Direct Sales Approach to Selling Crude Oil in Kazakhstan - Essay Example

Kazakhstan is a country endowed with many oil reserves. It has several oil fields that produce millions of tonnes of oil every year. This has led to its ranking among the top oil producers in the world. Kazakhstan has many oil fields but the three largest ones are Tengiz, Kashagan and Karachaganak. Tengiz, in North-Western Kazakhstan is the largest oil field accounting for up to a third of production. Together with Karagachanak, Tengiz accounts for about 40% of Kazakhstan’s oil production. The main refineries in Kazakhstan are Pavlodar, Tyrau and Shymkent. Pavlodar and Shymkent process West Siberian Crude oil. These refineries are located around the oil fields to reduce transport costs. However, not all the oil from the fields is refined in the country. This is because the local refineries do not have sufficient capacity to process all the oil. Kazakhstan transports some of this oil to Russia through pipelines for processing (Van Vactor 24). The main buyer of Kazakhstan oil is Italy. That is according to a report by Kazakhstan’s Customs Control Committee. Apart from Italy, other consumers of Kazakh oil include China, the Netherlands, France and Austria. China has started investing in Kazakh oil with intentions of increasing its consumption of Kazakh oil. Though Russia refines Kazakh oil, it is not a major consumer of the oil. There are many challenges that companies selling crude oil face. That is due to the rules and regulations set by the authorities to govern the industry. Marketing of crude oil by private companies outside the country is limited. That is because the government allows only one company to do so. The company allowed to trade crude oil outside the country is KazMunayGas Trading AG. This is a subsidiary of the National Company KazMunayGas. The other companies remain only with the country’s refineries as their main customers for crude oil. Marketing strategies for oil Oil companies may sell crude oil through two channels. One is selling it directly to the refinery operators and the other one is selling it through intermediaries or brokers (Van Vactor 30). Refineries are the end consumers of crude oil as they process it to produce different oil products. These refineries prefer light crude oil as it is easier to refine. This is because it has low sulphur content hence saving costs on refining. Agent companies and brokers help oil producers look for potential markets for the crude oil. They link the producers with the refinery managers and make it possible for them to trade the crude oil. The agents do not buy the crude oil for their own sake but rather look for buyers for the crude oil. Whatever channel may be adopted depends on the selling firm Direct marketing involves promoting a product directly to the consumer without involving intermediaries and brokers. It requires one to be in constant contact with the customers to enhance sales. In the case of crude oil, the marketer will need to market directly to the end user who is the refinery. Companies seek to create an impression directly with the refineries thus avoid the alternative channel of using brokers and agents. To succeed, the management of the company has to come up with a good direct marketing strategy. A direct marketing strategy is one that is capable of delivering success to the company on the marketing front. A successful marketing campaign means higher sales, which in turn translate to higher revenue (Inkpen and Moffet 36). With direct marketing, the aim is to spur some action from the consumers such as buying the product, ordering for the product or requesting for information on the product. Direct marketing can be highly effective especially if it is well organized. The direct marketing strategy adopted depends on three main factors, that is, the audience, the offer and creativity. For your marketing campaign to succeed, you have to reach out to your prospects. This entails identifying your target customers and channeling the direct marketing strategy towards the potential customers. For crude oil marketing, the audience would be the refiners who process the oil into its various products. The information to note about the audience would include their production capacity and their total demand for crude oil. The offer involves the seller marketing the product and its suitability to the consumer’s needs. The seller should price the product properly and fairly as compared to its value as perceived by the consumer. In order to market the crude oil successfully to the refiners, the marketer should be able to present the offer in a convincing way. The producer should price the crude oil competitively in accordance to the market prices and should meet the expectations of the refiners for that particular type of crude oil. The company should provide some incentive for the refiners to buy its crude oil. The terms of sale should also be encouraging to the refiners. Creativity in marketing entails the method the seller uses to present the offer. Marketing aims at evoking interest in a product. To succeed, it must be creative enough to attract the attention of the potential customers. It should develop some interest and build a desire within the consumer to purchase the product. The marketer should therefore strive to make it convincing. A direct marketer for crude oil should therefore make the marketing campaign convincing enough to the refiners for them to develop an interest to trade with the company. A company may use one of several direct selling methods to sell crude oil. These may include telemarketing, email marketing and direct or personal selling. These will constitute establishing a direct and personalized communication with the prospective customer. Telemarketing involves calling prospective customers to sell them products. Communication through email to customers constitutes email marketing. It is a simple and cheap way of marketing a product. It reaches out to both existing and potential customers. Direct selling involves using salespersons to sell products to customers on a face-to-face basis. This can happen at the work place of the customer or at their home. It establishes a contact between the seller and the customer (Inkpen and Moffet 32). Due to the industry situation in Kazakhstan, the best direct sales strategy would be a combination of telemarketing, email marketing and direct selling. This is because each of those methods has a different level of impact on the final consumers, who are the refiners. Personal direct selling will help establish a relationship with the prospective customer and create an interest to purchase crude oil from the company. It will give the salesperson a platform to convince the refiner to choose the company as its supplier of crude oil. The salesperson can also clarify any issues about the crude oil supplied by the company. The refiner may have some questions to ask before making an informed decision about where to get crude oil. The physical presence of a representative from the company helps convince the refiner to contract the company as the supplier. Given the fact that selling crude oil outside the country is limited, the company has to use direct selling in order to create interest. Once the company has created interest in its crude oil and has managed to get a contract to sell crude oil to a refiner, it needs to maintain this interest to keep sales increasing. To manage this, the company has to maintain constant communication with the customer. That is where telemarketing and email marketing come most into play. The company will have to call the customer constantly to inform them of any new changes in the product. This will also help them get feedback from the customer about the crude oil. The feedback will help determine whether the oil meets its description. Email marketing will also serve the purpose of communication via email. Constant communication with the customer will ensure they stick to the company and as production capacity increases, they channel these extra needs to the same company. Even with the use of telemarketing and email marketing, the company still needs to keep sending representatives to the customer to discuss new deals and try convincing the customer to increase consumption. Persuasive selling may lead to increase in sales as the salesperson tries hard to win lucrative contracts for the company. Key to the success of any sales strategy is well-trained salespersons and company representatives. It therefore becomes necessary to train the staff to be engaged in the direct selling process. That is to equip them with necessary knowledge to be able to convince prospective customers whether face-to-face, on the phone or through mail. Once the staff grasps the nature of their work in the sales process, they will be able to push for new deals and sales contracts. Conclusion For any company to participate in crude oil trade competitively, it must have a good marketing strategy. One such strategy is direct selling. However, direct selling also depends on some factors to succeed. The most critical of these is an understanding by the staff participating in direct selling. Another important factor to consider would be communication as it determines how company representatives relay a message and the effect it has. With a good direct selling strategy, members of staff who understand it and proper communication skills, a company can be able to beat competition in the sale of crude oil especially in Kazakhstan even with the existing regulations. Works Cited Inkpen, Andrew and Moffet Michael, H. The Global Oil & Gas Industry: Management, Strategy and Finance. Tulsa. Oklahoma: PennWell Corp. 2011. Print. Van Vactor, Samuel A. Introduction to the Global Oil & Gas Business. Tulsa, Oklahoma: PennWell Corp, 2010. Print. Read More