ECO7: LAUNCHING A NEW MOTOR OIL Harvard Case Solution & Analysis


Problem Statement

The case highlighted an importance of identifying the launch of the new product where there was intense pressure from the shareholder’s perspective. Under the particular scenario, Vice President of Avellin was considering a new product launch to overcome the pressure from the shareholder’s side as well as satisfy the existing and new customers to take along-term position to become profitable. However, the market for passenger car motor oil seemed good, and customers didn’t want to change the product line because of their already built perception. Therefore, it has been analyzed that the introduction of the new product might hurt the existing product category or it would be able to increase profits of Avellin through the innovative product line.


Consumer Expectation:

Consumer market of passenger-car motor oil is growing rapidly, with the increasing numbers of cars and other engine-based vehicles (i.e. generators). Due to the limitation of a physical product, it is little difficult to target each customer’s demand and satisfy on the individual level Avellin Corporation has been one of the leading oil car oil manufacturers in the market for many years now and is therefore well aware of the market movements and the expectations of its consumer. With the rapidly changing world, the time value for the general public has developed at higher strengths, therefore the consumers are demanding products or services which offer time-saving services without compromising quality. This is probably the reason for decreasing demand in “do-it-yourself” services.

However,Avellin’s fast-lube channel stores, are unaffected with the shift of priority. SevoGreen is a direct competitor of Avellin and has been giving Avelling hard-times, and with its green product (Motor oil produced through recycling procedure) it has probably earned thetrust of many green loving customers. But Aaron Joiners on, Vice-president of Avellin is confident that with the launch of Eco7, Avellin will very likely beat SevoGreen in both terms (customer trust and low-cost effective techniques).

ECO7 LAUNCHING A NEW MOTOR OIL Harvard Case Solution & Analysis

Avellin’s performance:

In early days of its establishment (1936), Avellin was in the business of providing refining oil and operated in this limited sector for around 60 years. In mid ninety’s Avellin started focusing on its high profitable divisions, of industrial materials and to do so it had to get rid of the low margin divisions. It few years after its set focused, 60% of Avellin’s revenue was dependent on the automotive industry. By 2014, Avellin owned 10 manufacturing plant around the USA, and most (65%) of its industrial oil sector’s revenues came from PCMO division. Its fast-lube channel and high margins of 20% to 22% and automotive chemicals contributed much to its success.

According to researchers and analyst, the industry of lubricants in the USA which is currently at $10.5 billion is facing a growth of around 2% atleast till 2020. The performance of PCMO is judged by its capability to effectively support engine as long as possible. Out of three PCMO categories, conventional is most demanded and is sold at around 3$ per quart. The prices of Eco7 are little higher at around 6$ which is still a little lower than its synthetic oil products. In a normal usage of the car, the owners are advised to change the car oil after every 3000 miles but with conventional oil, drivers could extend the time limit to 5000 miles.

Avellin Strategies:

Since its establishment in 1980, the major target of Avellin has been DIFM channel. And by entertaining wholesalers and DIFM customers with quality services and cheaper rates, Avellin has successfully earned trust and of many of its loyal customers.However, after operating for more than 30 years, Avellin has achieved many of its targets and is now receiving the main revenues from three specific categories of customers.

Independent DIFM: In 2013 Avellin was popular among DIFM customers. Avellin’s launch of new campaigh “The Aventage Program” in which customer feed backs were recorded through sales manager, wholesalers was educated to develop better convincing techniques and factors like presentation and product impression were concentrated. All these caused Avellin to lead among the fas-lube channels and repair shops in 2013.

National Retailers: Contributing 9% sales to Avellin, national retailers and wholesalers were the bulk quantity purchases of Avellin, the key point here was that these channels were focused on attracting DIY customer, because of their loyalty factor, it was difficult to impress DIY customers and was very likely to keep the customer trust for a long time once earned.

AvellinAuto: To keep a close relation with its customers, Avellin started following its rivals’ footsteps and open about 436 fast-lube channels by 2014. But unlike other competitors who were focused on attracting more customers, Avellin was more worried about maintaining the intact relation with its existing customer. Therefore Avellin chose the locations which could best provide services to its existing customers..................

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