

LEVEL PSO AUTOMOTIVE BRAND SIZE RS.
SJ/CF CARIENT ULTRA 20W-50 210 Drum 158.75
SJ/CF CARIENT ULTRA 20W-50 20 Ltr Can 160
SG/CD CARIENT PLUS 20W-50 210 Drum 128
SG/CD CARIENT PLUS 20W-50 20 Ltr Can 130
SG/CD CARIENT PLUS 20W-50 04 Ltr Can 137.5
SF/CC CARIENT SUPER 20W-50 210 Drum 117
SF/CC CARIENT SUPER 20W-50 20 Ltr Can 110
SF/CC CARIENT SUPER 40 210 Drum 115
SF/CC CARIENT SUPER 40 20 Ltr Can 108
SE/CC CARIENT ADVANCE 20W-50 210 Drum 113
SE/CC CARIENT ADVANCE 20W-50 20 Ltr Can 108
SE/CC CARIENT ADVANCE 40 210 Drum 111
SE/CC CARIENT ADVANCE 40 20 Ltr Can 105
CARIENT EXTRA 10, 20, 30,
SD/CC 40, 50 210 Drum 103
CARIENT EXTRA 10, 20, 30,
SD/CC 40, 50 20 Ltr Can 89
SD/CC CARIENT EXTRA SAE 40 04 Ltr Can 115
SC/CC CARIENT 10, 20, 30, 40, 50 210 Drum 100
SC/CC CARIENT 10, 20, 30, 40, 50 20 Ltr Can 98
SC/CC CARIENT 40 04 Ltr Can 111
DEO 8000 SAE 15W- 40,

CH-4 20W- 50 210 Drum 175
DEO 8000 SAE 15W- 40,
CH-4 20W- 50 20 Ltr Can 170
CH-4 DEO 8000 SAE 15W-40 04 Ltr Can 180
DEO 7000 SAE 15W- 40,
CG-4 20W- 50 210 Drum 170
DEO 7000 SAE 15W- 40,
CG-4 20W- 50 20 Ltr Can 160
DEO 5000 SAE 10, 20, 30, 40,
CF/SF 50 210 Drum 125
CF/SF DEO 5000 SAE 20W-50 210 Drum 128
CF/SF DEO 5000 SAE 20W-50 20 Ltr Can 118
CF/SF DEO 5000 SAE 40 20 Ltr Can 115
DEO 6000 SAE 15W- 40,
CF-4/SG 20W- 50 210 Drum 145
DEO 6000 SAE 15W- 40,
CF-4 20W- 50 20 Ltr Can 135
DEO 4000 SAE 15W- 40,
CE 20W- 50 210 Drum 115.75
DEO 4000 SAE 15W- 40,
CE 20W- 50 20 Ltr Can 110
DEO 3000 SAE 10, 20, 30, 40,
CD/SE 50 210 Drum 105
DEO 3000 SAE 10, 20, 30, 40,
CD/SE 50 20 Ltr Can 100
DEO 3000 SAE 15W- 40,
CD/SE 20W- 50 20 Ltr Can 105
25
DEO 3000 SAE 15W-40, 20W-

CD/SE 50 210 Drum 107.5
CD/SE DEO 3000 SAE 40 04 Ltr Can 114
DEO 2000 SAE 10, 20, 30, 40,
CC/SD 50 210 Drum 103
DEO 2000 SAE 10, 20, 30, 40,
CC/SD 50 20 Ltr Can 89
DEO 1000 SAE 10, 20, 30, 40,
CC/SC 50 210 Drum 101.75
DEO 1000 SAE 10, 20, 30, 40,
CC/SC 50 20 Ltr Can 85
CC/SC DEO 1000 SAE 40 04 Ltr Can 111
2- STROKE OIL (Plastic 1 Ltr

DOT - 3 Bottle) Bottle 113
•PSO employs a diversification strategy when it comes to pricing.

