Remember sitting in the back of your parents car, going out for a drive? One of the most exciting moments was always filling up with petrol. Not for the octane buzz of the petrol fumes, but for the possibility that today might be the day you got a free gift. Depending on how old you are, the anticipation might have been about completing a Green Shield stamp book, getting a whole set of Esso coins, or having enough BP Option vouchers to claim a premium.
More often than not, though, the reality was that you drove away with a free glass. Not enough of a gift to meet that thrill of expectation, and certainly unlikely to keep the kids happy. That is one reason at least why the landscape of petrol promotions, once almost uniform in its premium-based collect-and-redeem approach, has now changed completely.
Not only has the conventional orthodoxy of forecourt sales promotions been overthrown, there is no longer even agreement on what is the best new approach. The one factor which continues to dominate is convenience. For every petrol retailer, having the right sites is critical since most drivers fill up at wherever is nearest when they need fuel, or at a location they are passing anyway. That is why supermarket forecourts have captured a large market share so rapidly.
It may only be among high mileage drivers that “it is possible that loyalty programmes and promotions have an impact”, according to Robin Shuker, director of IMP, which handles the Texaco account. This is a point which Texaco recognised in 1994, when it decided to pull out of its long-term Star Collection. In its place it introduced Global Club. This was the first electronic loyalty system which also had a link with a payment card – members could get a Visa card which accrued points when they spent.
The scheme has played an important role in locking in the high-value customers which all marketers know they must retain. But there has been an issue around pulling in the switchers who use different outlets every time they fill up, since Global Club was not available to them. Currently, Texaco is assessing how it can deal with these multiple tiers of use.
“We are now looking at ways of reducing the cost of servicing the scheme so we can profitably extend it to a broader market,” says Shuker. “We have been testing it on the forecourt using point-of-sale leaflets inviting people to join. That is something we have never done before.”
Until now, membership of the Global Club has been restricted to a small group of high mileage drivers, about 120,000 people. These have been identified by forecourt staff from the frequency with which they claim promotional gifts. They are invited to join the scheme, but there has been no other visible evidence of the Club’s existence on the forecourt.
For the rest of its customers, short-burst promotional campaigns have been used as an added incentive to buy, like the recent free Virgin music tape, called ‘Keep on Rocking’. Eight- to 12-week campaigns allow the company to keep its promotional offer fresh without being locked into the long-term liability which giving away points can create.
Texaco is also trying to build its brand values to reduce the emphasis on price which currently dominates the market. “We are trying to push consistent images around the Formula 1 sponsorship and the values associated with that,” says Shuker. “There is a move towards the core strengths of motoring values, rather than trying to be a shop with a promotional scheme.” While increasing sales of non-petrol items is important to all forecourts, Shuker says research has shown that customers want a range of relevant products, rather than the same huge choice of a supermarket.
What Texaco, like every other petrol retailer, is keen to avoid is putting so many promotional vouchers into the field that it can never afford to pull out of a scheme. When Esso decided to close down its Tiger Tokens programme after many years, the reported cost of meeting all claims was estimated at between 10m and 20m. As one observer puts it: “People kept finding tokens in their glove compartments and down the back of the sofa. Esso really got a shock.”
That is nothing compared with the 200m which Esso is said to have spent so far on supporting its Pricewatch campaign. If anything, this has been the most significant break with the tradition of petrol sales promotions, taking the offer down to a single, basic claim – low price.
According to Simon Mahoney, managing director of sales promotion agency SMP, “Esso is adding value by keeping prices low.” He points out that the price difference is highly visible, at about 8p or 9p a gallon. While that may be cutting into Esso’s margins, it has increased its volume – as its new advertising campaign says: “One million new customers a week can’t be wrong.” Nor does the company have to carry the cost of an electronic loyalty card programme.
