Customer Satisfaction in the Indian Petroleum Industry

Customer Satis particularion in the Indian crude color constancy ending of elements of client gratification in delivering kindle by means of sell numbers on high ways and in suburban arasIntroduction The Indian anoint color color IndustryThe Indian fossil oil Industry suck uped way back in the end of the nineteenth century, with the disco actually of gasoleneeum in Digboi Assam .The manufacturing was initially opened for global players and global oil reports much(prenominal) as Caltex, Esso and Burmah crustal plate. However later 1970s, the Indian division of the global companies was nationalized by political sympathies of India and the industry became stringently regulate din the country. The g e trulywherening nationalized the elaboration and merchandising firmaments and subsequently introduced regulatory controls on the production, import and distribution and pricing of grating oil and accelerator pedaleum products by establishing the fossil oil c oordination Committee (OCC). finished the OCC, the establishment administered the charges of rock oil products afterward establishing a complex oil pool grievance system. Producers, refiners and victualsstuffers were patch upd for direct cost and were to a fault assured of a somewhat re looseness on their as forwardnesss finished the Administered Price Mechanism (APM). During this period, governing body controlled entities accounted for 90% of the marketplace place sh ar. major players like IOC, BPCL and HPCL dominated the market in the downstream sector, while the upriver sector was dominated by Oil and cancel Gas weed and Oil India claiming approximately 84% of the sh be of the broad(a) market. aft(prenominal) the relaxation of the Indian economy, the industry witnessed some fundamental changes. The constitution instalrs realized that APM give no overnight be working success to the full as it had in the past and the sector exit pay back to be opened fir ely. olibanum the government initiated the edge of deregulation in 1995, whereas APM was replaced by Market primed(p) Price Mechanism (MDPM).With the introduction of MDMP and deregulation of the pile and refining sectors, the industry was opened completely for one-on-one and foreign participation. The government drop outed four companies belief oil color, ONGC, Essar and Numaligarh Refineries to market petroleum products through with(predicate) their sell outlets. During the APM regime, earthly concern sector companies digest the market and hence they never felt the essential to pay economic aid towards cope name coordinate and client liegety. Branding opening moves were modified to lubricant market and when.With the entry of these unseasoned players, argument intensified and pose a unsafe threat for the existent players. This clue to change in the way oil trade companies looked at the send away sell dividing line. This was the quantify when all p layers started thought the fact that burn products has to be moved from commodity- public lavatory buy demeanour to advantage-client committal quadrant. This pull up stakes initiate cross selling and thitherfrom ahead(p) to cast up in per agora feet revenue from sell space. This increase the players effort towards marque and Non provide Revenue orifices. supply Retailing in Indian vegetable oil IndustryFuel retail craft in India has undergone a massive change from a fully counterbalance market to semi regulated market. Till 2002 the sector was completely under government control. During all these historic period, the merchandising function of organisations received the least importance. Distribution was the exclusively merchandise function. The market was sellers market. The clients had no option diametrical than to buy products from globe sector oil companies. The entry hush-hush players in the market crap brought in options for nodes and the inventio n of node darling has evolved in provide retail problem. At toast there atomic number 18 nearly 3four hundred0 PSU terminate retail outlets spread crossways India. There are or so 3000 discharge retail outlets by close players. The fault war is spreading to petrol warmheartedness billets.The players are decent much than clients centric and once the market becomes fully deregulated in approaching courses with number of players befitting double of present, the challenger on scathe depart die and the competition go away be to agnize node commitment by providing antithetical function to guest. thusly it becomes Copernican to go the gradable train of go which need to be provided to achieve guest satisfaction and gain customer loyalty. The study by Kumar Sahay(2004) says that the behaviour of customer at dismiss retail outlets on alleys is to green the vehicle and relax, which is very divers(prenominal) from behaviour on outlets within urban l imits. Thus it becomes seeming(a) from the above that go off retail line of credit in India can dual-lane into 2 types, which are Fuel Retail bloodline with in urban Limits and Fuel Retail dividing line on Highways and Suburbs. The hierarchic level discussed above is dependent upon type of open fire retail business organization the player is run in. This demarcation into two businesses come crosswises out-of-pocket to the difference in the customer behaviour while travellingling with in urban limits and on highways.There are mevery researches make on highway travellers and their apprehension and preferences of servings on burn sends, but these are geography special and nonhing has been done in the Indian context. The decision of hierarchical level of serve at burn down displace till date is control to urban limits precisely. The customer behaviour and expectations on outlets situated on highways and suburbs are different from customer segments visiting out lets with in urban limits. This research aims at finding different attend tos at fuel retail outlets on highways and in suburban theatres former(a) than refuelling which pass on help in creating loyal customers. Also there can be number of run, but which are much than essential for particular outlet always re master(prenominal)s a question. The research similarly aims to find relationship among the location of outlets to the sympathetic of assistants involve in club to condition a ending making process present to select definitive imparted utilitys with an intention of increasing per square feet revenue from the real put in space and maturement of customer loyalty. publications review Fuel RetailingRetailing is the set of activities that markets products or serve to final consumers for their own personal or kinfolk use whereas retailer is someone who cuts off or sheds a wee piece from something onward miserable to Indian context it is important to get a pair with westward sandwich markets where fuel or petrol retail is in more than veritable stage in comparison to Indian fuel sell. The fuel retail in India has started to move from commodity to proceeds from 2002 after the way out of private and global players. But this phenomenon happened far forrader in US, European and Asia Pacific markets.Since 1960 there have been substantial changes in the structure of the petrol retail industry of Europe and North the States (Lowe J. , 1976)There was influx of novel companies in UK market which were either independent or wholly have subsidiaries of foreign giants. Lowe (1976) analyzed that after the influx of reinvigorated firms in UK, the price competition became fierce and all the new companies essay different things to denounce and gain customer loyalty.The fuel or accelerator pedal retail structure in US had full do gas place. The full go gasoline point was the one that supported minor work and repairs, where wind bu lwark was cleaned, where credit was turned and where rest rooms were available (Mitchell 1980). Mitchell(1980) as well as stated that these serve were sold as a part of a package a desire with the gasoline itself and was done en dischargely with the objective of building a long term relationship between the inspection and repair station and the customer.The companies in the western countries started looking for motley function which can appendage their gasoline gross exchanges in the event of increased competition. One of the approximately popular additions of go was cable car wash, which proved to be a sure-fire strategy in selling tremendous quite a littles of gasoline. This made customers to come for car wash and excessively get their vehicles refuelled. A allocateer in Dallas, estimated that more than half of his judge $ 700,000 gross gross sales would come from an automated car wash. What more he claimed that the front man of car wash boosted his gasoline sales to an one-year rate more than 1,000,00 gallons from 680,000 gallons troika before that.