What type of fuel marketer are you?
By Ian Thompson, Senior VP, Global Solutions Consultancy
At the beginning of this series, I introduced the analogy of the convenience retailer as a finely tuned performance car in a race for volume. In the previous two articles, we looked at the role of pricing in generating volume and how the top percentile retailers use data to get and keep a winning edge. The analogy that we used was pricing as the turbo charger and data as the telemetry in our high-performance race car.
In this article, we will focus on the competition—having a keen awareness of their performance, their goals and the appropriate way to respond without letting them determine your strategy and tactics.
The starting point for dealing with competitors is having a clear, documented and internally publicized strategy for fuel. Far too often, I’ve heard strategy defined as, “I will always be a cent below competitor X,” or “I want to make as much money as possible.” Unfortunately, there are few occasions when I’ve heard fuel strategy defined in clear, measurable terms. Without that precise definition, it is almost impossible for your organization to know how to react to the competition and the ever-changing market conditions that are normal in fuel today.
A great strategy should not only be defined at the top level, such as, “We intend to grow our fuel market share 2% this fiscal year.” It should also highlight how each department will contribute to that success. For example, “Operations will improve scorecard performance by 5 points,” and “Fuel pricing will price within 15 minutes and measure retail execution to maintain brand image.”
Too often the strategy is neither stated nor linked with the execution capabilities of the organization. This makes winning the race much more challenging. Corporate, department and individual remuneration should be based around the common goal of increasing 2% market share, with each department head defining how they will contribute and setting objectives to meet that strategic imperative.
The race analogy works from a competition perspective too. There are some circuits or tracks where one race car holds a significant advantage and the rest of the field know they are fighting for second place. That’s also true of gas stations. There are locations where the volume race simply cannot be won, but you can still compete to the very best of your capabilities.
It’s important to recognize that each location is completely unique and that tactics need to be developed for each site to maximize return from fuel, c-store, car wash…the whole location.
It’s also important to understand which lane you are driving in compared to the competition. In other words, what type of fuel marketer are you? Do you drive in the fast lane? Are you a genuine “A” player who does everything right and can leverage that professionalism to maintain, or even grow volume, maybe even glean a little more margin? Or are you a slightly lesser brand that needs to operate brilliantly, price competitively or invest in facilities to stay in the race?
There are occasions when retailers decide to “change lanes,” and this almost always ends badly. An “A” player that decides to move into the slow lane will cause carnage. Price wars will likely ensue. Margins will drop for all retailers. And while the volume may shift around a little, it is probably not enough to justify the reckless maneuver.
To move into the fast lane and become a bona fide “A” player takes investment in locations, facilities, people, processes and technology; however, once there, the rewards can be massive. The top percentile retailers typically have class-leading revenue per square foot, return on investment and EBITDA (earnings before interest, taxes, depreciation and amortization).
Monitoring the competition is important, but being truly aware of your own strengths and weaknesses is even more imperative. Clearly defining your strategy and communicating how it will be executed will put you in the right position to win the volume race.
Original article series first appeared in CSP Daily News
Coming in Part 4 of “The Race for Volume” series: Facilities.
Click here to read Part 2
Click here to read Part 1
Download 7 Elements White Paper