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BPMM6013
Marketing Management
Eco7 : Launching a New Motor Oil
Hafizullah Mohd Amin 822481
See Pei Hiam 822112
Zuhadi Sham...
Content
• Executive Summary
• Introduction
• Situational Analysis
– STP Analysis
– SWOT Analysis
– BCG Analysis
• Financia...
Executive Summary
• Consumer interest in “green” automobile technology, such as
hybrids or electric vehicles, had increase...
Introduction
1936
Founded in
United States
1980s
Focused on becoming the
preferred brand in the
DIFM channel
1995
Divested...
Initiators
DECISION MAKING UNIT
Consumer Behavior
A complex buying behavior backed
by extensive research
Dissonance reduci...
• Older
• Higher income
• Had more education
• Live in metropolitan area
Demographic
STP Analysis
Passenger Car Motor Oil
...
STP Analysis
PCMO Consumers
Price
Focused
45%
Quality
Focused
30%
PCMO Service Providers
32% Fast Lube
29% Car Dealer
12% ...
STP Analysis PCMO Service Providers
Car Dealer
Oil Change-plus
Mass merchandisers
and clubs
Repair shopFast Lube
The value...
Strengths Weaknesses
Opportunities Threats
W
T
S
O
SWOT Analysis
• Preferred brand in DIFM
channel since 1980s
• Well esta...
BCG Analysis
High
High
Low
Low
IndustryGrowthRate
Relative Market Share
? star
dog cash cow
7
Proposed Marketing Objective
• To start capturing market for environmentally
friendly motor oil
• To become the preferred ...
Marketing Mix Product
• Environmental friendly motor oil
• Eco7 is packaged part of
PCMO services
• Manufactured from
recy...
Marketing Mix Price
Conventional
$3.25
Full Synthetic
$7.00
Synthetic
Blend
$4.75
Price @ $5.25
• Too tight and would sque...
Marketing Mix Place
Car Dealer AvellinAutoIndependent DIFM
• Included fast lubes, oil change–
plus stores, and repair shop...
Marketing Mix Promotion
Aventage AveGreen
Market
Mission
Message
Measure
Money
Media
Independent DIFM Car dealer
To streng...
Eco7 : Test Marketing
Cost
Evo 7 : $2.01
Synthetic : $1.95
Conventional : $1.20
Campaign Slogan
You have the green light
E...
Financial Forecast – Price & Cost per unit
Conventional Synthetic Private Label Eco7 : Full Eco7 : Dis
DIFM Retail
Average...
Financial Forecast – Incremental Revenue & Gross Profit
for Independent DIFM
Eco7 : Full Eco7 : Dis
Eco7 vs Conventional p...
Financial Forecast – Incremental Revenue & Gross Profit
for AvellinAuto
Eco7 : Full Eco7 : Dis
Eco7 vs Conventional per un...
Financial Forecast – Incremental Revenue & Gross Profit
for Avellin (Annual) average retail price @ $6.75 (Exclusive)
Aven...
Financial Forecast – Incremental Revenue & Gross Profit
for Avellin (Annual) average retail price @ $6.75
Aventage Non - A...
Financial Forecast – Incremental Revenue & Gross Profit
for Avellin (Annual) average retail price @ $5.25
Aventage Non - A...
Marketing Controls
Type of Control Prime Responsibility Purpose of Control Approaches
i. Annual-plan Top management
Middle...
Conclusions
• Eco7 is a good environmentally friendly product.
• The price between $5.25 - $6.75 should be further explore...
References
• http://www.valvoline.com
• https://www.slideshare.net/jainprakhar1/apollo-v2
• https://www.epa.gov/greenvehic...
