In the early 2000s Oil Marketing Companies OMCs (HPCL, BPCL and IOCL) introduced Branded Petrol which turned out to be lucrative and a new profit making petrol sector for the companies. Branded petrol such as BPCLs SPEED, IOCs Xtrapremium, and HPCLs POWER were introduced in the market to get an extra edge by positioning these brands in consumers mind .The price of branded petrol was kept slightly higher to get an extra edge over the regular petrol . Many factors affected buying decision of consumers for branded Petrol like spending capacity (Income), cost, benefits, availability, type of the vehicle, environmental concern, brand image, recommendation from others etc. The sector looks promising but the change in Government policy widened the gap of branded and regular petrol price which hurt the price sensitive Indian consumer.
How it all started?
Petrol existed as an undifferentiated commodity and no serious efforts were made in augmenting and differentiating this commodity .In the early decades marketing was basically restricted to distribution of petrol. In the name of marketing, petrol selling companies focused primarily on strengthening their distribution network in terms of adding more and more number of outlets (petrol pumps) to their network. Efforts made to increase their presence in geographical areas were termed as marketing. The Discontinuation of Administrative Price Mechanism (APM) in 2002 fuelled more private sector investment & injected air of competition in the sector. Various players in the market entered in the same segment which intensified the competition. Marketing of petrol then turned an undifferentiated commodity to the branded product. Companies under such circumstances introduced branded petrol to cater new services to their customers.
Marketing and Value Addition Activities on Petrol pumps
OMCs injected huge funds and endorsed sports personalities in promoting their 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. Opening of ATMs, Pizza outlets, Coffee houses, Pharmacy stores, Music stores, convenient food store are the value added activities which is linked with the Pumps. Companies also introduced loyalty cards where each transaction via debit or credit card earns reward points which could be redeemed later. Consumers started differentiating the petrol pump outlets with respect to facilities it offer and the consumer activity has now moved more with respect to just filling of petrol!
Product Differentiations among three brands
IOCs Xtrapremium is the largest selling branded petrol in India. Product aims to reduce the deposits at the port fuel injector, intake valve and controls combustion chamber deposits to maintain “like new” performance of the vehicle. Meanwhile BPCLs Speed contains unique deposit control additives that effectively remove harmful deposits from all fuel metering systems and components resulting in enhanced overall engine performance On the contrary HPCLs Power blended with specially imported additives provides comfort, removes deposit of intake valves and fuel injectors, gives more power and acceleration, reduces exhaust emissions, reduces engine knocking and prevents sticking of intake valves. The Close look will project that product resolves close to the functioning of engine and it is difficult for a layman to find the difference in the three products. It was interesting that product was viewed in three different projections by the companies.
Reasons for the low demand
Increase in the price of the branded petrol coupled with complexity in logistics played crucial part in the slowdown of its demand. In September, 2012 the government announced withdrawal of subsidy support for branded which, in effect, increased branded fuel prices considerably. Currently the differential is upwards of R10-15 per liter for branded petrol. The government had then cut excise duty on non-branded petrol by R5.50 to R9.28 per liter. But it did not cut the R15.96 a liter excise duty on branded petrol, which has led to more price difference between regular and premium segment. Price was always the issue with branded petrol but the gap has now widened in the two digit figure which really checked the loyalty of the consumer. Company has also realized the cost factor and has now reduced substantial amount of distribution of branded petrol in their outlets .The below diagram reflects the dip in sale of sale of branded petrol.
Volumes in kiloliters, Network in number of Fuel stations
Summing Up
Awareness level among all consumers about branded petrol is high and they are accepting that it enhance life and increase the performance level of the vehicle. But still the consumers are not completely accepting the benefits offered by it over cost differentiation with respect to regular petrol. Cost of Economics playing a crucial part in consumers mind over the purchase of branded petrol .Government move to cut subsidy on the branded petrol has taken heavy beating on the sale of this sector. The entire value added activities still blossom if we compare the sale of petrol as now consumer enjoys filling petrol coupled with all the facilities available in the outlet. It looks pretty disappointing that all the investments in the branded petrol have gone down the drain but this is the ugly truth for the price sensitive Indian market.
Siddhartha Bhatnagar: He is currently pursuing MBA in Energy and Infrastructure from School Of Petroleum Management, Pandit Deendayal Petroleum University Gandhinagar, Gujarat. He has completed B.Tech (I.T.) from Jaypee University of Information Technology, H.P. and was engaged with Infosys as Senior Systems Engineer. He believes India is energy scarce country and it needs personnel who can understand the complexity in this secto. A deep research mindset, voracious reading, and ability to simplify things will prove handy and that is where his contributions incline.