•Each product and sub product is priced differently.
•Depending on the amount of fixed purchase, the prices also vary.
•PSO’s pricing on lubricants needs to be standardized on homogenous packs.
•A maximum of three pack sizes may be offered, but the subdivisions of prices need
to be curbed.
26
7.5 Distribution Strategies
Distribution Structure
PSO Shell Caltex

Retail Outlets 3866 1290 650
High-Street Distributors 14 22 30
•PSO has three times the number of retail outlets that Shell has, and six times that
of Caltex.
•However, the trend is opposite when it comes to high-street distributors.
•Out of the 3866 outlets, more than 50 are CoCo sites, (Company Owned and
Company Operated).
•PSO needs to curtail the resources spent on developing new sites, and in turn
invest in optimizing its distribution network, (more is better is not necessarily the
best strategy).
•PSO needs to capitalize on their larger retail network by offering long-term
discount schemes to its dealers.
•The major gap in PSO’s distribution network is that there is little trust between
the company and its dealers.
27
7.6 Marcom Plan
1. Formulate a comprehensive marketing and advertising campaign to build

customer perceptions of GTX Magnatec.
See Sample Ads on page 33
2. Introduce promotional activities that not only capture short-term sales, but also
build long-term customer loyalty.
See Attachment 1
3. Invest in dealer relationship management by offering long-term incentive schemes
and discounts, so as to build trust between both parties.
See Attachment 2
4. Manage lubricant displays at stations and auto-workshops that house PSO brands.
5. Develop an SOP (Standard Operating Procedures) which would standardize
quality of service at all points of sale, as well as on the Speedy free oil change
service.
See Attachment 3
6. Enlist an endorsement from the CEO of BMW, MetroCab and/or White Cabs, in
which they would highlight the superior quality of PSO lubricants.
7. Negotiate partnerships with major auto-workshops and service stations by
offering them rates lower than market rates, in exchange for effective shelf space.
8. Develop a co-branding campaign with Yamaha in which Blaze 7 and Castrol
Activ would be backed by a strong motorcycle brand.
28
8. SUMMARY OF ACTION PLAN
PROPOSED
ACTION METHODOLOGY TIMELINE
INVESTMENT
1. Promotional Schemes See Attachment 1: 1/10/2005 Rs. 35 Lakhs

•‘Pump it Up’ (Race to 1000 to
Litres) 31/3/2006
•‘Spin and Win’ (Wheel of
Fortune)
2. Magnatec Marketing •Nationwide advertising: 1/4/2005 Rs. 15 to 25

Campaign Print ads, TV Spots, to Lakhs
Hoardings 30/6/2006
•Corporate Dinner/Letters
to corporate heads
informing them of
Magnatec’s benefits
3. Build Dealer See Attachment 2 1/1/2006 Rs. 2.5 Lakhs

Relationships to
30/6/2006
4. MetroCab •TV Spot: CEO MetroCabs 1/6/2006 Rs. 2 Lakhs

Endorsement endorses PSO’s lubricants to
•Provision of free lubricants 30/8/2006
for one promotional period
of three months
29
THE FOLLOWING ADVERTISING CAMPAIGNS FOR MAGNATEC WERE DESIGNED BY BABAR MUSHTAQ
FOR PSO DURING HIS INTERNSHIP IN THE SUMMER OF 2005.
30
31
ATTACHMENT 1
‘PUMP IT UP’ -
RACE TO 1000 LITRES
___
LUBRICANTS SCHEME
32
OBJECTIVE
• To promote lubricant sales
• To promote Premier XL petrol sales
• To increase the number of PSO Loyalty Card holders
ESSENTIALS
PSO will launch a promotional scheme in which a figurative race will take place
where all the participants will try to achieve the filling of 1000 litres of Premier XL in
under three months.
This contest will be open to all PSO Loyalty Card holders, upon purchase of
lubricants. In order not to limit the target segment, another facility will be available, and
that is that lubricant buyers who do not have a loyalty card will have the opportunity to
fill out the Loyalty Card application form which will be attached to the promotional
pamphlet printed specifically for this event.
The pamphlet that will be attached to all lube packs during the promotional phase
will include a description of the event, all rules and regulations, as well as a prizes list.
Attached to the last page of the pamphlet will be an application form which will
serve as the entry into the competition. For potential loyalty card customers, a copy of
their NID card is required and must be submitted before last date of submission. After 15
to 20 days the card will be issued to all those participating individuals and will serve as
their entry into the competition.
A database will be compiled using the current operational database that the PSO
Cards division maintains. This database will sort on a daily basis all the fields required
for upkeep. Fields include:
1. Participating Loyalty Card Holders
2. Type of petrol filled (Premier XL only)
3. Car license number
4. Name and number of registered individual
5. Quantity in Litres
6. Date and time of transaction
33
Scoreboards will be set up at selected PSO outlets which will be updated on a

