by Ian Thompson, Executive VP, Global Solutions Consultancy
Automated pricing processes can feel like a risk. How will you know if your prices are optimized? Can you really depend on a software solution to boost profit? And how will you feel giving up some control over pricing tactics?
By Ethan Walker, Solutions Consultant
Utter the word "automation" in a room full of people with diverse careers and histories. Some will shudder. Some will ignore. Some will start to get excited at the possibilities. Utter it in a room full of best-in-class fuel pricing analysts, and they're liable to start clapping. While automation is sometimes perceived as threatening, scary or "too difficult," it is absolutely essential from an overall efficiency standpoint. And at the end of the day, it equates to increased revenue, which analysts and executives alike happen to enjoy.
Our high-performance race car is almost complete. We have pulled together a powerful turbo engine, great telemetry, winning powertrain, fantastic crew and the right spoilers and wings. In relation to our convenience store, we are set up for success with great facilities, the right data and analysis of the competition, excellent operations, the right merchandise and world-class pricing.
In Part 1, I introduced the analogy of the convenience retailer as a finely tuned performance car in a challenging race for volume. We explored pricing as the turbo charger, best used in short bursts for growing margin and exploiting daily opportunities, but not the best way to maintain or grow market share. We also looked at how dropping prices across the board to increase volume often results in price wars and minimal volume growth at reduced margins.
You don't always have control over your promotional items, and that means you don't always have a plan to understand their effects on sitewide sales. Your gut instinct on what works and what doesn't is a good start, but is it giving you all the strategic support you need? Access to critical, integrated data can raise your game to the next level.
To the average consumer, spikes and dips in fuel prices feel personal — like negative consequences and little rewards. The average consumer is unlikely to assess the oil price upstream or know what other factors determine whether or not the change at their favorite station is justified. Instead, they'll pay the price established and move along with their days. As a retailer, you do not have the same option. You need to understand which factors influence change in fuel prices so you can make better pricing decisions based on your pricing power and position.
By Ian Thompson, Managing Director, Planning
As Warren Buffet once told the Financial Crisis Inquiry Commission, "If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business. And if you have to have a prayer session before raising the price by 10 percent, then you’ve got a terrible business."
by Ian Thompson
When you focus day in and day out on fuel pricing, it's easy to see pricing as the panacea to every convenience store and fuel ill. After all, when all you have is a hammer, everything looks like a nail. But Total Site Profitability is more than the sum of its parts, and so, pricing — or any other element — cannot stand alone.