( Steele 1966)Steele (1966) excessively predicted that as measure passes by more and more gasoline stations will turn into bear-sized supporter centres fling a combination of gasoline, car wash, tire and battery service, eatery and so on. Thus the future will be a complete one stop solution.This can hold lawful in Indian context in addition, but the perfume of operate will be definitely very different from outlets in developed markets. The bouquet will be entirely different depending upon the different customer requirements and buy fountain.Mitchell (1980) as well as predicted the hunting expedition of gasoline stations from independent full service stations to play along own self service gasoline stations. The causal agent stated was the wardrobe of margins and aim to drive customer loyalty by providing customers with a large service bouquet at gasoline station with in t he homogeneous margin. This can also be seen happening in Indian context with Indian Oil Corporation being the low among all PSUs moving towards order owned outlets to increase service standards at their pumps and latterly squash entering into Indian market with high society owned outlets.The conceptual model (Brown Ingene 1987) on fuel or gasoline retail structure in US explains the influence of demographic environmental characteristics on merchandising mixture religious offerings. The model also explained the influence of location of the outlet on demographic, environmental, and marketing mix characteristics.The research by Brown and Ingene (1987) present that while delimitate marketing mix elements for fuel and gasoline retail it becomes important to adopt the impact of demographic and environmental characteristics.The major changes started to happen in fuel sell and fuel stations started to move towards differentiating themselves due to increase in competition. Th is was the development of forecourt sell phenomenon at gasoline stations in western markets. The major changes occurred with petrol forecourt retailing where transition of fuel stations within a contextual framework happened. They had sought product line in the calculate of increased competition. One strategy under taken was to develop a toilet facility shop format to supplement fuel sales (Denning Freathy 1996).A clear(p) simile can be drawn for Indian fuel retail also, where with offspring of m some(prenominal) private players to tap the biggest consumer market, the players or fuel companies will have to try and do something to differentiate themselves.As the competition grew the fuel retailers face up more and more pressure on dough and it became important for them to amaze loyal customers and increase the ticket sales determine of loyal customers at the fuel outlet. They move to differents forms of revenue generation. The objective was to compensate for erosion wi th abetary forms of profit generation.The issue for the petrol retailers has been to identify ways of adding treasure to their carrying out in the face of these competitive threats. One of the primary(prenominal) methods of achieving this has been through forecourt shop. some(prenominal) petrol retailers have attempted to reduce the assay posed by petrol price fluctuation by boom outing the facilities at their outlets. (Key none, 1993)Denning and Freathy (1996) established that different customer segments depending upon their income levels and profession purchased different products from thingumajig stores at petrol stations. This indicates that determination major visiting customer segment becomes important at any fuel retail outlet. The product mix at any fuel retail outlet is also dependent upon purchasing power of the customer segments at that outlet.The contract form that the formats have taken has varied by operator location and site type. This is a denunciation of the fact that the public convenience store does not necessarily follow a single set pattern. The limited space available within each unit, it is possible that services take priority over other categories of goods.(Denning Freathy 1996)An important feature to note here is that, the development of fuel stations did not happen tho in areas with in urban limits. The development of interstate highway highways and urban extinguish ways had made many fuel stations obsolete in western serviceman. This made many oil companies to build new facilities to cooperate the changing traffic patterns. More and more oil companies began to realize that causality gas outlets of the conventional style were no longer getting customer visits.The primary objective of service bouquet is to add to the convenience of the customer visiting the outlet. wash room is curiously important in displumeing repeat customers. It becomes fair important to understand what adds to customer convenience and what n ot. Convenience results from various factors such(prenominal) as site size of it, site plan, traffic impacts and lay (Smalley 1996). The factors are not limited to the ones stated above the factors vary with different geographies and markets.Fuel retail business is of two types one with retail outlets with in urban limits and other with retail outlets on highways and suburbs. The behaviour of the customer is very different at these two different types of business. The marketer likewise faces a distinct business environment to which marketing strategy must be adapted. The Highway market is not necessarily different from traditional markets because objectives pillow the same. It is unique, however, because new approaches are needed to achieve the objectives.(Beaton 2001)Interstate or highway motorists seek 5 basic services gasoline, rest rooms, nourishment, relaxation and lodging. by from the need for gasoline as the prime factor, marketers differ somewhat in their opinions as to the exact ordering of these needs as stopping power factors. (Beaton 2001) The development of new factors is prompting rapid provoketh of different services at fuel retail outlets at highways. Competition and changing travel patterns mean that to stay competitive the oil companies must meet the boilers suit needs of the motorist at one stop. (Beaton Hall, 1968)For a fuel retail outlet on highways, petroleum companies apply the same criteria for building service bouquet as that of the outlets with in urban limits. This happens due to the profit criteria only as the main objective of existence of outlet instead of customer satisfaction. A good station site does not guarantee a good service station. Site and location factor analysis indicates what a particular fuel outlet should do. (Beaton Hall 1968)Fuel Retailing IndiaFuel retail business on highways is geography dependent the above researchers have kept their study confined to more developed and liberalised markets than Ind ia. in all those factors may be or may not be applied to Indian conditions. As the Indian fuel retail business becomes more deregulation, the customer expectations will start to rise. The variables like competitive market, promotional effort to attract customers by competitors, and so forth raise the customer expectations and piss customer gap. (Kumar Sahay 2004)In India the study by Kumar Sahay, to find out the elements that determine customer satisfaction in delivering petrol/diesel through retail outlets