daily basis, and will show that day’s top ten leaders.
Leader-boards will also be available for viewing on the website www.psocl.com.
Another facility will be offered to participants, in which they can send a query
through an SMS, and then they will receive a reply message regarding their position on
the leader-board, as well as all other quantitative details regarding their progress in the
event; such as amount of petrol filled, approximation of kilometers traveled each week,
estimated lag behind the leader, and other similar data.
PRIZES AND CONDITIONS

Prize List
a. The first three participants to reach 100 litres first will choose between
three prizes (first winner will get fist preference of prize and so on):
i. Dinner for two at Lal Qila restaurant
ii. Voucher for Rs. 1000 at Laraib
iii. Warid sim card
b. On 200 litres;
i. Creative mp3 player
ii. Shopping coupon at EBCO for Rs. 5000
iii. Sony CD Player
c. On 300 litres;
i. Gift voucher at Jaffarjees for Rs. 7500
ii. Body Shop products
iii. One year subscription to SHE magazine
d. On 400 litres;
i. Sony Ericsson Mobile Phone
ii. Perfume/Cologne set
iii. Designer watch and sunglasses
34
e. On 500 litres;
i. Pentium 4 Desktop computer
ii. Sofa/Bed set from ChenOne
iii. Dining Room Tableware Set
f. On 600 litres;
i. LG Split AC Unit
ii. Sony Camcorder
iii. Trip to Murree for four people with accommodation for four days
and three nights
g. On 700 litres;
i. Rs. 20,000 shopping spree at Park Towers
ii. Round Trip for two to Dubai with hotel stay for two days and three
nights
iii. Free Makeover at Nabila’s
h. On 800 litres;
i. Home Theater System
ii. Car Accessories
iii. Tessori Gold Jewellery Set
i. On 900 litres;
i. Flat Screen LG TV
ii. Latest Toshiba Laptop
iii. Rolex
j. The first participant to reach 1000 litres;
i. Grand Prize: Mitsubishi Lancer 2005
Conditions
Certain measures and parameters have been developed in order to minimize the
risk of deviation on the part of dishonest participants who fill petrol in more than one car
with their card. These measures are necessary in order to maintain a healthy and fun
competitiveness to the contest, and serve as an assurance to other players of the fairness
involved.
35
Option 1
This promotional scheme will be monitored on a daily basis. Thus, by enforcing a
rule that will count only the single highest transaction of each participant per day, it
would enforce an accurate and fair checking system.
This system would include the following:
1. The risk that participants may cheat by filling petrol in more than one car
on their card in a day would be eradicated, as only their highest transaction
every day will be counted.
2. Attendants would not need to be held responsible or accountable on the
accuracy of transactions.
3. This would promote a fair atmosphere to the contest and would allow
participants to potentially see themselves as feasible winners.
4. This would allow participants the chance to develop strategies and involve
themselves in planning on how to effectively win each stage.
Option 2
Each participant will be issued two stickers; one sticker with their participation
number on it for their car, and another smaller identical sticker that will be pasted on their
loyalty card. These stickers will remain for the duration of the event, and for two weeks
following the close of the competition, the small sticker may be traded in or shown for a
discount on lubricants. During the duration of the event, all attendants will be responsible
for checking and matching the number on the card with the number on the car. If they do
not match, the attendant should swipe the loyalty card twice; this will identify double
entries on the database which would then be disqualified.
Although this system may not be enforced properly due to attendant negligence, it
will still serve as a form of assurance to the majority of participants that a proper
checking system is in place.
36
Alternative Prize Condition