Mahoney believes that the investment involved in these is making it hard for Esso’s competitors to answer its aggressive pricing. “Collection schemes and their massive budgets are not being paid for by the petrol companies, but by the consumers in pence per gallon,” he says. One consequence might well be a split in the market between business drivers, for whom the cost of petrol is less of an issue but who are more likely to get high value rewards from collection schemes, and private drivers, who are extremely price conscious.
For independent petrol retailers, investing such huge sums in promotions or loyalty schemes is not an option. But they still have to respond to the forecourt marketing wars being waged by the majors. The Save Group (formerly the Frost Group) is a franchise network of over 400 outlets, which is the fourth largest petrol retailer.
Managing director Dean Overton says: “We have replaced the traditional promotion of a free glass for every 20 gallons because we think the consumer is more sophisticated. We also detected in the market a weariness with all the catalogues flying through the door for all sorts of schemes offering the same white and brown goods. From our customer response, we think people are fed up with those.”
The group runs a Flexible Points scheme based on a magnetic stripe card which is loaded with points for each fill. Once full, it is redeemed for cash. “People want to feel they are getting something back and it is nice to have that in cash,” says Overton, although customers can opt to send in for a gift voucher or donate the money to Guide Dogs for the Blind.
Two practical issues have been crucial to making the scheme “very successful”, claims Overton. Firstly, customers get the money instantly on the forecourt. Secondly, there is no data capture to get a card. “There shouldn’t be any barrier to prevent people from taking part in the promotion,” he says, although data is gathered from those who send in for a voucher.
He believes the scheme gives the independents a chance to compete against the majors despite the price war, because they can discount through the cashback offer, but at lower levels. Overton believes petrol promotions have changed for good: “I don’t see anyone taking on the forecourt redemption promotion where you give gifts to customers there-and-then. That has gone out of the window, because people expect more.”
For BP, the decision on how to use sales promotions has been complicated by the merger with Mobil. Three years ago, the company ended its own collection scheme, called Options, and had been focusing on short-term promotions, such as the “That’s Entertainment” tie-in with Sony. But when BP took over Mobil, it also inherited the latter’s Premier Points scheme.
According to Suzanne Partridge, associate director at Interfocus which handles BP, this has meant a twin communications strategy. “Mobil customers were extremely concerned that the scheme was going to be taken away, so we had to let them know it wasn’t. For BP customers, is has been an introductory message saying this is now available,” she says.
Premier Points has 14 different types of benefit, ranging from money-off at Argos to 5,000 different products in a catalogue, which gives it a varied appeal. “As long as the target market continues to be motivated by shopping at Argos, that’s fine,” says Partridge. “But BP is also looking at ways of broadening the scheme and adding value, like Shell has done.” Also, the scheme is not driven by a database, so information is not being gathered on customers, which is another limitation.
BP has been forced to respond to Esso with its own Price Focus. At the same time, the company is trying to reposition itself — it is currently viewed as a big corporate player and it wants to be seen as more friendly and approachable. This could mean a change in communications strategy. “It has not yet been decided how that will be taken forward. The question is whether to position the focus on price in a way that is equivalent to Pricewatch, or whether to let it drop while BP looks at other areas to steal a march,” says Partridge.
Splitting the promotional offer may well be what characterises the petrol sector in the future. It is already noticeable that packaged goods manufacturers are running promotions within independent forecourts specifically tailored to that market. The major chains may well start to introduce their own in-store activity. A spokeswoman for Shell says: “In the shops we will be doing promotions on shop goods. On the forecourt, our research and customer behaviour shows that the Smart card is the way we will be going forward.”
The way supermarkets promote petrol sales will also have an impact. They are currently using their store loyalty cards to steal market share, by offering double points. But this does bring with it the risk of diluting the value of their schemes while incurring heavy costs. After all, what finally drove Green Shield stamps out of the market was retailers doubling and quadrupling their rivals’ offers. The consumer may end up happy – especially the children in the back of the car – but the bottom line ends up in a state of distress.