Opinion: Mastering the Fuel-Pricing Process

Ian Thompson, Managing director of planning, Kalibrate

gas prices

CLEVELAND -- Fuel-pricing success is dependent on more than just your pricing process. Other key factors are necessary to achieve pricing success: pricing power, your position in the market, the skills of your pricing team, and how well you incorporate data into your strategic and tactical decisions.

Here are some ideas to bring them all together ...

Gathering data


World-class pricing is dependent on both automation and management by exception. In other words, the greater the level of automation you can drive and the more empowered your pricing analysts are, the more successful your overall fuel-pricing process will be. The daily minutiae involved in the pricing process will melt away in favor of new efficiencies fueled by a slick and effective process.

To create those efficiencies, you must first gather the right data. Whether information comes from your site managers, area managers, territory managers, third-party providers, scraping the internet or other means, you must be able to determine whether the data is valid.

You can’t just gather the data, enter it into a system and hope for the best. Indeed, validity of data is the crux of your successful process. Without that, you can’t trust any automated rules your pricing analysts create. They won’t be able to predict any future pricing behavior or debate the merits of a specific price tactic without trusted information. Your team should gather the data from valid sources, and then scrub it thoroughly to ensure there is no room for “garbage in, garbage out.”

Automation and integration

buying gas

Once the data is valid and clean, you can begin to generate prices. There are typically two reasons to change price: a change in the micromarket or in the cost of your product. As soon as one of those changes occurs in input, your team should have the newly generated price to the site and point-of-sale (POS) in 15 minutes or less.

If you have one site, that’s simple. If you have 300 sites, that’s a tall order. And that’s exactly why complete automation is such an integral factor in pricing success. Having anyone touch price when it’s not necessary is going to negatively affect value. The better approach is to have them jump in only when they must, and to be sure that’s the case, the data in/data out model must be fully automated.

My take: Automate and integrate whenever you can. Data collection, analysis, price generation and communication should all be carefully integrated so your pricing team rarely must jump in to make a change. This is, of course, easier said than done. But pricing is a challenge that demands multiple sources to solve—including the right system.

Ready for anything

heavy snow fall

Let’s say you get to a point where your team is focusing only on the necessary data to price strategically. Great users of fuel pricing automation will understand how and when to manage by exception, especially around “events.” Events are occurrences that might affect site traffic: A major snowfall at the right time of year will bring an influx of skiers, for example. Great pricing teams running best-in-class processes would understand that a major increase in volume isn’t due to pricing decisions but rather the snowfall. Therefore, they wouldn’t make a rash pricing change and expect it to have the same results.

An anomalous event, such as snowfall in August, is when pricing by automation and exception shows its value. Your software won’t understand what to do in the case of this anomalous event; it doesn’t fit the typical model. But your people can recognize the anomaly and make the right decisions.

The combination of smart software on normal days and smart people for those abnormal cases is the key to the perfect pricing process: automation and exception. You can’t have the latter without the former, and you must have both to be a world-class fuel pricer.