In order to maintain the competitive drive in participants, an option is to offer the
nine runners up a Nokia mobile phone, upon reaching 1000 litres.
FINANCIALS
Cost
Fixed
Marketing Expense: Rs. 750,000
Prizes Cost: Rs. 1,874,0003
Total Fixed Cost: Rs. 2,624,000
Variable
Pamphlet Cost/participant: Rs. 10
Revenue
Profit Margin on Lube packs/participant: Rs. 80 (20 Rs. per litre x 4 litres)
Profit Margin on Premier XL/participant: Rs. 1397 (0.0954 x 49.025 x 3006)
Total estimated profit margin from this promotional scheme: Rs. 1477
Break-Even
Fixed Cost = 2,624,000 = 1789 participants
Selling Price7 – Variable Cost 1477 – 10
Estimated Profit
At 5000 participation level: Revenue – Variable cost – Fixed cost
7,385,000 – 50,000 – 2,624,000 = 4,711,000
At 10,000 participation level: Revenue – Variable cost – Fixed cost

14,770,000 – 100,000 – 2,624,000 = 12,046,000
3
See attached financial workings page.
4
Average profit margin per litre of Premier XL generated by PSO.
5
Price of one litre of Premier XL.
6
300 litres is the estimated amount of extra petrol consumption per participant during the three month
promotional quarter (about 25 litres extra per week).
7
Because we are calculating the break even number of participants for a promotional scheme, the Selling
Price is set as the total profit margins being made off of the scheme.
37

59,080,000 – 400,000 – 2,624,000 = 56,056,000
IMPLEMENTATION PLAN
In order to effectively implement this plan, a deal must be established with Dewan
Mushtaq Motors in which they will entirely sponsor the car or give a discounted price for
exchange of the marketing of their company throughout our promotional phase. The
advertising effort put forth would include mention of their company as co-sponsors of the
event in all the print mediums utilized.
Furthermore, an event will be held on the first Saturday following the close of the
contest, in which all of the winners will be invited in order to receive their prizes. The
event will be televised, and will culminate with the grand winner receiving his keys to his
new car. This event may be called “The Crowning of the King” or “The PSO
Coronation”.
PAMPHLET DESIGN
FRONT COVER CENTER SPREAD BACK COVER
38
‘SPIN AND WIN’ -

WHEEL OF FORTUNE
___
LUBRICANTS SCHEME
39
OBJECTIVE
• To promote lubricant sales.
ESSENTIALS
1. Spin and Win
A spinning game wheel will be set up at the top fifty lube selling stations in
Karachi. One spin of the wheel will be offered to all PSO customers upon purchase of a
lubricant pack. The wheel will be divided into eight slices, with each slice containing a
prize valued at around fifty rupees. The prizes will be instant giveaways.
The game will be called ‘Spin and Win’, and would be conducted on a daily basis
for the duration of three months.
Alternative Option
2. Wheel of Fortune
Upon purchasing a lubricant pack, the customer will receive a coupon. Upon the
collection of four or more coupons during the promotional phase, the customer will
qualify for the ‘Wheel of Fortune’, an event to be held at the Forum.
The ‘Wheel of Fortune’ event will basically be a televised event in which all
qualifiers will get the chance to win big prizes by partaking in different fun games. Three
wheels will be set up ranging in size and prize value, and qualification for the respective
wheels will depend on the participant’s performance on these games. The games include:
1. ‘Dart Mania’
2. ‘The Mean Spinner’
3. ‘Hole in One Ace’
Dart Mania
A dart board will set up where each participant will get five throws. There will be
ten different sections of the board, ranging from the outer rim which is one point all the
way to the bulls-eye which is ten points.
40
The Mean Spinner

Participants will have the opportunity to test their might by spinning one of the
wheels the hardest. Depending on number of spins (rotation of wheel) they will qualify
for a spin on one of the wheels of fortune. Each participant will get five attempts.
Hole in One Ace

A small mini golf hole will be set up in which participants will have to sink the
ball in the least number of tries. Each participant will get five attempts.
Scoring
After each game, the participants’ scores will be tallied, and the winner of each of
the three games will get to spin the Gold Wheel of Fortune. The next five highest scorers
in each game will qualify for a spin on the Silver Wheel of Fortune, and the rest will get a
spin on the Bronze Wheel of Fortune.

