apollo tyres | iimc | sales & distribution

SALES AND DISTRIBUTION LIVE PROJECT | GROUP 2 1

CONTENTS

PROJECT OBJECTIVES ..................................................................................................................................................... 2

Tyre industry in india ......................................................................................................................................................... 3

Indian Tyre Industry- Highlights .................................................................................................................................... 3

Industry Growth Drivers ............................................................................................................................................... 4

Replacement Segment ................................................................................................................................................ 4

Apollo Tyres.................................................................................................................................................................. 5

Competitive landscape................................................................................................................................................. 6

MRF Tyres ............................................................................................................................................................... 6

JK Tyres .................................................................................................................................................................. 6

CEAT Tyres ............................................................................................................................................................. 6

Apollo Sales Organisation ............................................................................................................................................. 7

PRIMARY RESEARCH-INSIGHTS FROM INDEPTH INTERVIEWS with sales managers ....................................................... 7

OVERVIEW & PURPOSE ............................................................................................................................................... 7

HIGHLIGHTS ................................................................................................................................................................ 7

PRIMARY RESEARCH-INSIGHTS FROM INDEPTH INTERVIEWS with tyre dealers ............................................................ 8

Haralalka Tyre Agencies ............................................................................................................................................... 8

Indo Tyres .................................................................................................................................................................... 9

Maya Tyres .................................................................................................................................................................. 9

PRIMARY RESEARCH-INSIGHTS FROM INDEPTH INTERVIEWS with truck fleets ............................................................ 10

Speed Ways Logistics.................................................................................................................................................. 10

S N Transport.............................................................................................................................................................. 10

Rajeev Transports ....................................................................................................................................................... 11

Key takeaways from ground interactions: ............................................................................................................... 11

MOTIVATORS & barriers FOR DEALERS ......................................................................................................................... 12

Characteristics of Dealers: ........................................................................................................................................... 12

Identifying Dealer Needs: ............................................................................................................................................ 12

Motivators for dealers ................................................................................................................................................. 12

Effort building motivators ...................................................................................................................................... 12

Efficiency building Motivators ................................................................................................................................ 13

Consistency building Motivators ............................................................................................................................. 13

Barriers for dealers to sell or push Apollo Tyres ........................................................................................................... 13

MOTIVATORS & barriers FOR FLEET OWNERS ............................................................................................................... 13

Characteristics of Truck Fleet Owners: ........................................................................................................................ 13

Channel design for truck fleet replacement tyre segment ................................................................................................ 14

Identifying the target segment: ................................................................................................................................... 14

Consumer Buying behaviour & service requirements ................................................................................................... 15

Evaluating the current channel .................................................................................................................................... 16

Identify the gaps ......................................................................................................................................................... 16

Identify possible alternative channels and their structure, competencies, service levels ............................................... 17

apollo fleet assist and lifeline channel specifics ............................................................................................................ 17

CHALLENGES AHEAD ........................................................................................................................................... 18

COMPETITIVE LANDSCAPE of fleet management in india .......................................................................................... 18

Channel Conflict: ........................................................................................................................................................ 19

Source of Channel Power ............................................................................................................................................ 19

Expanding Apollo Tyres existing Dealer Network ............................................................................................................20

Locating potential dealers ...........................................................................................................................................20

Continuous engagement .............................................................................................................................................20

Avoiding channel conflict ............................................................................................................................................ 21

SECONDARY RESEARCH ON INVESTMENTS FOR DEALERSHIP .................................................................................... 21

ANNEXURE .....................................................................................................................................................................22


PROJECT OBJECTIVES

This project has three broad objectives from a marketing as well as sales & distribution

point of view- Increase the sales of Apollo Tyres in Eastern Region (Particularly in Kolkata) by

1) Identifying Motivators and Barriers for existing dealers

2) Conceptualizing a sales and distribution strategy to motivate Emerging segment 'Truck fleet'

3) Study on Go to Market strategies of competitor companies


TYRE INDUSTRY IN INDIA

Indian tyre industry is estimated to be Rs 520 billion in size (FY 2015). The industry is

dominated by truck and bus segment which accounted for 49% of the demand in tonnage

terms. 80 % of the demand is met by the top 7 players.

