by John Keller | Oct 1, 2010 | Fuel Pricing Strategy, Industry News
The market research firm NPD Group reports that convenience store traffic and sales were up for the quarter ending June 2010 compared to a year ago. Convenience store traffic was up 8% and sales increased 11% over 2009. This is a reversal in the trend from 2009, when the number of visits was down.
The report is based on tracking the behavior of 49,999 convenience store shoppers in the USA. Over an average 30 day time period in the second quarter, the average number of visits customers made to a convenience store rose from 6.1 visits in 2009 to 6.4 visits in 2010.
The number of pay at the pump visits to buy fuel only are virtually the same year over year, while visits to purchase at the store only are increasing. The number of visits to buy both fuel at the pump and items in the store are declining. Consumers say the top two reasons for visiting convenience stores remain “convenience location” and “in-and-out-quickly”.
The research was reported by National Petroleum News at http://bit.ly/b2UBLA.
by John Keller | Sep 7, 2010 | Fuel Price Management, Fuel Price Optimization, Fuel Pricing Strategy
CSP Daily News reported today the findings of a new Nielsen online survey. The survey results directly speak to fuel price management strategies at c-stores:
- 45% of households are “diligently seeking” lower fuel prices
- 63% of households combat high fuel prices by combining errands and trips
- 85% of households buy their fuel from c-stores /gas stations
- 79% of customers who buy fuel from c-stores / gas stations do so because of lower fuel prices
- 67% of customers who buy fuel from c-stores / gas stations do so because of the convenient location
- 14% of customers who buy fuel from c-stores /gas stations do so because of shopper loyalty programs
These results may not reveal revolutionary new insights into the customer behavior of buying fuel, but they do reinforce key aspects of well-known fuel pricing strategies:
- Location matters – shoppers will fuel up at your location as part of a broader errand run, especially if it truly is at a convenient location
- People’s fuel buying habits have not switched out of recession mode – they’re still shopping around for the best fuel price
As retail businesses come and go, so do consumer traffic patterns. Fuel price optimization strategies must adjust to react to these traffic patterns. Sometimes Fuel Managers can even use lower fuel prices to proactively alter these traffic patterns. Successful Fuel Managers rely more than ever on fuel pricing software such as PriceAdvantage to reveal the relative success of their fuel price adjustments.
by John Keller | Aug 26, 2010 | Customer News, Fuel Price Management, Fuel Pricing Strategy, Industry News
On August 19, 2010 I wrote a blog article discussing how critical it is for Fuel Managers to be diligent about adapting their fuel price management strategy in order to quickly react to the constant changes in their fuel markets. One example I gave is how fuel retailers are adapting fuel rewards programs, allowing them to gain market share without having to adjust their fuel price management strategy.
Today Kroger announced the expansion of their fuel and grocery reward program to 48 Shell stations in the Roanoake Valley and Lynchburg areas of Virginia. Customers accumulate points on their Kroger loyalty cards when they purchase groceries, and points can be used for cash discounts at the pump.
Carl York, a spokesman for Kroger’s mid-Atlantic region office in Roanoke said “Fuel is definitely important to us. We’ve learned that it’s a nice fit with the grocery business. We can drive grocery sales by providing fuel centers. This partnership with Shell allows us to have a bigger footprint to make our fuel promotion more impactful”.
This is another example of the volatility in the fuel market. Fuel Price Managers who compete against Kroger need to carefully monitor the impact this reward strategy has on the market. As we all know, consumers love a fuel bargain, and they will travel out of their way to cash in their discounts. Competing c-stores may need to adjust their fuel prices down to minimize any loss of market share.
by John Keller | Aug 19, 2010 | Fuel Price Management, Fuel Price Optimization, Fuel Pricing Strategy, Industry News
The Washington Post published an interesting article about BP and its brand recovery efforts. According to John Kleine, executive director of the BP Amoco Marketers Association, which represents the station owners, BP retail fuel sales are returning to previous levels. After the spill, sales dropped off 40 to 50 percent at some stations on the Gulf Coast. Now in most cases retail fuel sales are down only about 10 percent on the gulf and less than 5 percent in other parts of the country.