Prize List (Spin and Win)
Each slice on the wheel will contain one of the following prizes costing Rs. 50:
 Stuffed Toy
 Audio CD
 Cap
 1.5 litre Pepsi
 Cybernet: Internet Prepaid Card
 Photo Frame
 Chocolate Pack
 Gillette: Two disposable razors
Conditions
1. On purchase of one lubricant pack, only one spin may be taken by
participant.
2. Only one gift will be given per spin.
41
3. Gifts will not be exchangeable or refundable.
Prize List (Wheel of Fortune)

Bronze Wheel
• Warid sim card
• Bad Luck (Keychain)
• Jump to higher Wheel level
• Swatch watch
• 50 Rupees
Silver Wheel
• Nokia Phone 9210i with sim card
• Bad Luck (Drop to lower wheel level)
• 100 Rupees
• Sony CD Player
• Jump to higher wheel level
Gold Wheel
• Grand Prize Sony 60” TV
• Bad Luck (Drop to lower wheel level)
• 500 Rupees
• Return Tickets to Dubai
• Spin Again
42
FINANCIALS
‘Spin and Win’
PSO will receive a revenue of Rs. 80 per customer of lubricants through the ‘Spin
and Win’ scheme, and will need to spend Rs. 50 per prize gift for each customer. Thus
the cost of the prizes will be adjusted from the profit margin itself. The other costs such
as marketing expense and the manufacturing of the wheels would be included as fixed
costs.
Cost
Fixed
Marketing Expense: Rs. 250,000
Wheels Manufacturing Cost: Rs. 5000
Total Fixed Cost: Rs. 255,000
Variable
Prizes Cost per unit: Rs. 50
Revenue
Total profit margin per participant: Rs. 80
Break-Even
Fixed Cost = 255,000 = 8500 participants
Selling Price – Variable Cost 80 – 50
Estimated Profit
800,000 – 500,000 – 255,000 = Rs. 45,000
4,000,000 – 2,500,000 – 255,000 = Rs. 1,245,000
Considering that on average, around 10 to 20 customers buy lubricants from

PSO’s top 50 sites in Karachi, we can estimate potentially more than 50,000 customers in
43
the three months promotional phase. Thus, it would seem feasible to launch this event to
further promote the sale of lubricants.
The financial directive of the ‘Wheel of Fortune’ event would be interpreted in a

long-term strengthening of our lubricants customer base, and the high expense attached to
it would be recovered through a larger clientele in the future.
IMPLEMENTATION PLAN
‘Spin and Win’
 Wooden boards can be fashioned into spinning wheels that will serve as the
Wheel of Fortune.
 Prizes must be stocked at each participating station.
 PSO would need to invest in the advance purchase of at least 1500 gifts of
each type.
This would mean a total number of 12,000 gifts.
44
ATTACHMENT 2
‘THE HIGH ACHIEVERS’ –

DEALER INCENTIVES
___
DEALER RELATIONSHIP
MANAGEMENT STRATEGY
45
OBJECTIVE
• To build trust and garner respect of all channel members.
• To offer incentives and motivation to dealers so as to encourage the sales of
lubricants through building competition between themselves.
ESSENTIALS
At the beginning of the quarter, an announcement will be made to all PSO
lubricant dealers, that their sites will be evaluated on the basis of three parameters:
1. Highest sales of lubricants
2. Most well maintained station
3. Best customer service provided
These parameters will be judged through an evaluation by a team of PSO

appraisers, and an overall score will be awarded to each station.
The three highest scoring sites will be showcased as ‘high achievers’, and will be
rewarded with special awards and prizes8.
From the results garnered from the top ten sites, a list of key positive indicators
highlighting their success will be fashioned. This list will serve as a quarterly bulletin
that will then be distributed to all dealer sites.
At the end of the quarter, the evaluation team will once again appraise all the
dealer stations, and compare the scores achieved at the end of the quarter with those at
the beginning.
The station that shows the most progress since the last check will be classified as
‘Highest Climber’ and will be awarded an incentive prize that will in turn serve as a
motivational factor to all other dealer sites.
8
See Prizes Section
46