Year (Lakh/ Nos) % Change Year (Lakh/ Nos) % Change

2000-01 86.12 2008-09 128.39 -2%

2001-02 84.74 -2% 2009-10 152.83 19%

2002-03 98.63 16% 2010-11 156.68 3%

2003-04 108.21 10% 2011-12 160.85 3%

2004-05 110.92 3% 2012-13 165.32 3%

2005-06 119.41 8% 2013-14 164.74 -0.4%

2006-07 123.67 4% 2014-15 171.12 4%

2007-08 131.37 6%

No. of Tyre Companies: 39

No. of Tyre Plants: 60

Industry Turnover 2014-15 (est.): Rs. 50000 crore (US$ 8.5 Bn)

Exports 2014-15 (est.): Rs. 10500 crore (US $ 1.7 Bn)

INDIAN TYRE INDUSTRY- HIGHLIGHTS

29%

17%

13%

12%

7%

5%

4%3%

4%3% 1%

Market Share

MRF Apollo

JK Tyres CEAT

Balkrishna Birla

Bridgestone Goodyear

TVS Srichakra Falcon

ATC Ralson

Metro


INDUSTRY GROWTH DRIVERS

Automobile demand

Increasing radialisation with strong thrust from OEMs

Steady aftermarket demand

Focus on geographical diversification

REPLACEMENT SEGMENT

Replacements depend on industrial activity and freight movement. Freight movement is, in

turn impacted by the performance of the agriculture, infrastructure, housing and industrial sectors.

(Research, n.d.). I.e. replacement tyre demand is strongly connected to the overall economic growth.

The demand typically grows at about 3-4% YOY. {CRISIL Research,ATMA}

Replacement Tyres drive 85% of the demand in overall commercial vehicle tyre demand.

60%

30%

10%

Segment Mix

OEM Replacement Others

60%23%

6%1%

9%1%

Product Mix(in tonnage)

CV PV 2W OTR Tractors Others

27% 30% 32% 36% 33% 32%

73% 70% 68% 64% 67% 68%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

OEM Replacement

Source: CRISIL Research, ATMA


Source: CRISIL Research, ATMA

APOLLO TYRES

Apollo is the second largest player in the Indian tyre industry with a market share of about

17% in 2014-15. The company is a leading player in the truck and bus tyre segment, with over 25%

market share. ATL has diverse revenue streams, with overseas subsidiaries contributing to 39% of

revenues in 2013-14. It enjoys a first-mover advantage in the production of radial tyres. {CRISIL

Research}

43%

66%

38%

59%

31%

62%

23%

12%

26%

13%

26%

14%18%

10%

19% 7%22%

7%

16% 6% 17%

5%21% 6%

0% 6% 0%16%

0%12%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

OEM Replacement OEM Replacement OEM Replacement

2011-12 2012-13 2013-14

Segment wise demand proportions

CV Cars & Uvs 2/3 wheelers Tractor Others

45%

37%

11%

6%

2%

Segment-wise market share (2013-14)

MCHV Cara/Uvs Off-highway LCV Others


COMPETITIVE LANDSCAPE

MRF TYRES

MRF is the largest tyre manufacturer in India with 29% market share. The company manufactures

rubber products, such as tyres, tubes, flaps, tread rubber and conveyor belts. It also has diverse

business interests, which include pre-treads, paint and coats and toys. Although the company caters

to all tyre segments, the truck & bus segment constitutes 48% of its production (in tonnage terms) as

of 2013-14. MRF is also a market leader in Car and Utility Vehicles and Two-wheeler segments and

enjoys a strong brand recall among OEM as well as replacement market.{CRISIL Research}

JK TYRES

JK tyres is the third largest player in the market with 13% market share. Its products include radial

and bias tyres for trucks, light commercial vehicles (LCVs), buses, passenger cars, tractors etc. JK

Tyres has pioneered steel radial technology in India. The company is a market leader in the Medium

and Heavy Commercial Vehicles (MHCV) radial tyres segment with a market share of 34%. The

company's product portfolio is heavily skewed towards the cyclical CV industry. .{CRISIL Research}

