Determine the characteristics of the three segments of NFWs (answered in the section on ungraded questions) based on the following parameters:
- Segment size
- Share in the oil change process
- Oil buying behaviour
- Financial condition
Now, the challenge was how to distribute the products to the NFWs. The team identified the following three major distribution models that can be incorporated to cater to these NFWs.
- Model 1: Ask the existing distributor network to supply directly to these NFWs.
- Castrol’s distributors have been loyal to the company for years, but they originally needed to be convinced of the great potential that was available to them, albeit with its share of issues and challenges.
- NFWs are scattered across the country, leading to complications in coverage, service and collections for the existing distributors.
- Model 2: Create a parallel set of exclusive distributors for the MCO product category. These distributors would solely cater to the MCO products and would supply directly to the NFWs.
- Instead of creating new territory, distributors can be divided by product category.
- Multiple channels have worked for some companies, by providing access to new markets that were unreachable or partially covered. A completely new channel could give Castrol the freedom to design new schemes and to experiment. However, the company will need to persuade the current distributors to give up MCO, a product category that has been growing.
- Model 3: Create a new channel partner of intermediaries between existing distributor networks and NFWs who will supply exclusively to these NFWs.
- This option would create another first-mover advantage in the industry, by developing a rapport with the larger NFW base, and by using a business model that is scalable and sustainable.
- It may be difficult to find these new intermediaries who are willing to work hard and invest their income for a starting salary that could also be earned by working in a comfortable environment, in big retail malls for fixed hours.
Question 5B: Evaluate these three models on the following parameters (Answer as ‘High’ or ‘Low’.):
- Parameter 1: Willingness of these channel partners to supply to the NFWs
- Parameter 2: Channel partners’ preliminary knowledge of the local market that they are operating in
- Parameter 3: Potential of conflict(s) with other channel partners
- Parameter 4: Capital investment required to set up this model
- Parameter 5: Cost incurred by the channel partner to supply to the NFWs (delivery cost)
After taking into consideration the advantages and disadvantages of each of the alternatives, Rai and his team decided to proceed with the third option (i.e., create a new channel partner of intermediaries between existing distributor networks and NFWs who will supply exclusively to these NFWs).
The new channel partners between distributors and NFWs were called Castrol Authorized Service Associates (CASAs). A typical CASA representative would be a young entrepreneur who owns a motorcycle or a moped and who has approximately ₹25,000 to 30,000 in cash as working capital for five or six days. The ideal candidate would be a driven entrepreneur who is first trained and then directed by the distributor.
You have been tasked to strategise the important aspects of this option. You have to fit these CASAs within the existing distribution model. Based on the knowledge that you have gained so far, answer the following questions:
- Who will these CASAs report to?
- Who will these CASAs serve?
