In our industry, change is a given. What works today may not work tomorrow. Today’s market landscape may shift, making strategies and tactics less effective or even obsolete.
The ability to anticipate market disruptions is a mark of companies with foresight. The will to prepare new systems and capabilities in advance of “what if” scenarios is a mark of best-in-class retailers. These organizations are not just easily able to change—they are change agents, and they thrive in conditions that make run-of-the-mill retailers flounder.
Market disruption is caused by any number of factors, including new competitors arriving on the scene, new technologies that change consumer behavior and new products that shift the offering spectrum. The most profound changes, however, are caused by legislation.
In North America, fuel markets can be disrupted by below-cost laws or state-of-emergency legislation. The boroughs of New York, for example, regulate the frequency of price moves; only one price increase is permitted in a 24-hour period, but there is no limit to the number of price decreases. In New Jersey, only a single price move is permitted in any 24-hour period, whether up or down.
Few businesspeople like restrictions, including legislative rules. But retailers who know that change is inevitable see such new conditions as an opportunity. They respond by revising strategies and tactics ahead of the competition, capitalizing on the fear and uncertainty that paralyze many businesses in the face of change.
The Price of Volatility
In learning how to navigate legislative hurdles, American fuel retailers can learn from their international counterparts. For example, in one central European country, the government introduced legislation that required fuel retailers to submit all price changes to a centrally hosted website accessible to the public and every other fuel retailer in the market. This apparently simple rule was intended to improve transparency of fuel pricing.
But industry veterans quickly saw that the rule could significantly increase price volatility. The threat was that every retailer would react to each price change in his or her micro-market, causing a domino effect of disruption that could prove impossible to stop.
One of these fuel retailers hired Kalibrate to help it prepare for this newly volatile condition. We assessed the client’s pricing strategy to determine whether its pricing was reinforcing or undermining its overall brand message. More tactically, we compared its retail prices to ensure that the agreed-upon strategy was being executed at each retail site. We also assessed the retailer’s operational capabilities, both at the head office and in the field, to ensure it was capable of handling the expected increase in workload.
What we found was that the retailer’s price position was inconsistent, and this was causing confusion among its customers across the market. Furthermore, this inconsistency was diluting its brand message.
The retailer was not clearly portraying its offering to customers. Finally, its systems and processes were unable to support the expected significant increase in price volatility that the new requirements would bring. This retailer’s foresight in engaging this assessment process enabled it to prepare prior to the legislation’s disruptive effect.
Together we defined a clear price position that would deliver the client’s strategic imperatives. We determined site-level tactics that provided overall nationwide consistency yet allowed freedom to change prices depending upon the nuances of each individual retail location. We also implemented a fully integrated, automated, exception-driven pricing process that ensured the retailer would thrive in the volatile market that the legislation would likely bring about.
Double-Digit Rewards
The retailer’s concerns were well founded. The legislation was enacted, and—very quickly—pricing became more volatile. Other operators struggled to cope with the increased frequency of data surveys and price changes.
In a market in which volumes were falling, the client experienced a double-digit increase and equally significant improvement in market share and market efficiency. Its integrated approach positioned the company to perform while its competitors scrambled. It continues to be a key factor in its agility and capacity to excel in the face of change.
7E Score*: Before and After
Defining a clear price position helped a central European retailer come out ahead of pricing volatility after a new regulation took effect.
| Measure | Initial | Improved |
| Overall | 58 | 72 |
| Market | 65 | 68 |
| Location | 63 | 67 |
| Facilities | 70 | 72 |
| Operations | 50 | 74 |
| Merchandise | 61 | 62 |
| Price | 49 | 81 |
| Brand | 58 | 79 |
* Kalibrate’s method of evaluating fuel retailers’ strengths and weaknesses based on an objective assessment of their sites and network | Source: Kalibrate Technologies
Ian Thompson is senior vice president of global solution consultancy for Kalibrate Technologies. For more information, visit kalibrate.com.
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