CEAT TYRES

CEAT is the fourth largest player in the domestic tyre industry. The company manufactures tyres for

trucks, light commercial vehicles (LCVs), passenger cars, utility vehicles (UVs), tractors, truck trailers

and two-wheelers. During 2014-15, CEAT outperformed the industry (in volume growth) in both OEM

and replacement categories. The company manufactures a range of tyres across automobile

segments with truck and bus being the largest. However, increasing competition in the low-margin

truck segment and relatively lower brand differentiation has led the company to shift its focus to non-

truck segments. Steadily, it has been gaining market share in the more profitable non-truck segments,

such as two-wheelers and passenger vehicles. {CRISIL Research}


APOLLO SALES ORGANISATION

PRIMARY RESEARCH-INSIGHTS FROM INDEPTH INTERVIEWS WITH SALES

MANAGERS

OVERVIEW & PURPOSE

This is an attempt to understand how Apollo is dealing with its tyre dealers and what

all improvements can be made in the engagement to motivate dealers to eliminate the

barriers to sell and push tyres to their customers. It s also an attempt to figure out how Apollo

can increase its brand equity among truck fleets. Good brand equity will help Apollo to retain

fleets and convert new fleets into its loyal base. Finally, this also looks at various avenues for

Apollo to expand its market, mostly by adding more dealers into its fold.

HIGHLIGHTS

There are dealers who are committed with other companies. We do not want to run an

affair with them. It is like being a girlfriend to a married man.

Credit policy not in Apollo’s agenda

Prices will remain the same. Centralized decision. Apollo will not cut prices, will dilute

brand equity.

Change in consumer behavior. Transformed customers are conscious about mileage and

cost/km. They will not buy a tyre just because it is priced low.

Fleet Management system is an evolving idea. It is the future

Apollo follows a 1:1 model with 3 rotations a quarter for the amount deposited with

the company. They have fixed percentage discounts that are flat and there are no slabs as

RBU HEAD

Controller-RBU CSM-RBU Sales

ABU Manager

Commercial Sales

RBU

ABU


compared to Ceat or JK tyres. The discount last year was 1.85% of sales. In addition to this

flat discount, Apollo runs schemes which vary throughout the year. Since it s a flat discount,

both large and small dealers are benefitted in a similar fashion and hence, small dealers can

compete with large dealers of Apollo. This is the reason why Apollo is welcomed by dealers

in all ranges of scale. On the other hand, CEAT increases the discount % as the volume of

sales increases and hence large dealers have an advantage over small dealers. They can sell

the tyre at a lower price than small dealers. So CEAT and JK tyres will have a few large dealers.

CEAT and JK have flexible credit system and hence project an image of being a less

strict company. Apollo has no intention to provide a credit system and it implements its

policies uniformly all across the country to avoid being put in the same bracket. It is hence

not ready to dilute it and let the ball to be in dealers court.

Segments of tyres

Truck Car radial Non truck

MRF tyres are perceived to be of better quality. For a sales revenue of 1 cr, MRF will

generate 35 lakhs from truck and the rest is from the passenger car segment. For Apollo

however, 60 lakhs will come from truck and for Ceat almost 80 % is from truck.

Truck fleets demand higher credit from the dealers all the time. When the dealer is

unable to increase the credit any further, the truck fleet will approach another dealer. So it is

not uncommon to find truck fleets buying tyres from more than 1 dealer.

Dealer Schemes: Credit notes, free tyres, Gold coins, foreign trips (to dealers)

Fleet management system: in introductory phase

PRIMARY RESEARCH-INSIGHTS FROM INDEPTH INTERVIEWS WITH TYRE DEALERS

HARALALKA TYRE AGENCIES

• Started in 1982.

• Companies served: CEAT, Apollo, Continental, Michelin, JK

• Margin varies from company to company, but it is usually around 1%

• Indian companies give better margins than foreign ones (Michelin)

• Categories of tyres served: all categories

• Most sold category: truck

• Buying behavior:

o Order taking through phones

o Retail sales in 2 methods: consultative selling and traditional selling

• Maximum order size sold: 2000 pieces in a single order- (which happened in truck

fleet category)

• Sales around 5 crores per quarter

• 4000 pieces monthly sales

• There are 25 fleet owners who buy from him


• 5 to 6 months credit period to fleets

• Dealer takes tyre from the company after depositing a fixed amount at the company s account. They are supposed to make sales worth that much. Incentives like discounts

are provided by the companies for reaching specific milestones

• No incentives or bonuses for displaying the boards of companies at the stores

• Apollo has started sacrificing margin because they are losing out in the market