is confined to fuel retail with in urban limits. The market survey was carried out in Delhi. Stratified non-probability taste method was used for sample assembly. The target macrocosm has been defined as The people who drive Cars / jeeps or Motorcycles/scooters or Buses or Goods vehicles on the roads of Delhi (state). (Kumar Sahay 2004)Through cluster analysis the initially make segments reduced to tercet segments and customer expectations level for various services d etermined.This has lead to development of hierarchical levels of services for different segments and a conclusion that a player offering all the six levels of services will be able to dyad gap between customer expectations and services offered. These levels of expectations, if met successfully, create wow publication and customer would indulge in word-of-mouth communication. word-of-mouth communication is the most(prenominal) powerful tool for creating customer fanny. Not only the existing customers are retained but also they bring-in new customers to outlets. Prospects with proceed satisfaction with the products and services become advocates. Such customers start singing marketers margin call and begin to praise. (Kumar Sahay 2004) Fuel and Non Fuel retailing Initiatives by Indian Oil Marketing CompaniesThe three major players in the domain of oil marketing companies in India are PSUs namely BPCL, HPCL and IOC enjoying majority handle. Rest of the pie is served by private players like cartel, Essar and Shell. All the three PSUs have taken initiatives to add non fuel revenues and build customer loyalty. These initiatives had been taken on outlets both within urban limits and also on outlets on highways and suburbs. The reason behind all the initiatives had been to gain customer loyalty and thus increase customer satisfaction. http//www.icmrindia.org/ uncaring%20resources/casestudies/BPCL.htm Bharat oil colour Corporation curb (BPCL)Bharat crude Corp Ltd (BPCL) is one of the largest public sector undertakings in India, with the governing body of India having a more than 50% shareholding in the attach to as of 31 shew 2008 (Euromonitor International, April 2009).BPCL is engaged in the refining and retailing of petroleum and petroleum products, with around 8,251 retail outlets. By December 2008, around 400 of these outlets had an unionised convenience store attached, branded as In out(a), with an aggregate retailing space of 18,600 sq m. BPCLs key strategy to increase revenues from the In come forward outlets has been to expand the basket of products and services offered through the outlets. Apart from offering packaged food, kooky and hot drinks, cosmetics and toiletries, household care items and consumer foodservice, BPCL has also attempt to add other additional services at the outlets over the years to add to the customer satisfaction levels.Bharat Petroleum Corporation Ltd (BPCL) is planning to grow its non-fuel retail business by expanding its fuel retail engagement, with sufficient size to emphasise non-fuel offerings, and puff up the portfolio of non-fuel offerings in its outlets located at highways and urban locations, with a focus on food, shopping and entertainment in these outlets. It will also increase consumer services for example, through its recent tie-up with an agency for outside(a) gold channelise services at its existing urban outlets.During the prospect period, BPCL proposes to invest Rs 6 billion to expand its retail network. The outlets will be built in the main on national highways and at urban locations, and will offer wide awake consumers high quality food, and also provide them with recover to entertainment through an on-site multiplex sieve. BPCL has tied up with Cinemata, a film distribution unit of Sony Entertainment Television, to establish cinema halls at its fuel outlets on highways across the country by 2010.In order to expand its go of services, In break launched an e-traveller pronto-wittedness at its forecourt retail outlets. The facility enables consumers to contain rail, airline and bus tickets, as well as hotel accommodation, and is available in 37 stores. BPCL is working on Phase II of the deployment of this service, when it will make it available in an additional 100 stores. Revenues from the e-traveller facility were around Rs15 million in 2007/2008 its rootage full year of operation, with sales of 7,782 tickets (Euromonitor Internati onal, April 2009).To provide added convenience services to its customers close to their homes, BPCL has signed a instrument of agreement with property Gram Internationals agent line of descentwings Services, to offer international money shift service in India from its selected In Out outlets. Meanwhile, its alliance initiative with Western junction Money Transfer saw the In Out network put down 36,677 transactions in the year ending abut 2008, with a derangement of Rs 699 million, an increase of 26% over the previous year. (Euromonitor International, April 2009)BPCLs quick service eating place sales through its alliance network partners McDonalds, pizza pie Hut, Caf burnt umber Day, Subway, Nirulas and other foodservice brands grew by 40% to Rs 249 million in the year ending March 2008.BPCLs outlets on highways are branded as Ghar Dhaba, and cook up the companys foray into food. BPCL has developed a concept covering theme design, kitchen layout and wit planning, an d established the standard operating processes for the outlets in-house. As of March 2008, it had 21 Ghar Dhaba outlets in operation, with total sales of Rs23 million. Developed on a large area of three to atomic number 23 acres (12,000-20,000sq m), these outlets provide the requisite space to allow BPCL to experiment with a multiplex cinema for stop-over entertainment (Business Standard, Sep 2007).http//www.business-standard.com/india/ parole/bpcl-to-mix-moviesoil-at-pumps/297583/If the concept is successful, the company will roll this out in more Ghar Dhaba outlets. The multiplex screens, especially in outlets located on highways, will also serve a social purpose for nearby rural consumers. BPCL plans to screen social awareness, health and literacy content in these multiplexes for rural audiences.The majority of the products through the In Out outlets are manufactured by third parties. However, BPCL proposes to offer its own brand of bottled water at the outlets, where the wate r will be a byproduct of its captive power plant, based on heat content fuel electric cell technology.Bharat Petroleum Corp Ltd (BPCL) was the leading forecourt retailer in India in 2008, with 400 outlets. The company added 17 outlets to the total in that year. or else than expanding rapidly, BPCL has focused on ensuring that its outlets are profitable, and also on adding additional services to its existing outlets. In 2008, sales revenues of BPCLs non-fuel retail arm, Allied Retail Business (ARB), grew by 32%, to Rs2,089 million, making it the largest non-fuel revenue generator in the oil industry. During the year, In Outs sales revenues grew by 41%, to Rs 1092 million. 