by John Keller | Nov 19, 2013 | Fuel Price Management Solutions, Fuel Price Optimization, Fuel Pricing Technology, Fuel Software, PriceAdvantage
Rafe VanDenBerg is the editor-in-chief at MindBrew and contributor to PricingBrew, the online community for pricing professionals. He just wrote an article titled “Are pricing people too isolated to innovate?”. While this article was addressed to B2B pricing professionals, the questions discussed are directly applicable to fuel pricing strategies in the c-store business.
The article is based on results from a recent research study, and there are two critical statistics that apply to c-store fuel pricing:
- 70% of the respondents have worked for fewer than three companies in their career.
- Most people reported that their go-to source for pricing information and education is people within their own company.
First of all, in the c-store industry, it has been my experience that people stay in the business of c-stores often for their entire careers, and frequently work for only one company the whole time. That is certainly true for family run businesses, and even when the family is not involved, moving from company to company is somewhat rare and only happens several times through a person’s career. So there’s no doubt that the first point in this study is true for our industry.
Second, it has also been my experience that fuel analysts without fuel pricing software commonly price their fuels “the way it’s always been done.” That way is typically based on what others before them did, like the father or grandfather of the business. And if there is no fuel software to provide insight and analysis into what is really happening in the market, can you blame them?
The article raises the question that if fuel analysts follow in the footsteps of others before them, how can these people tell if there is a better way, to innovate, and to gain competitive advantage?
PriceAdvantage fuel software has proven that with its analysis views, reports, and optimization, the fuel analyst can evaluate whether or not they are using the optimized pricing strategies, and where there may be places to increase margins or volumes. Data and information is pulled from disparate sources and presented in a consolidated location, in a user friendly way, so that trends can be evaluated and what-if scenarios can be explored. And that is the enabler for fuel analysts to innovate and break out of the way it has always been done, to bring out profits never seen before.
by John Keller | Nov 14, 2013 | Fuel Price Management Solutions, Fuel Price Optimization, Fuel Pricing Software, Fuel Pricing Strategy, Fuel Pricing Technology, Fuel Software, Retail Fuel Margins
When analyzing the overall profitability of a c-store, there’s a fundamental question that needs to be answered: do increased fuel volumes correlate to increased in-store sales and therefore overall store profits? Some would argue the answer is “of course – more customers to the forecourt obviously equates to more customers in the store, so there’s a direct correlation”.
But is that true 100% of the time? Our PriceAdvantage team spent some time with industry experts at the recent 2013 Outlook Leadership Conference in Scottsdale, Arizona and the insight they provided may be surprising. Some of the folks we talked to said you can always count on the same percentage of forecourt customers coming into the store, and you can always count on the same per-dollar transaction average in the store; so therefore increasing traffic to the forecourt will directly correlate to increased store profits.
But others told us that as you modify your fuel pricing strategy, the buying profile of the forecourt customer changes too, and the percentage of these forecourt customers shopping inside the store changes. Further, the nature of what purchases this new customer makes in the store also changes. In other words, changing a fuel pricing strategy may mean you can’t count on the same percentage of converting forecourt customers to in-store customers, and you can’t count on the same per-dollar transaction average in the store.
What’s the right answer? We believe that it’s not “either / or”, it’s “both / and”: with some stores the customer buying profile is static and one you can count on to predict in-store profits, while with other stores the customer profile is more dynamic based on your fuel pricing strategy.
PriceAdvantage now allows you to select an unlimited number of product categories from an imported set of data from PDI, and run a report showing the correlation between retail fuel volumes and retail fuel prices with the selected data. That means you can see how fuel promotions impact in-store product category sales, along with the number of in-store transactions. You can even see how promotions of one in-store product category impact sales of another in-store product category, along with fuel volumes and fuel prices.
This type of rich analysis comes out of the box with PriceAdvantage and its integration with PDI, allowing fuel managers to optimize the entire business at the c-store, both at the forecourt and inside the store.
by John Keller | Nov 8, 2013 | Fuel Price Management Solutions, Fuel Price Optimization, Fuel Pricing Software, Fuel Pricing Strategy, Industry News, PriceAdvantage, Retail Fuel Margins
In October 2013, PetrolPlaza recorded an interview with me to discuss the unveiling of the new PriceAdvantage “Margin Percentage” report. The full interview can be found here.
This new report allows retail fuel managers to view retail fuel margins as a percentage of fuel price. Traditionally retail fuel margins have always been measured in terms of cents per gallon, with a generalized definition of success as being $0.15 – $0.20 per gallon. The problem with this thinking is that this number was defined back when retail fuel prices were in the sub-$2.00 per gallon range. Now that retail fuel prices are at $3.00 levels and above, these same cents per gallon ranges represent a much lower percentage of the retail price. Compared to other c-store product category margins, these are a very low percentage of price indeed, and that can be quite alarming to marketing managers who are less familiar with the fuels business.
In fact, marketing managers are often perplexed when fuels managers express fuels margins in terms of cents per gallon. That’s where this new report provides a nice bridge between retail fuels groups and marketing. The traditional cents per gallon way of measuring fuels margins is not going away any time soon, so this report displays side by side margins as cents per gallon, and as percentage of price. Thus the Margin Percentage report acts as both a translator between two divisions of the company, and as a new perspective into profits.