Company Sales by %

of total

Sales per month (Category wise) Rank in different parameters

Truck Motorcycle LCV

(Commercial)

PCR

(Private)

Economy Mileage Overload Premium

CEAT 80% 2000 1500 200 200 2 3 3 4

Apollo 10% 50 50 50 2 1 2

Continental 5% 200 2 3

JK 5% 10 30

Birla 1

MRF 1 1

INDO TYRES

• Established in 1968

• 19 shops in the chain

• Purchase from the company; deposit method (1:1)

• Sales depend on the margins and schemes(quarterly) offered

• No incentives received

• Orders worth 10 lakhs (monthly)

MAYA TYRES

• Passenger car tyres constitutes 90% of the sales. The rest is 2-Wheeler tyres.

• Average Monthly sales data was not divulged.

• The Brands which are on sale are Bridgestone, MRF and Apollo. The sales

contribution is in this order, with numbers not specified.

• Sales - Bridgestone>MRF>Apollo

• Stock replacement happens within 2 months

• Store Manager had prior experience in Commercial Vehicle tyre sales

• In commercial segment, tyres are replaced every 6 to 8 months. Buyers are

knowledgeable about the existing brands. (Unlike passenger segment wheels, where

replacement happens mostly every 5 years)

• The buyers for commercial tyres do not consult the dealer for product information,

since they have a preferred brand. (For heavy duty vehicles, tyres are a major concern

for efficient transportation)

• For Apollo, the most preferred category of tyres is Commercial tyres.


PRIMARY RESEARCH-INSIGHTS FROM INDEPTH INTERVIEWS WITH TRUCK FLEETS

We have conducted on the ground interviews with several truck fleet owners to know

more about their tyre procurement strategies. We covered the Kolkata Port Trust area, home

to a huge fleet network owing to the proximity of the port.

SPEED WAYS LOGISTICS

Areas Served- Only Bengal

Tyre Dealer: CAMAC Tyres; Sometimes done directly deals with the company (i.e. JK,

CEAT, Apollo or any other brand) but delivery (or routing) happens only through dealer

Tyre Types Used: 18 Ply and 16 Ply

Brands Used: JK Tyre, CEAT; Tries using other brands as well but finds JK to be the best

Factors influencing purchase decision:

o Durability

o Credit and Period of Repayment

o Timely Delivery

o Expects discounts but values quality much more

Price: Approximately 13000, Discounts in the range of 1000-1500

Credit Period: 1-2 months

Duration of purchase: Once a month mostly

Quantity: 70-80; 85% JK Tyres, 10%- CEAT, Rest-5%

Delivery: Camac Tyres in Camac Street usually delivers within an hour of order placed

Delivery Charges borne by the dealer

S N TRANSPORT

Dealer from whom tyres are bought: Eastern Distributors, Mohammed Ali Park

Tyres bought as of now: CEAT, Apollo

Order quantity: 30 tyres per month

Tyres last for 7 to 8 months, 18 ply

Discounts and gifts are available with bulk orders (which they look forward to)


Dealer delivers the tyres within half an hour after placing the order through a phone call

They value quality of the tyres more than the price. Will not shift to a low priced tyre if the

quality of the tyre is not good.

Since the quality of the tyre is important to them, they trust only branded tyres which they

believe are of high quality

RAJEEV TRANSPORTS

Tyres bought: CEAT, MRF, Apollo

Tyre lasts for 12 months if it is overload and 18 months if it is under- load (depending on the

truck); 16 ply on average

8 tyres per order

If it is Apollo, cost comes to around 39k, and if it is CEAT, cost comes to around 30k

CEAT is the more preferred tyre since it is economical and of good quality

CEAT gives around Rs. 100 discount for every tyre purchased

Lead time is half an hour after after placing the order with the dealer

KEY TAKEAWAYS FROM GROUND INTERACTIONS:

Lead time, quality of the tyre and the schemes offered are the most important.

Price Sensitivity: For of lower levels of tyre procurement (<10 tyres/order), price turns out to be the

key variable in the decision making process. The decision to buy is purely based on price. This is the

most price sensitive category.