Thank you
-June 2017-
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Case Study : Eco7-Launching a New Motor Oil

MBA (2017)
Northern University of Malaysia
Subject : Marketing Management
Result : A

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Case Study : Eco7-Launching a New Motor Oil

  1. 1. BPMM6013 Marketing Management Eco7 : Launching a New Motor Oil Hafizullah Mohd Amin 822481 See Pei Hiam 822112 Zuhadi Shamsuddin 822416
  2. 2. Content • Executive Summary • Introduction • Situational Analysis – STP Analysis – SWOT Analysis – BCG Analysis • Financial Forecast • Controls • Conclusion • References • Proposed Marketing Objective • Proposed Marketing Mix Strategy & Tactics – Product – Price – Place – Promotion
  3. 3. Executive Summary • Consumer interest in “green” automobile technology, such as hybrids or electric vehicles, had increased steadily. • Most research and development focused on improving fuel efficiency, alternative energy sources, or reducing emissions. • It had generated significant buzz within the industry and initial sales penetration of channel partners had shown promise, but the green motor oil market was clearly in its infancy.
  4. 4. Introduction 1936 Founded in United States 1980s Focused on becoming the preferred brand in the DIFM channel 1995 Divested its petroleum division, exiting the lower margin business of refining and marketing fuels 2014 Operated 10 lubricant blending and packaging plants; 7 regional distribution centers 2005 Sluggish growth and Avellin start losing it’s market share 2012 Start developing a new motor oil manufactured from recycle materials 7
  5. 5. Initiators DECISION MAKING UNIT Consumer Behavior A complex buying behavior backed by extensive research Dissonance reducing buying behavior with inclination towards brands with high awareness HIGH INVOLVEMENT Less likely More likely Planned Purchase Urgent Replacement Information Gatherers Influencers Decision Makers Purchasers Users Need to change motor oil by the driver of the vehicles • Sudden requirement • Planned – Self • Planned – Schedule Service provider / friends / family / research by self / service engineer / firms owners Driver with/without advice from technical consultant Owner of vehicle / owner of firms Need to replace perceive by the driver of vehicle 1 2 3 4 5 6
  6. 6. • Older • Higher income • Had more education • Live in metropolitan area Demographic STP Analysis Passenger Car Motor Oil do-it-yourself (DIY) do-it-for-me (DIFM)Segmentation base Behavioral • Younger • Less affluent • Live in smaller towns or rural areas Psychographic • Favored trucks & sports utility vehicles • Know more about their vehicles • Traditionalist • Prefer foreign cars and luxury vehicles • Don’t worry much about the details • Professionals • Cost-conscious • Customer-loyalty • Quality-conscious • Rely on professionals advice
  7. 7. STP Analysis PCMO Consumers Price Focused 45% Quality Focused 30% PCMO Service Providers 32% Fast Lube 29% Car Dealer 12% Oil Change-plus 10% Mass merchandisers and clubs 9% Repair shop 8% Others ?
  8. 8. STP Analysis PCMO Service Providers Car Dealer Oil Change-plus Mass merchandisers and clubs Repair shopFast Lube The value proposition was the speed with which the oil change service could be completed—often in just thirty minutes. Car dealers focused on the sale or lease of vehicles and usually provided after- sales service, particularly as part of the vehicle warranty. The outlets were usually specialty stores focused primarily on a specific product or service, such as tires, mufflers, or brakes, rather than on motor oil. Mass merchandisers and clubs were large-format retail chains that sold clothing, household goods, food, and electronics. These were typically small, independent outlets offering auto mechanic services and sometimes tire changes or gasoline sales. Others