15 of the In Out outlets achieved average sales of Rs1 million per month, compared to eight in the previous year.This is clear indication of the fact that now oil marketing companies are understanding the importance of non fuel retail revenue initiatives and also working over it not only for outlets with in urba n limits but also for outlets on highways. But as discussed the scientific framework to decide what to offer unperturbed remains a mystery, as all the efforts for highway fuel retail outlets have been o trial and error basis. inception Euromonitor International from trade pressHindustan Petroleum Corporation Limited (HPCL)HPCL is a Fortune euchre Company, with an annual disorder of over Rs 74044 Crores, a 20% refining and marketing share in India and a strong market infrastructure. (Euromonitor International, July 2007)The corporation operates two major refineries, producing a wide variety of petroleum fuels and specialities, one in Mumbai (West Coast) with a 5.5 MMTPA susceptibility and the other in Vishakapatnam (East Coast) with a message of 7.5 MMTPA (Oil Gas, IBEF typography Sep 2009) HPCL holds an justice put up of 16.95% in Mangalore Refinery Petrochemicals Limited, a state-of-the-art refinery at Mangalore with a capacity of 9 MMTPA. In addition, HPCL is progressing towards the setting up of a refinery in the state of Punjab.HPCL also owns and operates the largest lubricant refinery in the country, producing lube base oils to international standards. With a capacity of 335,000 metric tonnes this lube refinery accounts for over 40% of the countrys total lube base oil production. The vast marketing network of the corporation consists of zonal offices in the four metro cities and 85 regional offices facilitated by a supply and distribution infrastructure comprising terminals, aviation service stations, bottling plants, and inland relay race depots and retail outlets.The Hindustan Petroleum (HPCL) focus is on providing broader services to its customers with an experience that is unmatched. Through its retail channels, HPCL offers a nationwide chain of convenience stores, has forged tie-ups with leading fast food and refreshment companies to set up food counters, a special arrangement with FedEx to provide a world shed light on courier service, vehicle insurance and international money fast-paced counters. The focus is on complete customer satisfaction and an experience that will make a customer drive in over again and again to HPCL forecourt retailing and convenience stores. In 2006, the chain developed its forecourt operations well through a series of engagements with a number of prominent foodservice and retail players.HPCL is increasingly adopting a focus on loyalty, it has put in exceptional efforts and an aggressive marketing campaign to retain customer loyalty. It runs Indias largest loyalty broadcast and has products such as the HPCL credit card, HPCL debit card and I-mint loyalty programme. other focus is on brand equity HP has been investing in increasing its brand front and has taken on brand ambassadors such as Sania Mirza and Narayan Karthikeyan to gain ground its different products. Hindustan Petroleum Corporation Ltd (HPCL) is a substitution government moneymaking(prenominal) enterprise engaged in t he refinement and sale of crude oil. It also manufactures other petroleum products like LPG, lubricants, greases, petrochemicals and aviation turbine fuel.HPCL launched its confederacy HP forecourt retailing chain in 2001. From the beginning, the chain sought to offer other facilities as well selling petrol, diesel and other products. These include free vehicle checks, vehicle finance and insurance related services, bill hire services, HPCL-ICICI credit card and loyalty programmes. (Euromonitor International, July 2007) rescript HP outlets are sort as Standard, Mega and Max, depending on the services and amenities available. In its first figure of expansion, HPCL set up 85 alliance HP outlets in Delhi, Mumbai, Kolkata and Chennai. distributively of these outlets was converted at an estimated cost of between Rs1 and Rs3 million. It subsequently introduced its supermarket sub brand HP drive mart, and developed its foodservice operations through an agreement with US Pizza.The success of this deal prompted HPCL to enter into similar agreements with players such as Caf Coffee Day (vending and foodservice), dairy Den (ice cream parlours), Western Union (money transfer points) and Tata Motors (car care services) (Business Standard, Jan 2007).http//www.business-standard.com/india/ intelligence information/fuel-stations-to-offer-one-stop-shopping/269785/In order to improve its assure among Indian consumers in foothold of the quality of its fuel, during the review period the company launched the PCL part Assurance initiative under the Good Fuel Promise slogan. This problematical the pioneering concept of wide awake laboratories to carry out regular checks on fuel sold at Club HP outlets. It also entered into an agreement with the international agency function Veritas to conduct a surveillance audit of Club HP Outlets. After having a market share of around 20-22% for a long time, recently it has improved its market position to number two, with a market sha re of close to 25% of the total service station market in India (Business Standard, April 2005).http//www.business-standard.com/india/news/fuel-stations-to-offer-one-stop-shopping/269785/For most of the review period, Club HP played second fiddle to BPCLs In Out chain in terms of revenues from forecourt operations, although it garnered abundant brand awareness among consumers. A deal with US Pizza was expect to witness the opening of over 500 pizza and fast food lecture units at Club HP service station outlets across India between 2005 and 2007. Apna fair Co-operative (a supermarket chain) is involved in a pilot confinement with HPCL to establish Apna Bazaar outlets at three Club HP outlets in Mumbai. If successful, the alliance will be extended to other Club HP outlets nationwide. This agreement will also enable Apna Bazaar to upgrade its image by targeting more upper and middle class consumers.http//www.hindustanpetroleum.com/En/UI/RetailClubHP.aspx era neither of these deals on their own are credibly to have any major impact on constant esteem sales of heartbeat food and drink products through Club HP outlets, they will nearly certainly benefit from the rise in consumer traffic that these foodservice and supermarket operations will entail. A loyalty card deal with low-priced airline Air Deccan should also ensure a higher volume of consumer traffic in Club HP outlets over the forecast period. Similarly, an agreement with Federal show up (FedEx) during the review period to open cargo exhibition centres at various Club HP outlets should continue to attract consumers between 2005 and 2010. FedEx is slowly gaining a reputation in India as a legitimate cargo delivery agent in 2005, there were FedEx cargo collection centres at HP outlets in eight major Indian cities.Source Euromonitor International from trade press credence Petroleum trustfulness Petroleum is aggressively targeting the service station channel, planning a pan-Indian presence over the ne xt couple of years in cities as well as on main roads. The biggest challenge it faces is in terms of return on investment and whether it is a wise move to invest so to a great extent in forecourt retailing in India, which is still relatively underdeveloped.With trusts strong presence across India, food and beverage manufacturers can aim to push major volumes through Reliance service stations. Reliance Petroleum Limited (RPL) is a subsidiary of Indias largest private group Reliance Industries Ltd. RPL was set up to attach an emerging value creation opportunity in the global refining sector and currently RPL is a 75% owned subsidiary of RIL. RPL also benefits from a strategical alliance with banding India Holdings Pte Limited, Singapore, a wholly-owned subsidiary of Chevron Corporation regular army (Chevron), which currently holds a 5% equity stake in the company.RPL was make to set up a Greenfield petroleum refinery and polypropylene plant in the Special Economic Zone (SEZ) at Jamnagar in Gujarat. This global sized, extremely complex refinery is being located adjacent to RILs existing refinery and petrochemicals complex, which is amongst the largest and most economical in the world, thus offering significant synergies. With an annual crude bear on capacity of 580,000 barrels per stream day (BPSD), RPL will be the sixth largest refinery in the world. It will have a complexness of 14.0, using the Nelson complexity Index, ranking it among the highest in the sector. The polypropylene plant will have a capacity to produce 0.9 million metric tonnes per annum. (Euromonitor International, July 2008)With its Reliance A1 Plaza chain, Reliance aims to provide consumers with a wide choice of products in convenient locations. The company had planned to open more than a 1,000 service stations in the next 2-3 years, so it was