In case of medium levels of tyre procurement (around 50 tyres/order), the effect of price in decision

making process diminishes. Moderate price sensitivity is observed.

In case of high levels of tyre procurement (around 100 tyres/order), price plays a minimal role in the

decision making process. Least price sensitivity is observed

Brand Loyalty: The brand loyalty is proportional to the scale of procurement. The companies

procuring tyres in high numbers end up being loyal to the brand and buy from the same brand and

dealer for years. They create faith in a brand that will make their work hassle free. The companies

procuring smaller number of tyres are not loyal to any brand. In our interviews with fleet store

owners,it was revealed that they use CEAT tyres only because it is cheap. The fleet owners also

confessed that they never viewed CEAT as a big tyre brand.

Delivery Lead time: The lead time for tyre procurement is usually 30-60 minutes. The tyres are

delivered to majority of fleet owners in less than 30 minutes. The cost of transportation is borne by

the local tyre dealer.

Offers & Discounts: The discounts are proportional to the size of procurement. The discounts

varied from a mere INR 200 to up to INR 1500 per tyre purchased from the dealer. This translates

into discounts of upto 15% by the dealers. In addition, the dealers distribute special gifts to the fleet

owners on specific occassions.

Dealer – Fleet owner relationship: Most of the fleet owners preferred to work with the same dealer

on a long term basis. The relationship worked on the basis of mutual benefits and generated a lot of

trust and comfort between the partners.


MOTIVATORS & BARRIERS FOR DEALERS

CHARACTERISTICS OF DEALERS:

Dealers when selecting the various brands to be made available in their outlet, main

attributes catering to this decision-making are: popular demand, margins they receive, the schemes

they are offered with and the relation with the company. Dealers being sole contact with the end

customer, here the Fleet owners, enjoy considerable pushing power in customer s decision-making

process. Dealers determine the inventory to be maintained in accordance with order-demand they

receive in the tyre type and tyre company.

Dealers try to maintain a long term relation with the company as well as the customers.

Dealers exhibit an expert power over the customers as the product information is critical because

quality of tyre is major concern for efficient transportation.

IDENTIFYING DEALER NEEDS:

Dealer Needs Need Description Company Actions to Fill Needs

Status Need for recognition and

respect

Following personalized relationship with

the dealers

Encouragement & contact with authority

at Apollo

Control Decision making and feel of

control of things

Dealer Meetings: dealers getting to meet

Apollo executives & discuss company

prospects

Participative goal setting

Respect An Esteem need of

belongingness and self-boost

Dealer Meetings

Healthy relation with dealers

Having dealers in publicity strategizes of

the company

Accomplishment Need, to be appreciated for the

effort

Rewards & recognition for the dealer

Publicize comparative performance

Special recognition for outstanding

performance

Stimulation Pushing the existing skills to

new levels

Training on the product specifications &

also sales training to sell in new ways

Uplifting generic skills &

MOTIVATORS FOR DEALERS

EFFORT BUILDING MOTIVATORS: In congruence with Expectancy theory of Motivation,

motivators to induce increased effort to bring an upsurge in number of deals for Apollo

Monetary Methods: Dealer takes tyre from the company after depositing a fixed amount at the

company s account. They are supposed to make sales worth that much. Incentives like discounts are provided by the companies for reaching specific milestones

Participative Goal Settings, thus creating realistic goals which dealers are confident to attain,

pushes them to limits.

Rewards & recognition for the dealer


EFFICIENCY BUILDING MOTIVATORS: In congruence with Expectancy theory of Motivation,

motivators assuring that true effort would result in attainment of desired performance goals

Monetary Methods: Dealer takes tyre from the company after depositing a fixed amount at the

company s account. They are supposed to make sales worth that much. Incentives like discounts are provided by the companies for reaching specific milestones

Having dealers in publicity strategizes of the company.

Publicize comparative performance

Special recognition for outstanding performance

CONSISTENCY BUILDING MOTIVATORS: In congruence with Attribution Theory of Motivation,

motivators assuring consistent higher performance and a long term relationship

Dealer Meetings: Representation of dealers and a common podium of comparison and healthy

competition and communication. This is an arena to meet company executives and thus the

relationship strengthens

Following personalized relationship with the dealers

Encouragement & contact with authority at Apollo

BARRIERS FOR DEALERS TO SELL OR PUSH APOLLO TYRES

Current competition: CEAT tyres, having a major pie of the market size in catering to

existing truck fleet usage, gives the customers a major brand recall.

