EL DORADO, Ark. --Murphy USA Inc. is planning to pilot “a highly distinctive, unique loyalty program” in early 2018, President and CEO Andrew Clyde said during the company’s third-quarter 2017 earnings call.
Following a financial review that included a hurricane update, Clyde picked up a recurring theme from previous earnings calls—how Murphy USA intends to deal with competitive pressure and optimize its positioning.
“We know we have to capture demand from underserved segments,” he said. “We've talked about loyalty before and how important that is to customers who buy gasoline from grocery stores or mass merchants, and how we have not had a loyalty program, so it's an important segment.”
While major details on the loyalty and other initiatives are still forthcoming, here is what Clyde has revealed …
Not ‘me too’
At Murphy USA’s Investor Day in New York in May, Clyde said that loyalty is more than just a program, and that it involves the entire store offer.
On the company’s second-quarter earnings call in August, he added that Murphy USA is already an “everyday low-price retailer,” and its customers come to the stations for that low price. Murphy USA is “not going to be able to do what the majority of loyalty programs have done in the space, which is ‘let's raise prices to all the customers and then discount to those who are participating in loyalty.’ … It’s going to leverage a different set of technologies than the me-too programs that are out there today.”
Promising more details later, he said, “We've committed to not implement a ‘me-too-late’ model,” but something that adds to the “stickiness” the chain already has based on fuel prices.
Clyde, above, said at the time that the company was in the midst of designing its program from a technology standpoint, and that it had selected, but would not announce, pilot markets for the program.
New loyalty program
During the Nov. 2 earnings call, Clyde said that the loyalty program will launch in first-quarter 2018, likely with a digital component. “We think that's going to be an important contributor toward capturing that segment of underserved customers,” he said.
Murphy USA executives gleaned some insights into how customers might respond to a digital loyalty program when it launched a test on a much smaller scale for tobacco products, Clyde said. “We got close to a million customers signing up in a single month,” he said. He did not provide details on that program.
“It tells you something about the value orientation of our customers and the fact that they seek out loyalty programs as much as others. While many retailers pat themselves on the back for gaining 1 million to 2 million customers in a year, we were highly encouraged by what we were able to do in a very short period of time,” he said.
Murphy USA is also planning to go after what it considers to be another of its underserved segment—fleets.
“There's also some segments like the fleet customer where we know with our everyday low price and that discount, it's a competitive offer,” said Clyde. “We do not have a go-to-market model that's effective for that.”
The company’s sales force has been focused on improving communications in the field with its Walk of Excellence field sales tool and on improving the stores, but it is now turning its attention to fleets, he said. “We see a lot of opportunities there.”
Murphy USA is looking closely at its competitive positioning, as well.
“What we are seeing year over year over year is a deceleration of the new builds [by] competitors,” Clyde said. “One can simply look to Wal-Mart's Analyst Day and the 2019 projections they laid out for Supercenters and Neighborhood Markets.”
Wal-Mart said it plans to open fewer than 15 Supercenters and fewer than 10 Neighborhood Markets in the United States in fiscal 2019. Murphy USA has more than 1,000 gas stations in Wal-Mart parking lots via a relationship that ended in January 2016, with Bentonville, Ark.-based Wal-Mart deciding to move forward with its own fuel branding for new locations. It already has gas stations at Wal-Mart, Sam’s Club and Neighborhood Market stores.
“While clearly adding fuel in front of so many Neighborhood Markets in prior years had an impact on us and others, this is a rapid deceleration of that,” Clyde said.
Murphy USA is going to continue to concentrate on high-traffic areas in core markets where it “can build up scale with loyalty,” said Clyde. “That doesn't necessarily have to be right in front of the Wal-Mart, but that's always been a good proxy for a high-traffic area. But we have success away from that, typically with a little bit larger format.”
Another factor that Murphy USA is evaluating in terms of competitive positioning is price optimization. The company has implemented a new fuels-pricing system in all of its stores that is providing better data, tools and insights to optimize its pricing, said Clyde.
It is looking at markets with a “falling price environment … where we can go put a price on the street and get volume,” he said. “Where is that just immediately matched and you just erode the market and you just chase it down? Some of the competitive activity over time has made some of those opportunities fewer.”
So in some of those markets, Murphy USA will be “less aggressive in taking prices down,” he said.