Station owners said they began facing angry protests after the spill and turned to BP for help. The company gave them signs and took out print and radio advertisements emphasizing that the stations were locally owned and operated. BP helped the owners at some stations with customer appreciation campaigns including free car washes and free cups of coffee. Corporate staffers flew in to stand in driveways and listen to customers’ concerns, Kleine said.
“Where the owner is known in the community, there is a less significant impact,” Kleine said. “I think BP has to recognize that the local face is really a value to their brand even more so than anybody thought.”
I’m certain that the increased community awareness of local dealer ownership as Mr. Kleine describes is helping BP fuel price sales return to normal. And as news of the gulf spill continues to diminish, and public attention wanes, positive public feelings about BP will return to previous levels. But I believe there’s another key factor in play here. In a previous blog, I explained the rebate incentives BP is passing on to fuel dealers, allowing dealers the opportunity to reposition themselves in their local markets with lower priced fuel, rather than the premium fuel price strategy they previously enjoyed. This Washington Post article doesn’t mention these rebates, but I have to believe the lower fuel prices are making a significant difference.
by John Keller | Aug 19, 2010 | Fuel Price Management, Fuel Price Management Solutions, Fuel Price Optimization, Fuel Pricing Strategy, Retail Fuel Margins
Article Source: http://www.articlesbase.com/cars-articles/fuel-price-management-requires-constant-adjusting-in-order-to-optimize-retail-fuel-prices-2762156.html
Author: John Keller
It is the job of Fuel Managers to figure out the optimized retail fuel pricing strategy for each of their stores, in each of their markets, in order to maximize their fuel profit contribution to the bottom line. This job has become a daunting task for many, as the retail fuel pricing market has become increasingly complex and is constantly changing.
For example, Fuel Managers who compete against BP dealers report that BP dealers historically have priced their fuel at the high end of the market. The BP strategy has always been to emphasize the quality of their brand name fuel, and even the “green-ness” of their company as they promoted the morphing of their acronym from British Petroleum to Beyond Petroleum.
But in the months following the gulf oil spill in April 2010, BP dealers suddenly experienced fuel sales declines in the range of 10-40%. These dealers had to react quickly. So they reversed their fuel pricing strategy, and began pricing their fuel as the lowest in their markets. A competitor who was once at the high end of the retail fuel price market suddenly became a low price leader.
To further this trend, in June 2010, BP announced they would begin offering fuel rebates of $.01-.02 per gallon to their dealers. Many dealers used these rebates to lower their fuel prices even further, with the hope that price-sensitive customers will be willing to start fueling up at BP stations again when BP has the lowest fuel prices in town.
When competing against BP dealers, Fuel Managers have had to react quickly to this sudden reversal in their competitor’s strategy. They must carefully monitor the daily impact of the BP dealer’s new pricing. Do brands other than BP need to be priced the lowest in town? Are consumers in individual markets willing to pay a few more cents per gallon of fuel in order to avoid the BP brand? If non-BP brands are priced at the same level as BP brands, will consumers opt to buy fuel from non-BP brands in order to avoid BP? Only by carefully monitoring the daily performance of individual store sales, and the relative store pricing in each market, will Fuel Managers be able to answer these questions and find the fuel pricing strategy that works best for each of their stores.
BP and the gulf oil spill is only one example of the dynamic nature of retail fuel markets. The c-store industry as a whole is going through rapid consolidation, where larger c-store chains are gobbling up competitor stores, and expanding to more and more locations. That means the competitive landscape in each market continues to change as store brands come and go. A store next door may be a Shell brand one day, and unbranded the next. A c-store may have three pumps at the beginning of the year, and by the end of the year have 10-12. Small, unassuming manual fuel price signs one day may be replaced by bright electronic LED signs the next. These kinds of market dynamics force Fuel Managers to keep a careful watch on what is happening in each of their markets, and respond quickly with new fuel pricing strategies when the competitive landscape changes.
