by John Keller | Sep 28, 2012 | Fuel Price Management, Fuel Pricing Software
When optimizing fuel prices in the fuel price management process, there are numerous factors that play a role in determining the optimized price at any given point in time. Obviously the current price at each primary competitor is important, as well as the knowledge of which competitor moved recently. Another consideration is the current replacement margin, and the historical actual margin relative to corporate goals. Historical volumes compared to target are another important consideration. But there is one more less obvious yet still critically important consideration to make when optimizing fuel prices.
Fuel Managers must be aware of the published rack prices in each of their markets in order to compare store cost to the cost of the competition. The published rack cost allows you to compare your replacement margins with those of your competitors. The published rack cost tells whether your stores are at a competitive advantage or disadvantage relative to the competition, and can help you anticipate how the competition will react to your price move, based on whether or not they have the margin to respond.
This information is so integral to the fuel price management process that PriceAdvantage is now working with OPIS to import the OPIS published rack cost into the centralized PriceAdvantage fuel pricing software system. Each PriceAdvantage customer configures which markets and which terminals to include for comparison to their fuel costs, and the published competitor rack cost is then automatically imported multiple times a day.
The power of having this OPIS information in the PriceAdvantage fuel pricing software system is that it puts all the critical fuel price management information in one centralized system, allowing the fuel manager to react that much more quickly to market changes, and to optimize both volume and profit.
by John Keller | Sep 27, 2012 | Fuel Price Management, Industry News
The US Energy Information Administration reported that gasoline consumption for the first half of 2012 was down .3% compared to the first half of 2011. The year over year economic growth of 2012 was more than offset by the increased fuel efficiency of the in-use vehicle fleet, as well as higher gasoline prices, according to the US EIA.
From a fuel price management perspective, that means that across the enterprise, c-store fuel gallons sold are likely to be lower year over year, and that fuel volume targets set at the beginning of the year may need to be adjusted downward.
It also means that the trend for the past five years is continuing this year, where the overall market for gasoline continues to shrink, and c-stores are battling for pieces of a smaller pie. Only the c-store companies with robust fuel price management software and sophisticated fuel price optimization and analytics capabilities will be successful.
by John Keller | Sep 26, 2012 | Fuel Price Management, Industry News
On April 30 of this year when Energy Transfer Partners announced they were acquiring Sunoco, it left the fate of Sunoco’s 4,900 c-stores uncertain. Analysts speculate ETP will sell the 4,900 stores because the stores don’t fit well with the rest of the ETP assets.
In a Convenience Store News article today, there is a list of possible acquirers. Below is the list, with the number of stores they currently operate.
- Wawa: 599
- Marathon Petroleum: 2,670 stores
- The Pantry: 1,615
- Alimentation Couche-Tard: 3,585 stores
- Global Partners: 1,000 stores
It is immediately apparent from this list that should any of the above companies acquire all the Sunoco stores, it would be a dramatic growth in their business, essentially a minnow swallowing a whale. Even c-store giant 7-11 with their 7,341 stores would see a store count increase of over 60%. Perhaps a more likely scenario is the 4,900 Sunoco stores will be splintered and sold off in chunks.
It will be interesting to follow this story as it develops. But one certainty is this: the fuel price management market and strategies where these Sunoco stores operate are destined to be different after any sort of acquisition.
by John Keller | Sep 10, 2012 | Fuel Price Management, Fuel Pricing Strategy
When we build a new feature into our PriceAdvantage fuel pricing software, we always have a use case in mind. The use case includes two aspects: the persona, that is the primary business person who will take advantage of the feature; and the story, which is the way the business user will use the feature and the business problem solved. For each new feature, we write a user story as per the Scrum software development way, and we write it in this format: “As a [persona], I would like to [interact with the software in a specific way] in order to [solve this business problem]”. For example, “As a fuel manager, I would like to see each of my store locations plotted as colored push pins on a map, with color representing how well the store is performing volume compared to target”. This is a real world example of a feature we included in PriceAdvantage 3.8.