  9. 9. Strengths Weaknesses Opportunities Threats W T S O SWOT Analysis • Preferred brand in DIFM channel since 1980s • Well established 1936 • Sluggish growth since 2005 • Poor financial management • Lack of product innovation • Competitors offer lower price • Baud & Motoline expanded their fast-lube chain • Sevoline introduced SevoGreen • Ranked third among PCMO manufacturers • Green motor oil market in its infancy and expected to grow
  10. 10. BCG Analysis High High Low Low IndustryGrowthRate Relative Market Share ? star dog cash cow 7
  11. 11. Proposed Marketing Objective • To start capturing market for environmentally friendly motor oil • To become the preferred brand in DIFM channel * • To increase the overall market share by 2% *
  12. 12. Marketing Mix Product • Environmental friendly motor oil • Eco7 is packaged part of PCMO services • Manufactured from recycled materials • 65% of recycled oil • 45% less energy • Recycling the used oil potentially multiple times • Better driving performance
  13. 13. Marketing Mix Price Conventional $3.25 Full Synthetic $7.00 Synthetic Blend $4.75 Price @ $5.25 • Too tight and would squeeze margins • Devalue the innovation • Undermine efforts to market Eco7 as premium product • Easy to sell • 4.5 sales per day Price @ $6.75 • Nearly as expensive as full synthetic • Hard to sell independently • Require installer to understand the product well enough to explain to customer • Competitor is selling at $7.50 • 3.5 sales per day
  14. 14. Marketing Mix Place Car Dealer AvellinAutoIndependent DIFM • Included fast lubes, oil change– plus stores, and repair shops. • To build loyalty, the company promoted its Aventage program. • 6,000 independent fast-lube • 6,500 oil change-plus store and repair shop. • 4,400 were in Aventage program. • Car dealer that sells hybrid and electric cars. • They provided predetermined maintenance check. • One-stop shop for all maintenance • The oil change would be done in strict accordance with the manufacturer recommendation. • Avellin also sold via its own AvellinAuto stores. • AvellinAuto usually located near the distribution centre and away from independent DIFM • Margin is slightly higher • 436 stores open as of 2014 • Generated 7% of PCMO sales
  15. 15. Marketing Mix Promotion Aventage AveGreen Market Mission Message Measure Money Media Independent DIFM Car dealer To strengthen their brand awareness and improvement of perception To create new market segment and support green product Main focus is on communicating their vision of providing best value to customers in terms of quality, durability and value for money Main focus is emphasizing the significant green factor with no sacrifice in quality and value for money A mix of advertising, public relations, direct marketing and relationship marketing About 2-3% of net profit is used for promotion purposes Metrics used are response rate from firm owner/customer, loyalty rate, monthly sales report and customer satisfaction index
  16. 16. Eco7 : Test Marketing Cost Evo 7 : $2.01 Synthetic : $1.95 Conventional : $1.20 Campaign Slogan You have the green light Eye-catching green bottle and come with accompanying in-store display materials. Advertise on local television and news paper Price $5.25 and $6.75 Survey 1 What is your interest in a green motor oil? Survey 2 Assuming similar quality and performance, how likely are you to purchase a green motor oil if it is …. Survey 3 What information source will be most influential in your decision to purchase green motor oils? 3 months trails Outcome Concerns on pricing Installer advice influence purchaser Ignore the DIY segment Limit the encroachment of private label Starting to promote due to higher margin Alternative approach : available only in AvellinAuto and DIFM (Aventage program)