Prize List
Top three ‘high achievers’
First Place
1. Round Trip for two to Dubai with hotel stay for two days and three
nights.
2. 30% higher profit margin on lubricants for next quarter.
Second Place
1. LG Split AC Unit.
2. 20% higher profit margin on lubricants for next quarter.
Third Place
1. Sony CD and Cassette Player.
2. 10% higher profit margin lubricants for next quarter.
‘Highest Climber’
1. 6630 Nokia Phone with Warid sim card.
Conditions
At the end of the first quarter, those sites that receive prizes will not be eligible in
the next appraisal period. In the case that any or all of the same sites remain as ‘High
Achievers’, the three sites who score directly under them will be announced as that
quarter’s high achievers. The same applies to the ‘Highest Climber’ position holder.
Financials
The entire cost incurred by implementing this event would be done so in order to
motivate dealers to achieve higher sales figures.
• Extra Wages Cost: Rs. 25,0009
• Prizes Expense: Rs. 89,100
Total Expense: Rs. 114,100
9
Based on an estimated Rs. 5000 to be paid to each of the five employees in the appraisers’ team.
47
Total estimated income generated: Rs. 800,00010
Return on Investment: Rs. 800,000 = 7.01

Rs. 114,100
By investing in this scheme, we would be instigating dealers to achieve even

higher sales figures in the upcoming quarters. By awarding them prizes, we would be
showing that PSO acknowledges and rewards its dealers for their efforts, and in turn
dealers would be motivated to perform even better in the future. Thus this scheme’s
positive repercussions would be felt in the long-term increase of efforts on the dealers’
part in achieving higher sales of lubricants.
IMPLEMENTATION PLAN
For each area or city, a team comprised of capable PSO employees should be
formed. This team would be charged with the task of grading the different sites on the
afore-mentioned criteria. The team would include one employee from the customer
services department, one from lube sales, one from retail, one from brand, and one from
finance. This cross-functional team would allow an unbiased focus to the appraisal, with
each individual scoring based on his or her area of expertise.
10
This figure is based on an estimated extra sales volume of 100 litres of lubricants every quarter for a year
by a force of 100 better-motivated dealers.
48
ATTACHMENT 3
STANDARD OPERATING PROCEDURES

___
QUALITY OF SERVICE AT POINT OF SALE
49
STANDARD OPERATING PROCEDURES
I. Attendants
1. Attendants trained to fulfill all required tasks must undergo time trials to establish
efficiency levels.
2. An incentive bonus11 is on offer from the company to selected attendants upon
selling a certain number of lubricants and/or achieving the fastest completion time
during ‘Speedy’ trials.
a. This would create competition among attendants and would further
enhance the quality of service.
3. Selected attendants are to receive attractive new uniforms.
4. Potential attendants are to participate in training sessions.
II. Lubricants Display Canopy

1. The canopy is to be easily accessible.
2. It is to be fitted with luminescent bulbs so as to make it well-lit at night.
3. It is to be positioned so that potential customers filling fuel can see the canopy
from anywhere in the station.
4. Lubricants are to be situated based on categorization on either side of the canopy.
5. Monthly checks are to ensure the upkeep and proper maintenance of the canopy.
III. Rules and Regulations

1. Attendant must be wearing uniform jackets at all times.
2. The water used to clean the windows must be changed after every five ‘Speedy’
services.
3. The goody bag with added valuables (AV) must be offered to first time ‘Speedy’
customers. First timer bag includes branded Speedy keychain, tissue packet, and
candies.
4. Returning customers are to receive only AV perishables (tissue packet and
candies).
11
A bonus of Rs. 10 will be offered to attendants upon every three cars serviced/lube sold.
(Amount will be paid as a monthly stipend).
50
5. Customers must be informed of the best lubricant for their vehicle, as well as all
the service components and total time needed to complete the entire ‘Speedy’
service.
6. Mobile checks must be given to all customers upon first service.
7. From returning customers, the attendant must politely ask for the mobile check,
and should fill it out accordingly.
8. Customers should be informed of the discount available to Privilege Loyalty Card
holders.
9. Customers should be informed of lubricant price ranges and quality (in
accordance to their car specifications).
10. Customers must be offered mineral water if they are waiting in their car.
11. While service is taking place, customers must be offered the option of utilizing
the internet facility in the business center, or shopping in the Shop-Stop.
IV. Provisional Checking Policies