A third way Fuel Managers may see their markets change overnight is through the adaption of rewards programs. One Fuel Manager recently reported results of a grocery reward program he was piloting with a few of his stores. After only one month of implementing the rewards program at his pilot stores, he was seeing fuel sales volume increases of up to 100% year over year measured by gallons sold. And this was with no changes in his fuel pricing strategy – the relative prices at his stores remained unchanged in those markets. He was almost giddy as he said he knew he was taking market share away from his neighboring competitors, and they didn’t even know what hit them.
These market shifts require Fuel Managers to be diligent in monitoring and measuring the fuel sales performance at each of their stores, looking for sales trends, and quickly adapting to changes in competitive pressures. It may be tempting to some Fuel Managers to blindly follow the guidance of an algorithm that automatically provides optimized fuel prices based on historical data, leaving the human guesswork behind. No doubt, these fuel price optimization equations can be valuable in turning up statistical correlations that may otherwise go unnoticed. But with the reality of how dynamic the competitive pressures are in each market, there is no substitute for the human touch of the Fuel Manager.
Fuel pricing software solutions such as PriceAdvantage from Skyline Products (www.fuelpricingsoftware.com) make it possible to track the constant shifting of the competition in each market. Daily sales data imports from PDI display fuel volume sales trends for each store. And the historical street price trend at each store, along with the price at each competitor, can overlay the fuel volume trend. This view makes it easy to identify a sudden shift in how a specific competitor positions itself relative to others in the market, and whether or not that shift is impacting store fuel sales. Fuel Managers can compare competitor prices reported by Store Managers in the field to the competitor prices reported by OPIS. According to many Fuel Managers, these OPIS reports provide a critical validation check. If Fuel Managers notice a discrepancy between what the field is reporting as the competitor price, and what OPIS reports, they can quickly request a re-survey from the Store manager and get the right information into the system right away.
Without a doubt, the game of fuel price management has grown increasingly complex over the last few years, and increasingly competitive. Annual retail fuel price margins are at an all-time low. But Fuel Managers no longer need to view finding the optimal fuel pricing strategy at each c-store as a daunting task. By using the right kind of fuel pricing software solution, Fuel Managers can have all the information they need in one central command and control location, easy to access, and ready to respond to every competitor’s move.
Article Source: http://www.articlesbase.com/cars-articles/fuel-price-management-requires-constant-adjusting-in-order-to-optimize-retail-fuel-prices-2762156.html
About the Author: John Keller is the Sr. Product Manager of the PriceAdvantage fuel pricing software division of Skyline Products in Colorado Springs, CO. John is the author of the Fuel Pricing blog at www.fuelpricingsoftware.com.
by John Keller | Jul 28, 2010 | Fuel Price Management, Fuel Price Management Solutions, Fuel Price Optimization, Fuel Pricing Strategy, Industry News
These are good days to be in the retail fuel business. Valero announced in their Q2 results that their retail fuel operations segment had a record-setting performance with $109 million in operating income. These are the best second quarter results in Valero’s history. Valero reported their success is due to strong fuel margins at its gas stations and convenience stores.
A Fuel Executive for one of our PriceAdvantage customers reports they are up $2.4M so far this year. Other PriceAdvantage customers report recent months are some of the strongest ever.
In times like these, what do companies do to keep the momentum going? BJ’s Wholesale and High’s Dairy are investing in Fuel Price Management solutions from Skyline Products to automate their fuel pricing process to further improve speed to the street, and to maximize their fuel margins and profits. Shrewd companies like BJ’s and High’s recognize that using these strong profits to further optimize their fuel pricing strategies and to improve pricing efficiency is the way to make the most of these times of plenty.
