Petrol giants try new avenue to fuel loyalty

The UK motor fuel market is worth nearly £30bn a year, yet petrol retailers rarely advertise on television. Next month, however, Shell returns to our TV sets with an ecological-based advertising campaign to promote Optimax, its new premium-priced super unleaded petrol brand.

While its parent company Royal Dutch/Shell has run some corporate advertising campaigns, Shell UK has not advertised on television in this country for over ten years. According to a spokesman for the company, this is because the company has not had a significant launch since the late Eighties, when it launched unleaded petrol.

But others claim the reason for petrol retailers’ lack of investment in brand advertising is because consumers feel no loyalty to any particular petrol brand. In addition, low margins on fuel sales in the UK makes television advertising seem an expensive luxury. Although the recent protests against petrol prices would have us think differently, UK petrol retailers claim profit margins on fuel are lower than ever.

This is largely because of Esso’s Price Watch campaign, which it launched in 1995. The company started a ferocious price battle when it vowed to match rival petrol prices within two miles of its outlets. The aim was to claw back business from Tesco, Sainsbury’s and other supermarkets selling cheap petrol.

But the effect of the campaign was not only to lower the price of petrol. It also led to the closure of 1,500 petrol stations which were unable to compete in the price war.

Shell is not the only petrol retailer planning an TV advertising onslaught. BP has recently launched a high profile TV campaign.

But neither of the two rivals are running a brand advertising campaign for their forecourts. Shell is using its ads to focus on the new fuel and its ecological and engine performance advantages. BP’s campaign promotes its convenience stores BP Connect.

By flagging up their “incidentals”, such as convenience stores or a particular type of petrol, fuel retailers are trying to differentiate themselves from rivals and gain some kind of consumer loyalty.

One senior advertising insider claims that Shell’s £4m investment in advertising its new premium priced fuel will see little return: “Less than four per cent of petrol sold in this country is the high-cost unleaded fuel. People will not pay over the odds for petrol, whether or not it enhances their car’s performance.”

Shell’s spokesman unwittingly backs up this claim by admitting that super unleaded fuel accounts for just 2.6 per cent of the overall fuel market. But, he says, Shell believes that Optimax, which costs about 4p or 5p a litre more than standard unleaded petrol, will bring more consumers on board because it has the added benefit of enhancing engine performance.

“There are people who look after their cars, love driving and value their car’s response. This new fuel will make a difference to their engines, and we know these consumers want it,” he says.

Industry experts say that consumers believe that since the Esso Price watch began, petrol prices are guaranteed to be the same in a given area. This makes it particularly hard for a petrol station brand to differentiate itself from its competitors.

According to figures released by the Institute of Grocery Distribution, there are about 13,716 forecourt outlets in the UK. The five largest (Esso, BP, Shell, Texaco and TotalFina Elf) account for 62 per cent of all fuel sold. Yet Esso, Texaco and TotalFina Elf do not advertise on television.

Instead these companies, along with BP and Shell, invest in customer loyalty card schemes. Such schemes were very popular with retailers in the mid-Nineties but are now viewed by many as an expensive and ineffective way of retaining customers.

But for petrol retailers – unable to compete on price – they are one of the few ways to build brand loyalty.

Shell scrapped its Smart consumer rewards programme and replaced it in June with a new loyalty scheme called Plus Points, which it claims is more customer focused. BP has its Premiercard, which offers Boots and Marks & Spencer gift vouchers.

“Price is not a big motivator as people expect prices to be low almost everywhere. But promotional activity will often drive people in,” says Stewart Baxter, group account director at Marketing Drive, which runs the loyalty card scheme TOPS for petrol retailer TotalFina Elf.

“When you are in your car, you can be faced with several options, and a loyalty scheme can be the determining factor,” Baxter adds. “Of late, TV advertising [for petrol retailers] has been polarising into particular messages. BP Connect’s advertising is more lifestyle-oriented.”

Lifestyle advertising and focusing on environmental issues seem to be the current trend for petrol stations, marking an end to price driven campaigns. But this does not mean that petrol retailers will be able to recover their lost margins by hiking prices on the quiet, as recent blockades have proven how sensitive consumers are to fuel prices.

To avoid a repeat of last year’s unflattering media coverage and consumer outrage, fuel companies are likely to continue to focus their marketing efforts on incidentals and driving sales in their convenience stores in an effort to claw back profits lost in the past seven years.