Eco7: Launching of New motor oil Harvard Case Solution & Analysis

Eco7: Launching of New motor oil  Case Study Solution

Consumer behavior

Market is much diversified place, where each and every customer has its own nature, characteristic, approach toward the product as well. The PCMO market with various product line has tow kind of consumer segments. One those, who are cost-conscious, probably less educated, are from rural areas, even they prefer to change oil their selves, and thus they are called do-it-yourself consumer segments.

They better understand the specifications of oils, and they even have better understanding what mileage they do have as compared to the other oils in the market.

On other hand the PCMO market has second type of consumers, who are affluent, educated, and are probably from developed areas, or from large cities, they prefer to seek the professional assistance in purchasing oil. They get their oil changed from the professional experts, and they probably prefer the quality, fast service, so they are called do-it-for-me segment consumers.

Considerations

Conventional oil in the market has average cost of from$2.50 to $4.00 per quart, which has the average mileage of 5000 miles; similarly the company’s synthetic oil has average cost of $5.50 to $9.00 with an average mileage of the 10000 miles.

However the consumers are advised to change the oil with 3,000 miles usage, or in the three months, or whichever comes first. On other hand the consumers in 2013 changed the oil after the average of 4,500 miles.

The Do it yourself consumer segment has been declining since year 2000, whereas currently the do it for me consumer segment accounts for has increased to 75%, from 50%.

Benefits

  • Green product
  • Environmental friendly
  • Competitive advantage over the SevoGreen of Sevoline.
  • Good quality, performance, and consistency.
  • Comparable to the company’s other product synthetic blend of 7,500 miles.

Risks

  • High cost of production as compared to the conventional oil
  • DIY consumers might not prefer the oil.
  • Product is quality focused
  • Consumers had to pay premium based on the price change of conventional, and eco7.
  • Consumers are willing to purchase the eco7 on discount price.

Price Sensitivity

The price for the eco7 has been the major concern for the company in general terms, because the average conventional price per quart is $3.25; however the eco7 has full price of $6.75, which is more than the conventional oil, price but less than the synthetic oil price of $7.00.

However the two prices have been calculated one with full price of $6.75, and other hand with the discounted price of $5.25. So the consumers are about to pay the premium on the purchase of the eco7 on full price. Similarly private label synthetic oils have been priced at $4.75. Which is even less than the eco7 price, and company synthetic oil retail price.

Service Stations

The PCMO oils have been sold by many fast-lube stations, other interdependent stores that include the oil change-plus, and repair shops. On other hand the company has its service stations called fast-lube store, or quick oil change service. Similarly products have also been sold by the mass merchandisers and warehouse clubs as well. However some wholesaler prefer to private label sales.

Avellin’s Position in market

Avellin has the market share of the 11% in 2012, but on other hand the company’s share in the market has been declining since the 2000, where its market share was 14%. On other hand the PCMO market share can be divided into two parts one in the private label sales, and branded sales as well.

Where branded sales have been declining since the private label sales has been increasing since 2000. However the other competitors in the market have increased their market shares during the same period, but Avellin has lost the market share by 3%.

Consumer perception

Consumers perception can be divided into three sections one DIY segment, second DIFM price focused segment, and last DIFM quality focused segment. They account for 25%, 45%, 30% respectively.

Overall the 15% consumers preferred to purchase the brands of the Avellin; similarly the 17% DIFM price-focused consumers has preferred the Avellin’s product. On other hand the only 10% quality focused consumers from DIFM segment has preferred the Avellin’s product.

It is really matter of concern, why does company have large portion of price focused consumers, and less quality focused consumers. Does this indicate that company’s products have been underestimated in the market in terms of the quality, or the company has undervalued its products? So if this is the case, then how will the consumer will the premium to purchase the eco7?

It looks that company has to very conscious towards changing trends in the market; furthermore the Avellin has to ensure that it has provided proper education and details of the products to the consumer by any means.

Eco7 Launching of New motor oil Harvard Case Solution & Analysis

 

Distribution strategy

The company has been selling its products through various service channels. Includes the Independent stores, which includes fast lube, oil change plus, and repair shops. Furthermore Company’s order fulfillment was done by independent wholesalers. However the Avell in has 6,000 fast lube service customers.

On other hand company has national retailers; similarly the company also has 436 its own service stations. However that number is very as compared to the competitors in the market............

 

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