Nationalized policy: the policies of the company is a standardized one and thus customized

deals are not

Fixed discounts: Apollo tyres offers just flat discounts, which do not increase if bought in

large quantities. Unlike others, like JK, CEAT, where they offer slab discounts and increases

the discount percentage for large quantity purchases

No incentives or bonuses for displaying the boards of companies at the stores

Credit Policy not provided

MOTIVATORS & BARRIERS FOR FLEET OWNERS

CHARACTERISTICS OF TRUCK FLEET OWNERS:

Utility based way of getting things done is a characteristic of the Fleet owners. They confide

to the dealer they receive tyres from and try having a trustworthy long term relation with them. The

different companies they buy from is limited from 1 to 3. Fleet owners are concerned about getting

discounts, benefits and gifts available with bulk order. They are also concerned with the delivery time

of the tyres after an order is placed. They consider quality of the tyre above the price of it. Their motto

is, they would not go for a lower quality for lesser price. This motto has an economical side to it too.

They would not seek better quality, rather the optimum for business. Thus lead time, quality of tyre

and schemes are the most important.

Motivators for FLEET OWNERS Barriers for FLEET OWNERS

Discounts, benefits and gifts when

bought in bulk orders.

Dealer with in a convenient reach

Stock control and physical constraints

of fleet owner

Poor Management of Scrap tyre is a

deterrent


Very less Lead time: time to deliver

ordered tyres. Less than half an hour is

what fleet owners look up to

Capability of a dealer to meet monthly

demand and contingency demands

Standardized tyre management and

waste tyre disposal

Credit policy by dealers

Tyre management information:

Expert knowledge on tyre

management & what is best for the

fleet

For a new buy, according to cost-

benefit analysis, greater quality tyre at

lesser price is Fleet owners dream

Credit going over limits prevents them

to stick to one dealer

Economically viable solution makes

them stick to that scheme and never

change; urge for betterment is lower

CHANNEL DESIGN FOR TRUCK FLEET REPLACEMENT TYRE SEGMENT

IDENTIFYING THE TARGET SEGMENT:

Marketing channel system design requires starting with an analysis of the end user.

The end user in this case is the truck fleet owners. We have to look into the buying behavior

of the end user, evaluate the current channels used for distribution and sales and discuss the

options of alternative channels.

Market:

Kolkata (North and South Paragnas)

Rationale:

One of the largest ports in India. Serves as a trade center for transportation of goods into North East.

Large number of truckers/logistic firms

Target Segment: Logistics Operators

• Large: 80-200 tyres per month

• Mid: 30-80 tyres per month

• Low: Under 30 tyres per month

Needs of the Target Segment:

Low Price with Durability

Better Utilization Value for a unit of tyre

Strategy:

Since the size of the business units dealt with are smaller in size with long term prospects, it is better

to build an alliance by pushing clear policies regarding procurement and usage.


Levels of

Moderating

Variables

Shorter Association Longer Association

Large Business

Size

From Support to System

Orientation schemes

Schemes for building an

alliance along with system

orientation schemes

Small Business

Size

Build goodwill and move on

to support schemes

From Building an alliance to

Systems orientation schemes

CONSUMER BUYING BEHAVIOUR & SERVICE REQUIREMENTS

Decision Process What is the Buyer Looking

for during the purchase

Role of the Sales man

Sub-contract Buyer not knowledgeable,

depends on a credible source

Trade motivation to help the

consumer in decision making

The customers in truck fleet segment exhibits low brand loyalty. The tyres are

replaced every 5-8 months. The whole purchase of the truck tyres is a planned process which

involves interaction with the dealer or dealer salesman. The dealer can exercise significant

influence over the customer in making the purchase decision. This happens because

customer is knowledgeable and know about the tyre that suits him, his main consideration

is price and availability of credit. The dealer can influence the customer by providing better

discounts, easier credit as well as by educating the customer of the benefits of a particular

brand.