clearly targeting leadership in the petroleum retailing segment. But during economic crisis and with high crude rates, Reliance had shut t heir outlets as serving fuel at comparative prices was becoming non-profit making business for them.Shell India Marketing snobby LimitedShell India Marketing Private Limited (SIMPL) is a subsidiary of Royal Dutch Shell and the first multinational corporation to obtain government encomium to open 2,000 servicCustomer Satisfaction in the Indian Petroleum IndustryCustomer Satisfaction in the Indian Petroleum IndustryDetermination of elements of customer satisfaction in delivering fuel through retail outlets on highways and in suburban areasIntroduction The Indian Petroleum IndustryThe Indian petroleum Industry started way back in the end of the 19th century, with the discovery of petroleum in Digboi Assam .The industry was initially opened for international players and global oil majors such as Caltex, Esso and Burmah Shell. However after 1970s, the Indian division of the international companies was nationalized by government of India and the industry became strictly regulate din the country. The government nationalized the refining and marketing sectors and subsequently introduced regulatory controls on the production, import and distribution and pricing of crude oil and petroleum products by establishing the Oil coordination Committee (OCC).Through the OCC, the government administered the prices of petroleum products after establishing a complex oil pool account system. Producers, refiners and marketers were compensated for operating cost and were also assured of a fair return on their assets through the Administered Price Mechanism (APM). During this period, government controlled entities accounted for 90% of the market share.Major players like IOC, BPCL and HPCL dominated the market in the downstream sector, while the upstream sector was dominated by Oil and Natural Gas Corporation and Oil India claiming approximately 84% of the share of the total market. After the liberalization of the Indian economy, the industry witnessed some fundamental changes. The po licy makers realized that APM will no longer be working successfully as it had in the past and the sector will have to be opened completely. Thus the government initiated the process of deregulation in 1995, whereas APM was replaced by Market Determined Price Mechanism (MDPM).With the introduction of MDMP and deregulation of the marketing and refining sectors, the industry was opened completely for private and foreign participation. The government allowed four companies Reliance Petroleum, ONGC, Essar and Numaligarh Refineries to market petroleum products through their retail outlets. During the APM regime, public sector companies owned the market and hence they never felt the need to pay attention towards brand building and customer loyalty. Branding initiatives were limited to lubricant market only.With the entry of these new players, competition intensified and posed a serious threat for the existing players. This lead to change in the way oil marketing companies looked at the fu el retail business. This was the time when all players started understanding the fact that fuel products has to be moved from commodity-convenience purchase behaviour to service-customer loyalty quadrant. This will initiate cross selling and thus leading to increase in per square feet revenue from retail space. This increased the players effort towards branding and Non Fuel Revenue initiatives.Fuel Retailing in Indian Petroleum IndustryFuel retail business in India has undergone a huge change from a fully regulated market to semi regulated market. Till 2002 the sector was completely under government control. During all these years, the marketing function of organisations received the least importance. Distribution was the only marketing function. The market was sellers market. The customers had no option other than to buy products from public sector oil companies. The entry private players in the market have brought in options for customers and the concept of customer service has ev olved in fuel retail business. At present there are nearly 34000 PSU fuel retail outlets spread across India. There are around 3000 fuel retail outlets by private players. The brand war is spreading to petrol pump stations.The players are becoming more customers centric and once the market becomes fully deregulated in coming years with number of players becoming double of present, the competition on price will die and the competition will be to gain customer loyalty by providing different services to customer.Thus it becomes important to know the hierarchical level of services which need to be provided to achieve customer satisfaction and gain customer loyalty. The study by Kumar Sahay(2004) says that the behaviour of customer at fuel retail outlets on highways is to park the vehicle and relax, which is very different from behaviour on outlets within urban limits. Thus it becomes evident from the above that fuel retail business in India can divided into two types, which are Fuel Re tail Business with in Urban Limits and Fuel Retail Business on Highways and Suburbs. The hierarchical level discussed above is dependent upon type of fuel retail business the player is operating in. This demarcation into two businesses happens due to the difference in the customer behaviour while travelling with in urban limits and on highways.There are many researches done on highway travellers and their expectation and preferences of services on fuel stations, but these are geography specific and nothing has been done in the Indian context. The determination of hierarchical level of services at fuel stations till date is confined to urban limits only. The customer behaviour and expectations on outlets situated on highways and suburbs are different from customer segments visiting outlets with in urban limits. This research aims at finding different services at fuel retail outlets on highways and in suburban areas other than refuelling which will help in creating loyal customers. Al so there can be number of services, but which are more important for particular outlet always remains a question. The research also aims to find relationship between the location of outlets to the kind of services required in order to build a decision making process model to select important added services with an objective of increasing per square feet revenue from the real state space and development of customer loyalty.Literature review Fuel RetailingRetailing is the set of activities that markets products or services to final consumers for their own personal or household use whereas Retailer is someone who cuts off or sheds a small piece from somethingBefore moving to Indian context it is important to create a parallel with western markets where fuel or gasoline retailing is in more developed stage in comparison to Indian fuel retailing. The fuel retailing in India has started to move from commodity to service from 2002 after the emergence of private and global players. But this phenomenon happened far before in US, European and Asia Pacific markets.Since 1960 there have been substantial changes in the structure of the petrol retailing industry of Europe and North America (Lowe J. , 1976)There was influx of new companies in UK market which were either independent or wholly owned subsidiaries of foreign giants. Lowe (1976) analyzed that after the influx of new firms in UK, the price competition became fierce and all the new companies tried different things to differentiate and gain customer loyalty.The fuel or gasoline retail structure in US had full service gasoline stations. The full service gasoline station was the one that offered minor services and repairs, where wind shield was cleaned, where credit was offered and where rest rooms were available (Mitchell 1980). Mitchell(1980) also stated that these services were sold as a part of a package along with the gasoline itself and was done entirely with the objective of building a long term relationship be tween the service station and the customer.The companies in the western countries started looking for various services which can supplement their gasoline sales in the event of increased competition. One of the most popular additions of service was car wash, which proved to be a successful strategy in selling tremendous volumes of gasoline. This made customers to come for car wash and also get their vehicles refuelled. A dealer in Dallas, estimated that more than half of his anticipated $ 700,000 sales would come from an automated car wash. What more he claimed that the presence of car wash boosted his gasoline sales to an annual rate more than 1,000,00 gallons from 680,000 gallons three before that.