FRAMINGHAM, Mass. -- Getting a fuel customer to walk those last few feet to the store is vital for site profitability. The numbers are compelling. Fuel margins are 7% at best, while inside margins are 20% to 30%, depending on food and beverage offerings. The average fuel customer contributes less than $1 per pump visit in gross margin, while that same customer transacting inside the store contributes just more than $2 per visit.
But only 35% of fuel customers go inside the store after fueling, so even a site averaging 19,000 gallons per week (the “Mendoza Line” for successful fuel merchants) is seeing 250 fuel customers per site per day, and only 87 are going inside the store. The other 163 are driving away after fueling.
So how do smart convenience retailers entice shoppers into the store? In my 40 years in this industry, I have witnessed or implemented several strategies that are proven to improve one’s fuel-to-merchandise ratio. Here's a look at a few ...
1. Streaming video at the pump
Systems such as Gas Station TV, Clutch and Gilbarco Veeder-Root’s Applause Media systems all work on the same business model: The vendor who installs the equipment keeps most of the loop time to sell advertising, while the retailer usually gets a 30-minute loop to provide their targeted message.
This is a very effective marketing strategy, although retailers may have concerns about controlling their own messaging, and some customers may complain about being bombarded by advertising. Another important consideration for retailers, besides their time allocation, is the ability to change the message throughout the day. Being able to target breakfast or lunch items, take-home meals or indulgent snacks is important in driving fuel customers inside.
2. In-house radio
A less expensive marketing strategy employed by several retailers, including Maverik and Cumberland Farms, is in-house radio that pitches the latest specials and other company messages. Besides being less costly than pump-side video, radio can be implemented quickly with less hardware and can be targeted by time of day. Some retailers have an associate speak directly to the fueling customer: “Come on in! We have freshly baked fudge and some ice-cold sodas.” It’s the gas-station version of the Walmart greeter.
3. Surprise rewards
Some merchants run pseudo-lotteries at the pump by having a certain percentage of customers “win” a free cup of coffee, snack item or other promotions. Note that most states have a monopoly on lotteries or prohibitions if the reward is tied to a purchase.
4. Mobile promotions
Loyalty customers who have provided their cell number or email are “pinged” with solicitations or coupons when they are in range of the site.
5. Ordering at the pump
Operators such as Wawa have this capability, which can be expensive and best suits chains with made-to-order food items. Some retailers are experimenting with online ordering, which naturally increases in-store traffic.
6. The basics
Heavy fuel-volume sites or sites with limited MPDs should focus on providing convenient parking. Keeping the fuel island clean is a subtle but powerful message about the cleanliness inside. Sheetz, QuikTrip and Thorntons make fuel-island attractiveness part of their mystery-shop program. And having an inside presentation that is high-quality and appeals to all the senses—especially sight and smell—will draw fuel customers inside.
Each day, 40 million consumers fuel up in the United States, and nearly two-thirds of them drive away without ever coming into the store. It is incumbent that every retailer understands why and how to fix this.
Keeping the fuel island clean is a subtle but powerful message about the cleanliness inside.
Joe Petrowski is the former CEO of Cumberland Farms Gulf Oil and now is director of fuels for Yesway, West Des Moines, Iowa. Reach him at [email protected].