EVALUATING THE CURRENT CHANNEL

The current channel for truck fleet owners involve the company (manufacturer), the

dealer or the wholesaler and the truck fleet itself. After an interaction(s) with the dealer or

his salesman, the truck fleet makes a deal with the dealer for required number of tyres. Due

to the relationship built over years, the dealer enjoys enormous influence over the fleet

owner on the selection of the brand. The order frequency depends on the fleet size. It may

be once every 5-8 months or once every month. The dealer/wholesaler gives order to the

company every month. Dealer takes tyres from the company after depositing a fixed amount

in the company s account. They are supposed to make sales worth that much. Incentives like

discounts are provided by the companies for reaching specific milestones. The margin for

dealers in quite low at around 1%, but considering the cost of each truck tyre, 1 % margin is

a notable amount. The sales volume is also quite large for many dealers. For example, the

Haralalka Tyre dealer has sales of around 2250 truck tyres per month and an average

turnover of Rs 5 crores in a quarter.

IDENTIFY THE GAPS

As mentioned earlier, the dealers always try to push their favorite (most profitable for

the dealers) brands. Even if a customer comes with a positive predisposition for Apollo tyres,

he might end up buying some other tyres, depending on the push of the dealer. Apollo is

losing out on big potential sales due to this negative influence/indifference from the dealers.

Moreover the truck fleet owners hardly have any brand loyalty. A proper customer

relationship management program is required to cultivate the brand loyalty among the fleet

owners.


IDENTIFY POSSIBLE ALTERNATIVE CHANNELS AND THEIR STRUCTURE,

COMPETENCIES, SERVICE LEVELS

APOLLO FLEET ASSIST AND LIFELINE CHANNEL SPECIFICS

We propose a new channel to service the truck fleets in which a new service

manager/relationship manager interacts with the truck fleet instead of the Dealer based

model (which also exists in parallel). This is from the market observation that there are few

large dealers married to Apollo unlike Ceat in the east region.

The new model requires Fleet Assist team to deliver service to truck fleet in the form of

industry best practices, knowledge, assistance training and customized deals on bulk

purchases. This is in alignment with the Fleet management programs which other

Tyre/Automobile companies run for truck fleets. . It offers total tyre solutions – from the

purchase of new tyres to tyre disposal – to ensure the optimum Cost per Kilometer (CPKM)

to their fleets.


The orders thus collected (by an online portal) are serviced within a day with the help of

existing dealers (mostly small). This also helps in developing the smaller dealer network and

reducing the risk by spreading the orders across multiple vendors.

The skills required for this job is good communication skills, relationship-building,

technical knowledge etc. One such relationship manager will deal with atleast10-15 fleets

trying to convince them to pay the extra 000- 000 to enjoy the extra benefits along with other value added services.

This channel also includes a lifeline wing which assists the truck fleets in tyre-care; listing

lifeline and longevity of tyres, predicting replacement and retreading frequency etc.

CHALLENGES AHEAD

• Choosing which dealer to fulfil the order of truck fleet which was taken by the new

channel

• Dealer, in a way is paid for the work which was not done by him

• Cost benefit analysis (New business profit from bulk orders of truck fleet Vs hiring,

training, salary & other costs involved in new channel)

COMPETITIVE LANDSCAPE OF FLEET MANAGEMENT IN INDIA

All major players have their own fleet management solutions on ground which helps

them to service truck fleets and gain competitive advantage. Though the full potential of

Fleet management solutions can be realized only in the coming decades, this is indeed the

direction in which heavy automobile industry and tyre industry is heading to.

The Indian tyre major CEAT Ltd. organized a

knowledge platform – CEAT PRO’ – for fleet owners in

Chennai to help them better their business and reduce

operation costs. The interactive platform gave fleet

owners access to best practices and ideas across diverse

areas of the Indian trucking industry. As part of its fleet

excellence program, CEAT PRO knowledge series aims to

create a common platform for sharing information and

resources and thus helping fleets compete on a flatter turf.

The panelists speak about the benefits of telematics to

customers, AMC and maintenance, lubrication for one s fleet, radialization and how to better manage credit.