( Steele 1966)Steele (1966) also predicted that as time passes by more and more gasoline stations will turn into large service centres offering a combination of gasoline, car wash, tire and battery service, restaurant and so on. Thus the future will be a complete one stop solution.This c an hold true in Indian context also, but the bouquet of services will be definitely very different from outlets in developed markets. The bouquet will be entirely different depending upon the different customer requirements and purchasing power.Mitchell (1980) also predicted the movement of gasoline stations from independent full service stations to company owned self service gasoline stations. The reason stated was the pressure of margins and aim to drive customer loyalty by providing customers with a large service bouquet at gasoline station with in the same margin. This can also be seen happening in Indian context with Indian Oil Corporation being the first among all PSUs moving towards company owned outlets to increase service standards at their pumps and recently Shell entering into Indian market with company owned outlets.The conceptual model (Brown Ingene 1987) on fuel or gasoline retail structure in US explains the influence of demographic environmental characteristics on marketing mix offerings. The model also explained the influence of location of the outlet on demographic, environmental, and marketing mix characteristics.The research by Brown and Ingene (1987) demonstrated that while defining marketing mix elements for fuel and gasoline retailing it becomes important to consider the impact of demographic and environmental characteristics.The major changes started to happen in fuel retailing and fuel stations started to move towards differentiating themselves due to increase in competition. This was the development of forecourt retailing phenomenon at gasoline stations in western markets. The major changes occurred with petrol forecourt retailing where transition of fuel stations within a contextual framework happened. They had sought differentiation in the face of increased competition. One strategy undertaken was to develop a convenience store format to supplement fuel sales (Denning Freathy 1996).A clear analogy can be drawn for Indian fuel ret ail also, where with emergence of many private players to tap the biggest consumer market, the players or fuel companies will have to try and do something to differentiate themselves.As the competition grew the fuel retailers faced more and more pressure on profits and it became important for them to generate loyal customers and increase the ticket sales value of loyal customers at the fuel outlet. They move to others forms of revenue generation. The objective was to compensate for erosion with alternative forms of profit generation.The issue for the petrol retailers has been to identify ways of adding value to their operation in the face of these competitive threats. One of the main methods of achieving this has been through forecourt shop. Many petrol retailers have attempted to reduce the risk posed by petrol price fluctuation by expanding the facilities at their outlets. (Keynote, 1993)Denning and Freathy (1996) established that different customer segments depending upon their i ncome levels and profession purchased different products from convenience stores at petrol stations. This indicates that determination major visiting customer segment becomes important at any fuel retail outlet. The product mix at any fuel retail outlet is also dependent upon purchasing power of the customer segments at that outlet.The exact form that the formats have taken has varied by operator location and site type. This is a reflection of the fact that the convenience store does not necessarily follow a single set pattern. The limited space available within each unit, it is possible that services take priority over other categories of goods.(Denning Freathy 1996)An important feature to note here is that, the development of fuel stations did not happen only in areas with in urban limits. The development of interstate highways and urban express ways had made many fuel stations obsolete in western world. This made many oil companies to build new facilities to meet the changing tr affic patterns. More and more oil companies began to realize that former gas outlets of the conventional style were no longer getting customer visits.The primary objective of service bouquet is to add to the convenience of the customer visiting the outlet. Convenience is especially important in attracting repeat customers. It becomes fairly important to understand what adds to customer convenience and what not. Convenience results from various factors such as site size, site plan, traffic impacts and parking (Smalley 1996). The factors are not limited to the ones stated above the factors vary with different geographies and markets.Fuel retail business is of two types one with retail outlets with in urban limits and other with retail outlets on highways and suburbs. The behaviour of the customer is very different at these two different types of business. The marketer likewise faces a distinct business environment to which marketing strategy must be adapted. The Highway market is not necessarily different from traditional markets because objectives remain the same. It is unique, however, because new approaches are needed to achieve the objectives.(Beaton 2001)Interstate or highway motorists seek five basic services gasoline, rest rooms, food, relaxation and lodging. Aside from the need for gasoline as the prime factor, marketers differ somewhat in their opinions as to the exact ordering of these needs as stopping power factors. (Beaton 2001) The development of new factors is prompting rapid growth of different services at fuel retail outlets at highways. Competition and changing travel patterns mean that to remain competitive the oil companies must meet the overall needs of the motorist at one stop. (Beaton Hall, 1968)For a fuel retail outlet on highways, petroleum companies apply the same criteria for building service bouquet as that of the outlets with in urban limits. This happens due to the profit criteria only as the main objective of existence of outlet i nstead of customer satisfaction. A good station site does not guarantee a good service station. Site and location factor analysis indicates what a particular fuel outlet should do. (Beaton Hall 1968)Fuel Retailing IndiaFuel retail business on highways is geography dependent the above researchers have kept their study confined to more developed and liberalised markets than India. All those factors may be or may not be applied to Indian conditions. As the Indian fuel retail business becomes more deregulation, the customer expectations will start to rise. The variables like competitive market, promotional effort to attract customers by competitors, etc. raise the customer expectations and create customer gap. (Kumar Sahay 2004)In India the study by Kumar Sahay, to find out the elements that determine customer satisfaction in delivering petrol/diesel through retail outlets is confined to fuel retail with in urban limits. The market survey was carried out in Delhi. Stratified non-prob ability sampling method was used for sample collection. The target population has