  17. 17. Financial Forecast – Price & Cost per unit Conventional Synthetic Private Label Eco7 : Full Eco7 : Dis DIFM Retail Average retail price, per quart $3.25 $7.00 $4.75 $6.75 $5.25 Average revenue, per oil change (5 quarts) Gross margin % $16.25 50% $35.00 60% $23.75 65% $33.75 55% $26.25 50% Wholesaler Average revenue, per oil change (5 quarts) Gross margin %, $8.13 12.5% $14.00 12.5% $8.31 15.0% $15.19 12.5% $13.13 10.0% Avellin Average revenue, per oil change (5 quarts) Gross margin % $7.11 15.6% $12.25 20.4% NA $13.29 24.4% $11.81 14.9% Cost, per oil change (5 quarts) $6.00 $9.75 NA $10.05 $10.05 Cost, per quart $1.20 $1.95 NA $2.01 $2.01
  18. 18. Financial Forecast – Incremental Revenue & Gross Profit for Independent DIFM Eco7 : Full Eco7 : Dis Eco7 vs Conventional per unit Monthly 105 unit Annual 1260 unit per change Monthly 135 unit Annual 1620 unit Revenue, Eco 7 Revenue, conventional Incremental revenue $33.75 $16.25 $17.50 $1,838.00 $22,050.00 $26.25 $16.25 $10.00 $1,350.00 $16.200.00 Gross profit, Eco7 Gross profit, conventional Incremental gross profit $18.56 $8.13 $10.44 $1,096.00 $13,151.00 $13.13 $8.13 $5.00 $675.00 $8,100.00 Eco7 vs Private Label Synthetic Revenue, Eco 7 Revenue, PL synthetic Incremental revenue $33.75 $23.75 $10.00 $1,050.00 $12,600.00 $26.25 $23.75 $2.50 $338.00 $4,050.00 Gross profit, Eco7 Gross profit, PL synthetic Incremental gross profit $18.56 $15.44 $3.03 $328.00 $3,938.00 $13.13 $15.44 ($2.31) ($312.00) ($3,746.00) Eco7 vs Full Synthetic Revenue, Eco 7 Revenue, Full synthetic Incremental revenue $33.75 $35.00 ($1.25) $26.25 $35.00 ($8.75) Gross profit per change, Eco7 Gross profit per change, Full synthetic Incremental gross profit $18.56 $21.00 ($2.44) $13.13 $21.00 ($7.88)
  19. 19. Financial Forecast – Incremental Revenue & Gross Profit for AvellinAuto Eco7 : Full Eco7 : Dis Eco7 vs Conventional per unit Monthly 150 unit Annual 1800 unit per change Monthly 180 unit Annual 2160 unit Revenue, Eco 7 Revenue, conventional Incremental revenue $33.75 $16.25 $17.50 $2,625.00 $31,500.00 $26.25 $16.25 $10.00 $1,800.00 $21,600.00 Gross profit, Eco7 Gross profit, conventional Incremental gross profit $18.56 $8.13 $10.44 $1,566.00 $18,788.00 $13.13 $8.13 $5.00 $900.00 $10,800.00 Eco7 vs Private Label Synthetic Revenue, Eco 7 Revenue, PL synthetic Incremental revenue $33.75 $23.75 $10.00 $1,500.00 $18,000.00 $26.25 $23.75 $2.50 $450.00 $5,400.00 Gross profit, Eco7 Gross profit, PL synthetic Incremental gross profit $18.56 $15.44 $3.03 $469.00 $5,625.00 $13.13 $15.44 ($2.31) ($416.00) ($4,995.00) Eco7 vs Full Synthetic Revenue, Eco 7 Revenue, Full synthetic Incremental revenue $33.75 $35.00 ($1.25) $26.25 $35.00 ($8.75) Gross profit per change, Eco7 Gross profit per change, Full synthetic Incremental gross profit $18.56 $21.00 ($2.44) $13.13 $21.00 ($7.88)
  20. 20. Financial Forecast – Incremental Revenue & Gross Profit for Avellin (Annual) average retail price @ $6.75 (Exclusive) Aventage Non - Aventage Others AvellinAuto Total Stores Penetration 4,400 95% NA NA 436 100% Eco7 penetration, total stores Eco7 upgrades per store, annual 4,180 1,260 436 1,800 Total Eco7 upgrades 5,266,800 784,800 Revenue per change, Eco 7 Revenue per change, conventional Incremental revenue per change $13.29 $7.11 $6.18 $13.29 $7.11 $6.18 Gross profit per change, Eco7 Gross profit per change, conventional Incremental gross profit per change $3.24 $1.11 $2.13 $3.24 $1.11 $2.13 Incremental revenue $32,547,178 $4,849,819 $37,396,997 Incremental gross profit $11,216,638 $1,671,379 $12,888,017