What is interesting about releasing a new feature like this, is that despite all the market research we do to come up with the feature definition, once customers see it, they see additional benefit beyond what we expected. When we showed this color coded push pin map feature to a fuel manager customer, the first thing she said was “not only will this feature be great for me when managing fuel pricing strategies, but this will be great for our team who decides where to build new store locations, because it clearly shows the stores who are performing well and where they are located, as well as which stores are struggling.” She came up with a whole other persona and use case we hadn’t even considered. It is this customer insight that allows our software to continue to extend into solving more and more business problems in the fuel price management c-store business.
by John Keller | Aug 16, 2012 | Fuel Price Management, Fuel Pricing Strategy, PriceAdvantage
In the Q3 financial release from The Pantry, the CEO included a statement regarding how the c-store chain plans to improve their retail fuel margins and volumes. From the press release: “The company is implementing a fuel-pricing technology that will be designed to track and project street postings, to be more responsive to market elasticity, Hatchell said, adding that the software is currently “learning” to do its job by building sales histories and collecting data.”
This statement speaks to a critical component of an effective fuel price optimization strategy: rapid responses to fuel price changes in the retail market. Retail fuel prices in 2012 have been exceptionally dynamic and rapid. The Houston market saw a one day $0.20 price increase this year, something usually only seen once a career. It is easy for stores to be left behind when the first movers in a market make their price change. Lagging behind can result in missed opportunities, lost business, and even negative margins.
One way to maintain quick responses to market changes is to view OPIS Radius report content in your Fuel Price Management software. In PriceAdvantage, it is simple to compare the gasoline pricing reported by OPIS to what is reported by the store managers, in a “survey says vs. OPIS says” user interface. This keeps the store managers honest with their survey reporting, and alerts the Fuel Manager when a price change occurred that the store manager may have missed.
A second way to maintain quick responses is to automate the price change process to the street. This is the basis of what PriceAdvantage was built on from day one, replacing a manual phone call and fax process, with a one-button-click price change push to the store sign, POS and pump. Confirmation messages back complete the closed loop to make sure the price change was successful.
The third way to remain nimble in the retail fuel market is to post the latest store prices to all virtual mapping applications. GasBuddy and OPIS are the two content providers to virtually every gas price mapping application in the market. PriceAdvantage customers such as Valero and Rutter’s have already recognized the benefits of posting their latest gas prices online.
As the competition for retail fuel continues to get tougher, there will be winners and losers. A robust fuel price management software will allow the winners to execute an optimized gasoline pricing strategy, and become dominant winners in each retail fuel market.
by John Keller | Jul 5, 2012 | Fuel Price Management, Retail Fuel Margins
Today we had an interesting conversation with a CEO about what benefits he gets out of using PriceAdvantage as his retail fuel price management solution. He listed two specific interwoven benefits.
He described what it was like before PriceAdvantage, where he would send fuel price changes to the stores, and the store personnel would assure him they had implemented the price changes. Then he would drive by his stores and see they still displayed the old prices because the store folks hadn’t in fact changed the prices. Then there would be hours spent following up with the locations to follow through with the price changes. As you can imagine, this was a source of great frustration because his stores did not have the right prices at the street, and there were a lot of hours wasted on operations that would be better spent on strategic thinking.
Now with PriceAdvantage, he says he knows the price change has been completed when his Fuels Manager receives the automated successful price change confirmation email. In most cases, the Store Manager is removed from the fuel price change process completely because his company has integrated PriceAdvantage with the VeriFone POS. And in those cases where there is an operational problem, the Fuels Manager receives an automated email notification of a delayed price change, allowing her to follow up on an exception basis. That results in a savings of upwards of two hours each day.
So the PriceAdvantage benefits for this CEO are two-fold: confidence that based on their gasoline pricing strategy, the right retail price is at the right store at the right time, and hours gained each day in the operational fuel price change process.
