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Keys to Gas Station Marketing

According to the National Association of Convenience Stores, NACS members account for more than 80 percent of the fuel sales in the United States. The NACS reports that after credit card fees and other operating costs, net profit for gasoline sales average 3 cents a gallon. This meager return is not the result of plunging oil prices. According to the San Jose Mercury News, when the cost of wholesale gasoline (including taxes) plunges, the margin between the wholesale and retail prices widens and results in more profit—not less—for gas stations. 

The profitability of today’s gas station hinges on convenience store sales, not gasoline sales. Why convenience stores are so married to gas stations is a matter of consumer convenience.  Goods found at convenience stores can be bought elsewhere; only gas stations sell gasoline.



Positioning your gas station in the marketplace involves 1) offering value to consumers that most of your competitors do not and 2) communicating that value to consumers. The process begins with knowing your competitors and identifying their strengths and weaknesses. Competitors are not simply other convenience stores; they can include any store that sells alcohol, fast food, pharmaceuticals, groceries, etc. Next, know your customers. Selling the cheapest cigarettes in a low income neighborhood would be good positioning. Selling imported beers in the same neighborhood would not.  

Customer demographics—household income, age and gender—can be gleaned from observation. The real trick is identifying customers’ unsupplied demands. To this end, NACS surveys 50,000 people in 40 different states asking questions such as:

  • What drives customers to shop in convenience stores?
  • What are shoppers buying and why?
  • What did we fail to sell shoppers that they intended to buy and why?
  • Do they notice promotions and what type/method are most effective?
  • Do they engage in promotions that they notice?
  • How can we extract additional sales from shoppers?
  • What is preventing Fuel Only shoppers from entering the store or shopping when they pay inside?

However, reading your specific customer base requires software that enables gas stations to track and analyze sales data as well as administer inventory, pricing, promotions and loyalty programs. Several different programs are available.

In 2013, intelligence gathering extended to the collection of data from customer smartphones.  Smartphones send out short "pings" as they search for Wi-Fi networks nearby. These pings include the phone's MAC address. Sensors within a store intercept Wi-Fi  broadcasts in and outside the convenience store and map the users’ movements. It’s been said this software provides insights not into what people are buying, but what they are not. Makers of this technology include Euclid and RetailNext.



The brand power of Exxon, Arco, Shell and other major oil companies offers some value to gas stations that sell their gasoline. Oil companies have bolstered this advantage by creating apps that enable motorists to locate their nearest franchises.

There are other independent mobile apps that locate all brands of gas stations and list their prices  —e.g., GasBuddy, AAA TripTik, Route4Me, and iGasUp. However, according to the online marketing website WordStream, gas stations too often overly rely on apps and neglect submitting business listings to Internet search engines. Studies show that motorists seeking a nearby gas station rely more on Google, Yahoo and Bing than they do apps.  

Some gas stations across the United States and Canada have found a niche selling ethanol-free gasoline (see http://pure-gas.org for list). The attraction of ethanol-free gasoline is better gas mileage and it has proven a draw in most states.  One exception is California because of its strict emissions standards.



Demand for traditional convenience store merchandise is not what it once was. Increasingly convenience stores are finding a competitive advantage in introducing new products lines and particularly those that resonate with their customer bases. Examples include:

Health & Wellness

In 2012, Fox News reported that a growing number of gas stations were offering “healthy foods” in their convenience stores. Foods cited included fresh fruit, energy bars, low-fat yogurt, trail mix, bags of baby carrots, fresh fruit cups, low fat cheese sticks and peanuts in the shell. Since then, convenience stores have introduced salad bars, health shakes, juices, energy drinks, among other things. This is a trend bound to benefit from FDA regulations that, effective Nov. 25, 2015, will require chains of more than 20 convenience stores to post calorie content of their food and drink products.

Convenience stores have also introduced an array of non-prescription drugs, vitamins and personal hygiene products, as well as products associated with cleanliness, such as soaps, bath products, deodorants, toothpastes and brushes, etc.  It’s a strategy inspired by drug stores such as Walgreens and CVS reinventing themselves by selling grocery and beverage products (see Hartman Group article). To wit: Why make an extra trip to buy cough syrup when you can buy it while you fill up?

Tobacco & Alcohol


This involves doubling-down on convenience stores traditional role of selling cigarettes and beer. From a marketplace perspective, it takes advantage of CVS and grocery stores terminating or limiting tobacco sales. From a consumer psychology perspective, it exploits the link between smoking and drinking alcohol. Products include a wide selection cigarettes, cigars and pipe tobaccos, as well as boutique beers and fine wines. Paraphernalia products include cigarette rolling paper, pipe cleaners, lighters, etc.

Souveniers

Gas stations that cater to tourists can profit from consumers’ impulses to buy souvenirs. Products can include post cards, T-shirts, caps and hats, signature local products, books and calendars, dolls, etc.

Coffee Isle

The concept is simple. What is more convenient: filling up at a gas station and buying fresh-brewed gourmet coffee at a Starbuck’s., or buying both at a gas station? Essential to the success of the coffee isle is the quality, variety and freshness of the coffees brewed. Teabags of fine teas can be added to the mix.  So too can fresh pastries, muffins and donuts. However, it’s important that manpower be available to maintain the coffee isle.

Deli

The popularity of the gas station/fast food restaurant shows consumers appreciate the convenience of one-stop shopping for gas and breakfast, lunch or dinner. The convenience store deli counter offers this same convenience.  Moreover, the food industry blog Technomic reported a major trend of 2014 was that breakfast, lunch and dinner are no longer morning-noon-and-night occasions. “Consumers are less likely to eat according to a three-square-meals schedule; they nosh, skip meals, eat breakfast for dinner and vice versa.”  



The trick here is communicating with customers. Announcing promotions via e-mail involves the difficulty of harvesting emails and the probability most customers will ignore your promotional emails. More effective and less time-intensive strategies include:

Facebook/Twitter

Inform customers  by word-of-mouth, sign and receipt that those who follow you on Facebook and/or Twitter can take advantage of announced discounts. For instance, post a secret word for the day by which customers can receive discounts on gasoline or merchandise such as beverages or deli food. Promoting discounts and contests via social media also offers the opportunity to attract new customers. Ask your followers to share your posts to increase the buzz.

Receipt Coupons

This strategy is already being employed vigorously by grocery and drug stores. Customers who return to your gas station and present a coupon printed on a receipt can receive a discount on gasoline or merchandise.

Loyalty programs reward your best customers to sustain their patronage. Coupons offering discounts on specific merchandise or discounts on any future purchase are popular particularly with female customers. Required is software that tracks customer purchases and alerts you to loyal customers who deserve coupons. There are several developers of such software. Most also track other information about customers.

However, before investing in a program, you may want to explore the possibility of partnering a loyalty program with other local businesses.  Partners can include restaurants, bakeries, hardware stores, auto parts stores, grocery stores, pharmacies, etc.—i.e., merchants who want to encourage consumers to support small local businesses.

©Randy Bechtel 2014

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