  21. 21. Financial Forecast – Incremental Revenue & Gross Profit for Avellin (Annual) average retail price @ $6.75 Aventage Non - Aventage Others AvellinAuto Total Stores Penetration 4,400 75% 1,600 45% 6,500 30% 436 100% Eco7 penetration, total stores Eco7 upgrades per store, annual 3,300 1,260 720 1,260 1,950 1,260 436 1,800 Total Eco7 upgrades 4,158,000 907,200 2,457,000 784,800 Revenue per change, Eco 7 Revenue per change, conventional Incremental revenue per change $13.29 $7.11 $6.18 $13.29 $7.11 $6.18 $13.29 $7.11 $6.18 $13.29 $7.11 $6.18 Gross profit per change, Eco7 Gross profit per change, conventional Incremental gross profit per change $3.24 $1.11 $2.13 $3.24 $1.11 $2.13 $3.24 $1.11 $2.13 $3.24 $1.11 $2.13 Incremental revenue $25,695,141 $5,606,213 $15,183,492 $4,849,819 $51,334,664 Incremental gross profit $8,855,241 $1,932,053 $5,232,642 $1,671,379 $17,691,314
  22. 22. Financial Forecast – Incremental Revenue & Gross Profit for Avellin (Annual) average retail price @ $5.25 Aventage Non - Aventage Others AvellinAuto Total Stores Penetration 4,400 90% 1,600 60% 6,500 40% 436 100% Eco7 penetration, total stores Eco7 upgrades per store, annual 3,960 1,620 960 1,620 2,600 1,620 436 2,160 Total Eco7 upgrades 6,415,200 1,555,200 4,212,000 941,760 Revenue per change, Eco 7 Revenue per change, conventional Incremental revenue per change $11.81 $7.11 $4.70 $11.81 $7.11 $4.70 $11.81 $7.11 $4.70 $11.81 $7.11 $4.70 Gross profit per change, Eco7 Gross profit per change, conventional Incremental gross profit per change $1.76 $1.11 $0.65 $1.76 $1.11 $0.65 $1.76 $1.11 $0.65 $1.76 $1.11 $0.65 Incremental revenue $30,171,488 $7,314,300 $19,809,563 $4,429,215 $61,724,565 Incremental gross profit $4,189,928 $1,015,740 $2,750,963 $615,087 $8,571,717
  23. 23. Marketing Controls Type of Control Prime Responsibility Purpose of Control Approaches i. Annual-plan Top management Middle management To examine whether the planned results are being achieved • Sales analysis • Market share analysis • Sales-to-expense ratios • Financial analysis • Market-based scorecard analysis ii. Profitability Marketing controller To examine where the company is making and losing money • product • territory • customer • segment • trade channel • order size iii. Efficiency Line and staff management Marketing controller To evaluate and improve the spending efficiency and impact of marketing expenditures • sales force • advertising • sales promotion • distribution iii. Strategic Top management Marketing auditor To examine whether the company is pursuing its best opportunities with respect to markets, products, and channels • Marketing effectiveness rating instrument • Marketing audit • Marketing excellence review • Company ethical and social responsibility review
  24. 24. Conclusions • Eco7 is a good environmentally friendly product. • The price between $5.25 - $6.75 should be further explored in order to identify the right price point. • Test marketing is a good approach to understand the customer needs and demand • Upgrades from conventional to Eco7 will have impact towards demand on conventional market, to some extend customer may choose product from competitor. • The penetration percentage provided is too high to achieve. • Avellin should consider collaboration with car dealer to capture new customer rather than relying on existing customer
  25. 25. References • http://www.valvoline.com • https://www.slideshare.net/jainprakhar1/apollo-v2 • https://www.epa.gov/greenvehicles/alternative-vehicle-fuels • http://www.pennzoil.com • https://www.essays24.com/Business/Eco-7-Launching-a-New-Motor-Oil/66837.html • Kotler, P. & Keller, K. (2012). Marketing Management. London, England: Pearson.
  26. 26. Thank you -June 2017-

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