CSP Magazine

Opinion: Small Fuel Retailers: Go Big With Loyalty

Most large operators have a loyalty program tied to fuel purchases, and for good reason. According to 2015 data from Excentus Corp., a provider of loyalty programs, 54% of consumers belong to programs that offer fuel savings. They rank first in membership and activity, above credit-card cash-back rewards, coupons, discounts, airline miles, hotel points and other rewards programs.

And these programs are clearly important to consumers: Forty-six percent say they earn, buy, redeem or check their fuel-savings rewards daily or weekly. These programs offer, if not a competitive advantage, an opportunity for retaining existing customers.

Excentus reports that 19% of consumers would choose a different brand to earn 25 to 50 cents per gallon (CPG) on fuel, while 17% to 20% would switch retailers to earn 25 CPG to $1 per gallon on fuel. Twenty percent would a make a purchase in the store rather than online to earn 25 to 50 CPG on fuel.

Why is this important? A 1990 article from The Harvard Business Review, “Zero Defection: Quality Comes to Services,” argued the case for increasing profits by decreasing the rate at which customers defect. The article showed how a company could nearly double its profits by increasing customer retention by 5%. In a period of only five years, a firm with a 70% customer-retention rate will lose more than two times as many customers as a firm with a 90% retention rate.

In short: Loyalty matters.

Anonymity and Loyalty?

According to the NACS 2015 Fuels Report, there are more than 127,000 c-stores selling fuel in the United States, and 58% of them are single-store operators. Many of these small businesses may not have the resources to brand their stores separately from their fuel brand, which often leads to consumer onfusion over the stores’ ownership.

A do-it-yourself loyalty program can help a single-store operator retain customers and differentiate its store brand. Excentus reports 67% of consumers pay attention to gas prices and agree it is important to save on fuel when gas prices rise (64%) or fall (54%).

A do-it-yourself loyalty program can help a single-store operator retain customers.

The easiest path to creating a loyalty program is to use a third-party provider that will integrate a price-rollback program into your POS. However, single-store operators lack economy of scale, so they may not get an adequate payback. Also, a robust POS system is required to operate such a program.

According to Verint Systems Inc., 48% of consumers are suspicious about how their data is used. While large operators have programs that leverage consumer data, small operators could appeal to this consumer segment, which values anonymity in loyalty programs. This runs counter to every industry trend, but as a business owner you need to make the decision whether to invest money in keeping up with the pack or appealing to a niche that you can own.

Simplicity is also important. According to Colloquy, the top two reasons consumers continue to participate in a loyalty program are they are easy to understand (81%), and rewards and offers are relevant (75%).

Building the Vehicle

With this in mind, consider these two simple, easily executable solutions:

Partner with other companies: Let another retailer do the heavy lifting. This is especially beneficial if you do not have a foodservice program. A local pizza parlor, grocer or sandwich shop may be interested in creating a loyalty program that rewards customers with fuel savings. These partners can create and maintain the program, receiving most of the benefit but also bearing the cost. Your added burden is the reward redemption, but it results in increased volume for your site.

“Punch” or “stamp” card: Reward customers for making certain purchases and tailor the reward costs to the benefit received. You can design a card online for as little as $100 for 5,000 cards. If the goal is to differentiate your store brand from your gas brand, and you have a food program, this is a very powerful yet simple solution. You could offer a refund of 25 CPG off the next fill-up with 10 sandwich purchases. The margins gained on those 10 sandwiches can completely offset the $5 cost to you.

Many small retailers try to duplicate the success of large operators’ programs but fail because they do not have the same resources and economies of scale. A successful loyalty program scales the lessons from these retailers’ programs down to one that is manageable and true to your own brand promise while providing the maximum benefit.

Norman Turiano is principal of Turiano Strategic Consulting. Reach him at turianostrategic consulting@comcast.net.

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