In It to Win It

Loyalty programs can raise fuel volumes, but at what cost?

Linda Abu-Shalback Zid, Senior Editor

ATLANTA -- There's more to entering third-party loyalty programs than meets the eye. For Pat Lewis, partner at Oasis Stop N Go LLC, even doing his due diligence and deciding to go for it did not mean it was a done deal. "Do you want big box to know every single one of your customers, how many gallons they buy, what grades they buy, what's the proximity of their house to your location?", Lewis asked during a 2010 NACS Show workshop on Tuesday entitled "Fuel Loyalty Programs: What Works & What Doesn't."

He said he could see why big oil would appreciate the lift in gallon [image-nocss] volume that the programs might provide. But he added, "But if you're a retailer, there's other parts of the business where your margins are made. You need to have some sort of system to drive the consumers from the forecourt inside. Consider its value."

In the end, he thought he' would try out a Shell/Kroger partnership out for a year. Unfortunately, he then found out that the Shell program would shut off his ability to use his own loyalty programwith three-fourths of the people in his markets already carrying his card.

"At my company, I decided to build my own brand equity," he said.

Joe Leto, president of Westminster, Colo.-based Energy Analysts International Inc. (EAI), said that there are or soon will be 22,000 c-store sites that will be tied to third-party loyalty programs, including 8,000 for BP and 6,000 for Shell.

He added that a look at the c-store population of more than 144,000 also means there could be an average 11 retail sites that could tie to each hypermart site without fuel.

He added, however, "A lot of these programs are not customer-centric. The fuel site is basically serving as a redemption site. The customer is not necessarily entering the store."

Leto added that there is one way that retailers can win at the third-party loyalty game, and it is not by engaging in programs just because your neighbor has it. "You have to believe that either on fuel volume or store sales, you're covering that discount."

Joining Lewis and Leto as speakers on the panelmoderated by Walls, N.J.-based OPIS' Robert Goughwas Waycross, Ga.-based Flash Foods Inc. CIO Jenny Bullard.

Twin Falls, Idaho-based Oasis Stop N Go operates 13 locations in southern Idaho.

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for more details on the workshop.