The problems with sign price
Historically, fuel retailers would use a number of factors to inform their pricing. These factors included the cost of producing the fuel, additional fees and taxes, the perceived value of the fuel brand, store location and services offered. But most importantly, retailers based their pricing on what their competitors were doing and their publicly available sign price.
This tedious and inefficient process often requires a store manager to watch and match their competitor’s sign price, which takes them away from other important activities, including customer service.What’s worse is that approach is not good for business.
Pete Kalakarian, Owner of The Auto Wash Group in Pennsylvania, says it best:
“One operator puts a little bit lower price and the next one drops, drops, drops, drops. I call it the race to the bottom, because everybody wants to continue to maintain their volume and then they sacrifice their margin.”
In 2021, customers are more price-aware than ever. Between Google Maps, Waze, Apple Maps and more, digital tools show real-time pricing and influence customers’ purchasing decisions. And while demand for fuel stays stagnant at these low post-COVID levels, supply to customers is only increasing, with new market entrants like unbranded retailers and sophisticated chains like Walmart and Costco.
When market conditions were stable, public sign price was a good way to reach customers that were traveling near fueling stations. But now with new technologies, savvier market entrants, legislative shifts to green energy and changing buying behavior resulting from COVID-19, sign price adjustments is an insufficient way to stay competitive.
New ways to outmatch the competition
Today, factors like location, sign price and loyalty programs only reach a small segment of customers. Retailers need to find new customers where they are—online and in the context of their daily life—instead of relying on them to drive by the station. Competitive retailers must use digital tools to interact with the new customers driving near or past the station that are not part of the store’s loyalty program and have no strong brand affinity.
Since these tools are online, they know where and when customers are in their cars looking to fill up their tanks. The “where” data helps reroute customers to specific locations. The “when” information ensures that 99% of new activity happens during off-peak hours, when retailers have more than 90% capacity at the pump to take on more customers. That way, stores reach new customers regardless of whether or not they can see the sign price.
This is not a problem for next year or the year after. This is a problem that needs a solution today. Instead of sacrificing margin and creating a race to the bottom, take advantage of new ways to outmatch the competition.
This post is sponsored by GetUpside