been defined as The people who drive Cars / jeeps or Motorcycles/scooters or Buses or Goods vehicles on the roads of Delhi (state). (Kumar Sahay 2004)Through cluster analysis the initially found segments reduced to three segments and customer expectations level for various services determined.This has lead to development of hierarchical levels of services for different segments and a conclusion that a player offering all the six levels of services will be able to bridge gap between customer expectations and services offered. These levels of expectations, if met successfully, create wow effect and customer would indulge in word-of-mouth communication. Word-of-mouth communication is the most powerful tool for creating customer base. Not only the existing customers are retained but also they bring-in new customers to outlets. Prospects with continued satisfaction with the products and services become adv ocates. Such customers start singing marketers song and begin to praise. (Kumar Sahay 2004) Fuel and Non Fuel retailing Initiatives by Indian Oil Marketing CompaniesThe three major players in the domain of oil marketing companies in India are PSUs namely BPCL, HPCL and IOC enjoying majority share. Rest of the pie is served by private players like Reliance, Essar and Shell. All the three PSUs have taken initiatives to add non fuel revenues and build customer loyalty. These initiatives had been taken on outlets both within urban limits and also on outlets on highways and suburbs. The reason behind all the initiatives had been to gain customer loyalty and thus increase customer satisfaction. http//www.icmrindia.org/free%20resources/casestudies/BPCL.htm Bharat Petroleum Corporation Limited (BPCL)Bharat Petroleum Corp Ltd (BPCL) is one of the largest public sector undertakings in India, with the Government of India having a more than 50% shareholding in the company as of 31 March 2008 ( Euromonitor International, April 2009).BPCL is engaged in the refining and retailing of petroleum and petroleum products, with around 8,251 retail outlets. By December 2008, around 400 of these outlets had an organised convenience store attached, branded as In Out, with an aggregate retailing space of 18,600 sq m. BPCLs key strategy to increase revenues from the In Out outlets has been to expand the basket of products and services offered through the outlets. Apart from offering packaged food, soft and hot drinks, cosmetics and toiletries, household care items and consumer foodservice, BPCL has also tried to add other additional services at the outlets over the years to add to the customer satisfaction levels.Bharat Petroleum Corporation Ltd (BPCL) is planning to grow its non-fuel retail business by expanding its fuel retail network, with sufficient size to emphasise non-fuel offerings, and enlarge the portfolio of non-fuel offerings in its outlets located at highways and urban lo cations, with a focus on food, shopping and entertainment in these outlets. It will also increase consumer services for example, through its recent tie-up with an agency for international money transfer services at its existing urban outlets.During the forecast period, BPCL proposes to invest Rs 6 billion to expand its retail network. The outlets will be built mainly on national highways and at urban locations, and will offer mobile consumers high quality food, and also provide them with access to entertainment through an on-site multiplex screen. BPCL has tied up with Cinemata, a film distribution unit of Sony Entertainment Television, to establish cinema halls at its fuel outlets on highways across the country by 2010.In order to expand its range of services, In Out launched an e-traveller facility at its forecourt retail outlets. The facility enables consumers to book rail, airline and bus tickets, as well as hotel accommodation, and is available in 37 stores. BPCL is working on Phase II of the deployment of this service, when it will make it available in an additional 100 stores. Revenues from the e-traveller facility were around Rs15 million in 2007/2008 its first full year of operation, with sales of 7,782 tickets (Euromonitor International, April 2009).To provide added convenience services to its customers close to their homes, BPCL has signed a memorandum of understanding with Money Gram Internationals agent Airwings Services, to offer international money transfer service in India from its selected In Out outlets. Meanwhile, its alliance initiative with Western Union Money Transfer saw the In Out network record 36,677 transactions in the year ending March 2008, with a turnover of Rs 699 million, an increase of 26% over the previous year. (Euromonitor International, April 2009)BPCLs quick service restaurant sales through its alliance network partners McDonalds, Pizza Hut, Caf Coffee Day, Subway, Nirulas and other foodservice brands grew by 40% to Rs 249 million in the year ending March 2008.BPCLs outlets on highways are branded as Ghar Dhaba, and represent the companys foray into food. BPCL has developed a concept covering theme design, kitchen layout and menu planning, and established the standard operating processes for the outlets in-house. As of March 2008, it had 21 Ghar Dhaba outlets in operation, with total sales of Rs23 million. Developed on a large area of three to five acres (12,000-20,000sq m), these outlets provide the requisite space to allow BPCL to experiment with a multiplex cinema for stop-over entertainment (Business Standard, Sep 2007).http//www.business-standard.com/india/news/bpcl-to-mix-moviesoil-at-pumps/297583/If the concept is successful, the company will roll this out in more Ghar Dhaba outlets. The multiplex screens, especially in outlets located on highways, will also serve a social purpose for nearby rural consumers. BPCL plans to screen social awareness, health and literacy content in these mul tiplexes for rural audiences.The majority of the products through the In Out outlets are manufactured by third parties. However, BPCL proposes to offer its own brand of bottled water at the outlets, where the water will be a by-product of its captive power plant, based on hydrogen fuel cell technology.Bharat Petroleum Corp Ltd (BPCL) was the leading forecourt retailer in India in 2008, with 400 outlets. The company added 17 outlets to the total in that year. Rather than expanding rapidly, BPCL has focused on ensuring that its outlets are profitable, and also on adding additional services to its existing outlets. In 2008, sales revenues of BPCLs non-fuel retail arm, Allied Retail Business (ARB), grew by 32%, to Rs2,089 million, making it the largest non-fuel revenue generator in the oil industry. During the year, In Outs sales revenues grew by 41%, to Rs 1092 million. 15 of the In Out outlets achieved average sales of Rs1 million per month, compared to eight in the previous year.T his is clear indication of the fact that now oil marketing companies are understanding the importance of non fuel retail revenue initiatives and also working over it not only for outlets with in urban limits but also for outlets on highways. But as discussed the scientific framework to decide what to offer still remains a mystery, as all the efforts for highway fuel retail outlets have been o trial and error basis.Source Euromonitor International from trade pressHindustan Petroleum Corporation Limited (HPCL)HPCL is a Fortune 500 Company, with an annual turnover of over Rs 74044 Crores, a 20% refining and marketing share in India and a strong market infrastructure. (Euromonitor International, July 2007)The corporation operates two major refineries, producing a wide variety of petroleum fuels and specialities, one in Mumbai (West Coast) with a 5.5 MMTPA capacity and the other in Vishakapatnam (East Coast) with a capacity of 7.5 MMTPA (Oil Gas, IBEF Report Sep 2009) HPCL holds an equi ty stake of 16.95% in Mangalore Refinery Petrochemicals Limited, a state-of-the-art refinery at Mangalore with a capacity of 9 MMTPA. In addition, HPCL is progressing towards the setting up of a refinery