1. Random maintenance checks are to be facilitated every three months in order to
gauge the efficiency of the attendants, upkeep of the canopy, and enforcement of
regulations.
2. Checks are to be facilitated at the behest of the company, and the checker must
not be discernable as a representative of PSO.
3. The checker’s evaluation must be interpreted as constructive feedback, and action
must be taken accordingly.
51
V. Service Components for Speedy ‘Quick Oil Change’
Activity Duration Comments

(maximum minutes spent)
1.0 Engine Work

1.1 Oil change 7 One-time process
1.2 Cleaning of air filter 0.5 Inclusive process [1.1]
1.3 Cleaning of spark plugs 1 Inclusive process [1.1]
1.4 Radiator water check and/or filling 1 One-time process
2.0 Body Work
2.1 Tyre air pressure check/filling 4 One-time process
2.2 Cleaning of windows 4 One-time process
3.0 Interior Work
3.1 Spraying of Air Freshener 0.25 One-time process
3.2 Placing of ‘Mobile’ check 0.5 One-time process
3.3 Cleaning of ashtray 0.5 One-time process
3.4 Placing of Tissue Packet 0.25 One-time process
Total duration 9.5 (10) Two attendants14

12
Total duration 17.5 (20) One attendant
12
With two attendants, one would be working on the engine, while the other would be working on the body
and tires. Therefore, the two processes would be carried out simultaneously and this would minimize the
time duration for the entire service.
52

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STRATEGIC MARKETING AND PLANNING PAKISTAN STATE OIL

PSO’s extensive progress in such short time warranted it a proposal for

Business we are in:

Who are we serving?

What are we offering?

How are we achieving our goals?

Business we are not in:

2.1 Market Structure

PRICE CONSCIOUS IMPULSE

2.2 Competitive Sales Analysis

Shell 44,273,063.24 46,967,650.26 50,390,688.79 53,966,447.33

Caltex 19,436,954.59 22,365,547.74 23,437,529.67 25,698,308.25

Others 4,319,323.24 2,236,554.77 3,515,629.45 2,569,830.83

Total 107,983,081.07 111,827,738.71 117,187,648.35 128,491,541.26

Litres 30,000,000 PSO

Total Industry Sales

Sales Growth Over Four Year Period

2.3 Competitive Market Share Analysis

Market Share in Lubricants Category

PSO 37% 36% 34% 36%

Shell 41% 42% 43% 42%

Caltex 18% 20% 20% 20%

Total 100% 100% 100% 100%

2.4 Competitive Market Growth Model

2.5 Customer Buying Criteria

QUALITY AND PRICE PSO Shell Caltex

PSO’s Relative Performance Rating

QUESTION ITS COST KEEP IT UP

Worse Attendant’s Brand Image

Relative Relative cost

•PSO operates with a lowest cost operations policy.

• Castrol CR is PSO’s best performing lubricant.

3.2 Driving Forces

1. Global rise in petrol prices.

3.3 Key Success Factors

• PSO’s Sustainable Competitive Advantage is their association with Castrol.

3.4 SWOT Analysis

4. STRATEGIC MARKETING AND PLANNING

4.2 Mission Statement

4.3 Strategic Intent

4.4 Core Competencies

4.5 Business Objectives

1. Price sensitive market will not accept expensive Magnatec Advance.

6. OVERALL STRATEGIC DIRECTION

•To change customer perceptions regarding PSO’s product quality.

Furthermore, PSO launched a promotional scheme for lubricants in early 2004,

MARKETING AND PRODUCT PLAN

7.1 Segmentation Analysis

Lubricant Brand Income Bracket Vehicle Type Example of Vehicle

•PSO’s best selling lubricant is Castrol CR.

7.2 New Product Plan

Line Extension Brand Extension

Multi-Brands New Brand

Features of Magnatec Advance:

•These features need to be highlighted in a heavy marketing campaign in order to

7.3 Product Portfolio Management

Lubricant (Motor Oil) Category

Passenger Car Motor Oil Diesel Engine Oil Motorcycle Oil

•Havoline Formula •Delo Gold

High Market Share Low

Star Question Mark

Cash Cow Dog

Castrol GTX Castrol Magnatec

Product Line Categories

Strategic Marketing & Planning - Pakistan State Oil

Strategic Marketing & Planning - Pakistan State Oil