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Comment: Britain’s petrol retailers are facing a battle for customer loyalty

How price wars and forecourt promotions are leading petrol retailers to think more strategically By Paul Cooper

GENERAL MERCHANDISE

Comment: Britain’s petrol retailers are facing a battle for customer loyalty

How price wars and forecourt promotions are leading petrol retailers to think more strategically By Paul Cooper

With unleaded petrol hitting the £5.62 per gallon mark (approximately £1.25 per litre) in some areas and oil prices showing no inclination to drop below $90 per barrel, Britain’s petrol retailers are facing a battle for customer loyalty when margins are tight and they can no longer compete on price. Fuel is a huge industry and still growing. By 2015, it is estimated that the total sector will be worth £5 billion.

Price is nearly always the main deciding factor for petrol purchase, followed by convenience, but when competition in these areas is neck-and-neck, for example amongst the big supermarket or oil company-owned chains, then the “added value” of convenience stores, giveaway promotional items and customer loyalty schemes become even more important.

According to industry analysts IGD, in May 2010 there were approximately 9,013 forecourt sites in the UK, of which approximately 94% - (8,463) were also classed as convenience stores; The top five forecourt retailers by size are Esso with 529 outlets (and around 22% of the market), followed by Shell (582), Tesco (450), BP (351) and Morrison’s (292) and it is amongst these major players that most loyalty schemes operate.

Petrol retailers, even large ones, have traditionally been wary of investing in expensive brand building because petrol is seen as a basic commodity with no discernible differentiation, but nevertheless there have been some notable promotional success stories. 

Market research group, GI Insight have found that 87% of consumers in the UK own at least one loyalty card and, of those, more than a fifth held four or more cards from different companies.

Tesco’s Clubcard is by far the most popular loyalty scheme in the UK. Celebrating its 15th anniversary in 2010, Clubcard has issued £120 million of rewards to over 14 million Tesco customers during that time.

Multi-brand loyalty scheme, Nectar, which includes BP, Sainsbury’s and Homebase, has also reported an increased usage of its card in the last year. By September 2010, 500, 000 new collectors had subscribed to a Nectar card in the preceding six months, contributing to the 21 Nectar swipes calculated to be happening every second of every day.

In June 2010, Esso launched a tie-in with the South African World Cup. Its retro World Cup promotion allowed fans to collect medals featuring their top England football heroes. The company said the promotion aimed to bring back happy memories for many drivers of the first-ever Esso World Cup Coin Collection – which was produced for the 1970 World Cup in Mexico.

Morrison’s Miles’ Scheme is a loyalty card which allows customers to collect points on fuel which can then be exchanged for vouchers redeemable in the main store.  The very high redemption rates of this scheme compared to the industry average  demonstrate that a relevant and simple scheme can help to drive customer behaviour.
Any loyalty programme in the sort of keenly-priced environment must distinguish providers from their competitors, and must allow them to collect data, while providing customers with genuine value.

As well as having tried and tested technologies to process transactions instantaneously in real time, another winning factor is the ability to tailor loyalty schemes that target different types of customers and make the relationship between buyer and seller mutually beneficial . The best schemes even have the ability to customise personalised messages for each client transaction. Retailers who make full use of the data they receive and so gain the ability to predict what customers will do tomorrow - based on what they have done today - have a distinct advantage over their competitors.

Loyalty schemes may not always be the deciding factor when choosing where to purchase, but a disappointing loyalty scheme which doesn’t respond to customer needs can sometimes tip the balance.

Paul Cooper is CEO of HTEC

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