BUSINESS
How to Build on Traditional Loyalty By: Alex Kinnier
W
ho are today’s most “competitive” fuel retailers? The obvious answer is: the ones that get the most customers. What makes a customer choose them? That answer is less obvious. Selling more gallons and c-store items in today’s market environment is only becoming more difficult. The typical U.S. fuel retailer has at least one competitive site only 0.016 miles away, and at least one and a half sites within a half-mile radius.1 Not only do customers have a lot of choices when it is time to fill up or stop for snacks, but new COVID-19 variants have made the demand for fuel more fickle than usual in most metropolitan areas. The Energy Information Administration estimates it will take years2 for fuel sales to return to 2019 levels, if ever. The retailers that are winning the market today have become laserfocused on the factors that drive a customer to choose them. They also accept that those factors are different from what they once were, and that they need to go beyond the “traditional” in oil and gas to outmatch their competition. Getting the customer’s attention Price is the number one factor that influences a customer’s buying decision.3 Retailers use a number of variables to inform their public sign price, like fuel production costs, fees and taxes, the perceived value of the fuel brand, the store location and the services offered. But most importantly, they base their pricing on their nearby competitors’ sign price — dropping, raising or matching their own price while sacrificing margin. Consumers in 2021 are more price-aware than ever, with mobile apps on their cellphones that show them real-time pricing and influence their purchasing decisions by routing them right to the lowest price. Competitive retailers have embraced this behavior shift and have moved beyond the physically limited reach of their public sign price. By taking advantage of any of the various online marketplaces that connect consumers and merchants, fuel retailers are putting their sites right in the palms of customers’ hands and winning those customers where they are — online and driving in their cars. This is different from branded apps that reach a retailer’s existing customer base. By participating in a larger “marketplace,” retailers are listing their business in a place that customers already use to decide where to buy, which introduces their business to people they’ve never seen before and dramatically increases their exposure. Getting the customer to choose you With this increased exposure, retailers have to find a way to differentiate their price in the most profitable way possible. Instead of relying on margin-sacrificing sign pricing strategies, today’s most successful retailers use digital tools to competitively price for every customer. They offer personalized, margin-bound incentives on each gallon — delivered through something as simple as a mobile app — to change customer behavior and encourage them to choose their site over
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the competition. This kind of personalization protects a retailer’s margin as they grow. While some of the most sophisticated retailers do this on their own, using the data they already have, most retailers spend so much time on providing an exceptional customer experience that they outsource this process. It helps get new customers to choose them, regular customers to buy from them more often, and customers on-site to go to higher profit centers inside their convenience store. Keeping the customer for the long term The next challenge is to bring customers on-site as often as possible. Loyalty programs are the most commonly used tool for retaining customers and increasing their overall spend. In the past, loyalty programs focused on a standard cents-per-gallon discount every time a customer fills up at their station. Over time, these programs have advanced to offer more personalized discounts and offers, including discounts on food purchases or different grades of fuel.