The September issue of CSP magazine included an article titled “Stop Making Cents?“. It was this issue that introduced the idea to the PriceAdvantage team, and we’re proud to say that between the time when the article was released in September, and the NACS show in October, we were able to develop and demonstrate the Margin Percentage report in our NACS exhibit booth. Customers and prospects loved it, with the feedback being that this report will make it so much easier to communicate with Marketing departments, and to ultimately optimize store profits.
by John Keller | Oct 30, 2013 | Customer News, Fuel Price Management Solutions
The PriceAdvantage team would like to congratulate Parker’s on the grand opening of their 32nd store.
According to Convenience Store News, Parker’s celebrated the official grand opening of their new state-of-the-art location in Statesboro, Georgia. The 3,200-square-foot retail store is the third Parker’s location in Bulloch County.
Parker’s features its 1-Cent Wednesday Fueling the Community program at the Statesboro location. On the first Wednesday of every month, Parker’s sets aside one cent of every gallon of gas purchased to donate back to local schools.
Parker’s has been using PriceAdvantage for retail fuel pricing across all their stores since November 2011. Parker’s has added seven stores since then. The Parker’s PriceAdvantage implementation incorporates their Skyline electronic price signs, as well as their VeriFone POS system, PDI back office system, and GasBuddy OpenStore.
by John Keller | Oct 22, 2013 | Fuel Price Management Solutions, Fuel Pricing Strategy, Industry News
Colorado Governor John Hickenlooper and Oklahoma Governor Mary Fallin publicly thanked General Motors for bringing to market a 2014 Chevy Impala bi-fuel model that will operate on both CNG and gasoline.
Last year 15 governors solicited auto manufacturers for CNG vehicles as an effort to reduce dependence on foreign oil, protect the environment, and save money on state fleet costs. “By transitioning state fleets to CNG cars, Oklahoma taxpayers stand to save thousands of dollars per vehicle on fuel costs”, said Governor Fallin.
The 15 states involved in last year’s CNG vehicle solicitation now have more than 17,000 mid- and full-sized sedans in their fleets. The new bi-fuel Chevrolet Impala will offer 150 miles of natural gas range while providing full gasoline capability for an additional long distance range.
There is no question that CNG is poised for growth in the fuels US market. When and where to introduce CNG into your fuels management strategy requires close monitoring of your markets. The c-store offering CNG in the right markets will benefit from higher retail margins for this new product.
by John Keller | Sep 30, 2013 | Fuel Price Management Solutions, Fuel Price Optimization, Industry News, PriceAdvantage
A team representing PriceAdvantage just spent the week at the Insight NACS Future of Convenience industry show in London. It was an exciting time for us because for the first time we were able to show off the international capabilities of PriceAdvantage, where we can now price fuel in any country, without constraint for gallons or liters, or number of digits to the left or right of the decimal. Where previously PriceAdvantage was only able to handle prices ending in nine tenths, PriceAdvantage can now price fuel to three digits to the right of the decimal, and unlimited digits to the left of the decimal. That means from now on PriceAdvantage is a powerful solution for any country in the world. In addition to this internationalization of the product, we were able to show off the first localized version of PriceAdvantage, fully translated into French.
But this tradeshow was exciting for us in another way as well. It became clear throughout the conference that the same problems PriceAdvantage addresses for our US customers are shared with c-store fuel retailers everywhere. As one speaker put it, there are no unique problems in the c-store business around the world, just the same problems in different parts of their lifecycle. Here are three examples.
1) Retail fuel volumes continue to decline year over year. According to the Belfast Telegraph, petrol sales continue to plunge, as much as 5.8% from January to June of 2013 compared to the same period last year. That represents a decrease of 512 million liters. Diesel fuel sales increased over the same time period, but only by 270 million liters, not enough to result in a net gain. The article attributes the loss to changes in consumer behavior to cut back on their driving.
2) Grocery chains and c-store chains are in a major battle for fuel volumes. This article in the London business newspaper City A.M. reports that supermarkets are in a fuel pricing war. The article goes on to say that the supermarket chain Sainsbury’s just cut their petrol prices by 6 pence and diesel by 4 pence in a battle with Tesco and Asda.
3) Fuel profit optimization is most powerful when viewed as part of the overall gross profits of the store. In many cases, the advertised fuel price is strategically used as an advertisement to attract customers to the high margin food and store merchandise product offerings. One speaker called fuel, merchandise, and food the three pillars of c-store profitability. As retail fuel managers learn about correlations between fuel volumes and in-store profits, and how these correlations vary depending on the markets in which they compete, the fuel managers can use fuel software to optimize volumes and margins based on differing market profiles and with an eye to overall store profits across all categories.
September 2013 represents a significant milestone for PriceAdvantage as it is our launch into markets outside the US. We will continue to introduce more capabilities for our customers around the world, providing a dramatic ROI in a short time frame, by solving industry problems no matter where they may be on the fuel management timeline.