Fleet Management is a concept created by JK Tyre to

offer added value to its customers. The program is aimed

at increasing our connection with their customers. As part

of this exclusive service, JK Tyre provides a dedicated Fleet

In-Charge for every fleet who assists in the

implementation of best tyre care and maintenance

practices, like fit to application, proper fitment

procedures, correct inflation pressure, timely rotation, and

corrective actions for abnormal wear. Under this program,

the company also trains drivers in their role in tyre care and

maintenance. The company also maintains a centralized

record book for fleets to provide data management

software for tyre data entry and analysis. Tyre data records

of fleets are synchronized with fleets database for vehicle fitness and the vehicle fitness report is shared with the

owner and maintenance staff on a regular basis.

CHANNEL CONFLICT:

Channel Design parameters Dealers/Wholesaler Direct company

Target group Small retailers, Truck fleet,

personal users

Truck fleet

Buyers need Good deal, value for money,

durability, reassurance from

dealer

Better deals, durable, value for

money tyres

Channel partner need Margins, better incentives Salary, support of truck fleet

owners, fleet management,

knowledge training

Reach Almost all customers in the

area

Possible for truck fleet owners

Functions to be performed by

channel

Information, timely supply etc. Relationship building, fleet

management

Feasible & Distinct Yes Yes

SOURCE OF CHANNEL POWER

Channel power is the ability of one channel to get another channel to do something

it otherwise would have not done.


Type of Power Dealers/Wholesaler Direct channel Company

Reward No Yes Yes

Legitimate No No No

Coercion No No Yes

Expert Yes Yes Yes

Referent No Yes No

The source of channel power clearly indicates that if we start the new channel of

direct sales/ relationship management with the fleet owners, this particular channel will

enjoy more power than the existing dealers. If we look deeply, we can see that the new

channel can totally replace the dealer channel for truck fleet tyre replacement segment. But

we cannot totally replace the dealers who gives us considerable amount of sales.

The solution is to let the new channel focus on relationship building with truck fleet

owners through well designed fleet management and persuading and assisting the owners

to give orders to Apollo through this channel at the proper time. But the delivery can be done

through the dealers. So the dealers still gets the margin, they obtained earlier. This helps in

avoiding channel conflict.

EXPANDING APOLLO TYRES EXISTING DEALER NETWORK

Apollo Tyres already has a sophisticated network of dealers in Eastern region.

Nevertheless there is always a scope for improvement. Apart from the truck fleet customers,

there are a lot of other standalone customers who are either resellers, service stations or

garages. Currently, some of them are regularly serviced by the existing large dealers or these

dealers run their own reseller chains to cater to the needs of this market. It is always

profitable for Apollo to expand its direct business to this untapped market.

LOCATING POTENTIAL DEALERS

To accomplish a new dealership, Apollo Tyres should map all the dealer locations first

on a map. Now, imprint demand data onto this map. Demand data will clearly show the

locations where the there is enough demand to sustain Apollo Tyres policy of minimum lakh deposit a month for dealing truck tyres exclusively and x rupees deposit for the other kinds of dealership. Apollo should then identify existing resellers, service stations, garages

who can be converted to a dealer. Apollo may also nurture an individual as a dealer if he has

the caliber to sustain and grow its business in that locality.

CONTINUOUS ENGAGEMENT

Apollo Tyres should constantly engage potential dealers through its sales managers

and relationship managers and convince them to enlist as a dealer.


AVOIDING CHANNEL CONFLICT

Extreme care to be taken not to approach existing resellers serviced by our dealers

to avoid chances for channel conflict.

SECONDARY RESEARCH ON INVESTMENTS FOR DEALERSHIP

Brands Area Investment Breakeven RoI

CEAT Limited 500 – 1200 sq ft Rs 13 to 20

lakh

18

months

24 %

MRF 3200 sq ft Rs. 30 lakh 24 months NA

Tyre Secure

International Pvt Ltd

Minimum 200

sq ft

Rs 1.5 lakh to

10 lakh

Within 9

months

In

excess

of

35%

ChangeMyTyre.com 1000 sq

feet

Rs 35

lakh

1.5 years 95 %

Source: http://www.franchiseindia.com/articles/opportunity/tyres-business/Inflating-benefits-in-tyre-business-683/

http://www.franchiseindia.com/articles/opportunity/tyres-business/Inflating-benefits-in-tyre-business-683/


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