in the state of Punjab.HPCL also owns and operates the largest lube refinery in the country, producing lube base oils to international standards. With a capacity of 335,000 metric tonnes this lube refinery accounts for over 40% of the countrys total lube base oil production. The vast marketing network of the corporation consists of zonal offices in the four metro cities and 85 regional offices facilitated by a supply and distribution infrastructure comprising terminals, aviation service stations, bottling plants, and inland relay depots and retail outlets.The Hindustan Petroleum (HPCL) focus is on providing broader services to its customers with an experience that is unmatched. Through its retail channels, HPCL offers a nationwide chain of convenience stores, has forged tie-ups wit h leading fast food and refreshment companies to set up food counters, a special arrangement with FedEx to provide a world class courier service, vehicle insurance and international money faster counters. The focus is on complete customer satisfaction and an experience that will make a customer drive in again and again to HPCL forecourt retailing and convenience stores. In 2006, the chain developed its forecourt operations substantially through a series of agreements with a number of prominent foodservice and retail players.HPCL is increasingly adopting a focus on loyalty, it has put in extra efforts and an aggressive marketing campaign to retain customer loyalty. It runs Indias largest loyalty programme and has products such as the HPCL credit card, HPCL debit card and I-mint loyalty programme.Another focus is on brand equity HP has been investing in increasing its brand presence and has taken on brand ambassadors such as Sania Mirza and Narayan Karthikeyan to promote its different products. Hindustan Petroleum Corporation Ltd (HPCL) is a central government commercial enterprise engaged in the refinement and sale of crude oil. It also manufactures other petroleum products like LPG, lubricants, greases, petrochemicals and aviation turbine fuel.HPCL launched its Club HP forecourt retailing chain in 2001. From the beginning, the chain sought to offer other facilities besides selling petrol, diesel and other products. These include free vehicle checks, vehicle finance and insurance related services, bill payment services, HPCL-ICICI credit cards and loyalty programmes. (Euromonitor International, July 2007)Club HP outlets are classified as Standard, Mega and Max, depending on the services and amenities available. In its first phase of expansion, HPCL set up 85 Club HP outlets in Delhi, Mumbai, Kolkata and Chennai. Each of these outlets was converted at an estimated cost of between Rs1 and Rs3 million. It subsequently introduced its supermarket sub brand HP Speed mart, and developed its foodservice operations through an agreement with US Pizza.The success of this deal prompted HPCL to enter into similar agreements with players such as Caf Coffee Day (vending and foodservice), Dairy Den (ice cream parlours), Western Union (money transfer points) and Tata Motors (car care services) (Business Standard, Jan 2007).http//www.business-standard.com/india/news/fuel-stations-to-offer-one-stop-shopping/269785/In order to improve its image among Indian consumers in terms of the quality of its fuel, during the review period the company launched the PCL Quality Assurance initiative under the Good Fuel Promise slogan. This involved the pioneering concept of mobile laboratories to carry out regular checks on fuel sold at Club HP outlets. It also entered into an agreement with the international agency Bureau Veritas to conduct a surveillance audit of Club HP Outlets. After having a market share of around 20-22% for a long time, recently it has improved its m arket position to number two, with a market share of close to 25% of the total service station market in India (Business Standard, April 2005).http//www.business-standard.com/india/news/fuel-stations-to-offer-one-stop-shopping/269785/For most of the review period, Club HP played second fiddle to BPCLs In Out chain in terms of revenues from forecourt operations, although it garnered considerable brand awareness among consumers. A deal with US Pizza was expected to witness the opening of over 500 pizza and fast food delivery units at Club HP service station outlets across India between 2005 and 2007. Apna Bazaar Co-operative (a supermarket chain) is involved in a pilot project with HPCL to establish Apna Bazaar outlets at three Club HP outlets in Mumbai. If successful, the alliance will be extended to other Club HP outlets nationwide. This agreement will also enable Apna Bazaar to upgrade its image by targeting more upper and middle class consumers.http//www.hindustanpetroleum.com/En /UI/RetailClubHP.aspxWhile neither of these deals on their own are likely to have any major impact on constant value sales of impulse food and drink products through Club HP outlets, they will almost certainly benefit from the rise in consumer traffic that these foodservice and supermarket operations will entail. A loyalty card deal with low-cost airline Air Deccan should also ensure a higher volume of consumer traffic in Club HP outlets over the forecast period. Similarly, an agreement with Federal Express (FedEx) during the review period to open cargo collection centres at various Club HP outlets should continue to attract consumers between 2005 and 2010. FedEx is slowly gaining a reputation in India as a reliable cargo delivery agent in 2005, there were FedEx cargo collection centres at HP outlets in eight major Indian cities.Source Euromonitor International from trade pressReliance PetroleumReliance Petroleum is aggressively targeting the service station channel, planning a pan- Indian presence over the next couple of years in cities as well as on main roads. The biggest challenge it faces is in terms of return on investment and whether it is a wise move to invest so heavily in forecourt retailing in India, which is still relatively underdeveloped.With Reliances strong presence across India, food and beverage manufacturers can aim to push major volumes through Reliance service stations. Reliance Petroleum Limited (RPL) is a subsidiary of Indias largest private group Reliance Industries Ltd. RPL was set up to harness an emerging value creation opportunity in the global refining sector and currently RPL is a 75% owned subsidiary of RIL. RPL also benefits from a strategic alliance with Chevron India Holdings Pte Limited, Singapore, a wholly-owned subsidiary of Chevron Corporation USA (Chevron), which currently holds a 5% equity stake in the company.RPL was formed to set up a Greenfield petroleum refinery and polypropylene plant in the Special Economic Zone (SE Z) at Jamnagar in Gujarat. This global sized, highly complex refinery is being located adjacent to RILs existing refinery and petrochemicals complex, which is amongst the largest and most efficient in the world, thus offering significant synergies. With an annual crude processing capacity of 580,000 barrels per stream day (BPSD), RPL will be the sixth largest refinery in the world. It will have a complexity of 14.0, using the Nelson Complexity Index, ranking it among the highest in the sector. The polypropylene plant will have a capacity to produce 0.9 million metric tonnes per annum. (Euromonitor International, July 2008)With its Reliance A1 Plaza chain, Reliance aims to provide consumers with a wide choice of products in convenient locations. The company had planned to open more than a 1,000 service stations in the next 2-3 years, so it was clearly targeting leadership in the petroleum retailing segment. But during economic crisis and with high crude rates, Reliance had shut their outlets as serving fuel at comparative prices was becoming non-profit making business for them.Shell India Marketing Private LimitedShell India Marketing Private Limited (SIMPL) is a subsidiary of Royal Dutch Shell and the first multinational corporation to obtain government approval to open 2,000 servic