Branded vs. Unbranded
KSS Fuels' Stein lays out multi-factored debate
FLORHAM PARK, N.J.-- The choice to offer branded versus unbranded gasoline is an important decision that can potentially impact a convenience retailer's market perception, customer loyalty, volume and profits. While studies indicate that market share for unbranded gasoline continues to grow, it does not mean that branded gasoline is on the way out, as many consumers are still loyal to their brands.
There is no clear-cut, right-or-wrong answer to this debate, according to Bob Stein, president of KSS Fuels, the fuels pricing experts. In a recently published commentary on this [image-nocss] topic, "Tips for Choosing the Best Gasoline Brand," Stein said that the branding decision is one that convenience retailers should base on multiple factors, primarily local market conditions, customer behavior and unique characteristics for each store.
"While deciding between the numerous fuels choices may seem a confusing and daunting task, in reality, it doesn't need to be," said Stein. "There is real quantifiable data available that retailers can use to support and justify a decision for either branded or unbranded fuel at a particular location."
But first, Stein asserted that retailers should reconsider certain terms in this debate. "The fact is all retail gasoline has a 'brand'," he said. "So the more accurate terminology for this discussion should be 'national brands versus regional brands.' The national brands like Exxon and Shell already have established roots and loyalty, which is important for some retailers and consumers. Regional brands are less established and sometimes take the name of the convenience chain, while offering cost savings to store patrons."
The choice of a national or regional brand is unique for each retailer, and there are benefits for either direction.National brands offer retailers: Advertising and image support. Pricing incentives. Loyalty programs. The benefit of the brand's reputation. A customer base with branded credit cards.
Conversely, the benefits of being a regionally branded store include: A price advantage over nationally branded fuels. None of the costs of associating with a national brand. More negotiating power with suppliers. More responsibility for establishing the store's brand and developing its reputation.
The decision to go with a national or regional brand should not be a hasty reaction to your local business environment or competitive pressures, added Stein. Rather, it needs to be strategic, rational and data-driven. Fortunately, sophisticated analytical tools are available now to help retailers understand their market, customer preferences and the competitive landscape. When choosing a fuel brand, retailers should consider consumer history and behavior, as well as the overall strengths and weaknesses of brands in your areas of operation, he said.
Ultimately, the choice to be nationally or regionally branded is specific to a particular business model and retail location, according to Stein. Either option can and does work. The key to success is making a strategic, data driven choice and carefully implementing that choice.
"Then you must apply the branding strategy consistently and thoughtfully throughout the enterprise so customers know what to expect from the store," said Stein. "This will keep them coming back and ensure your success in the competitive fuels business."