Fuel Loyalty Programs: Enhancing the Fuel Retail Industry

The challenging dynamics created by COVID-19, has destabilized the demand in oil and gas industry, along with the supply shock due to Saudi Arabia and Russia’s disagreement on production costs which has initiated a price war, further reducing the prices. This could negatively impact countries such as Iran and Venezuela, who are economically and financially dependent on oil production and export. India’s fuel consumption declined by 9.1% in the FY 2021 because of plummeted demand of around 40-60%.

Other factors like crude availability, high transportation costs, price fluctuations, government norms, etc. are beyond control, and does affect the supply chain and demand. 197 countries have signed the Paris Agreement, to curb the Greenhouse Gas Emissions by 33-35% by the year 2030. And to add to that, the current fuel retail market is largely moving from a vehicle-centric market to a customer-centric one. This radical shift is disrupted by 3 key drivers:

• Evolving Consumer Expectations: Putting forth customer convenience
• Advent of EVs: Incorporating charging stations at fuel stations is leading to advance mobility options
• Alternative Fuels: Enabling a shift towards greener fuel consumption
  

  Fuel retail market: then and now… 

  The core offering of the oil and gas industry is an undifferentiated product, with similar price range, thus making it a convenience-based commodity. Customers expect a differentiated and personalized buying experience, hence fuel retailers need to invest in creating a value proposition which will know the customer, create affinity, and thus embark on a long term relationship.  Businesses are implementing a customer insights platform to identify and create interlinkages. This can not only aid in consumer retention but also acquire new customers. The fuel stations in the future, would be set up to drive consumer relationships and aim to enhance fuel retail experience. The evolution of Gas stations is poised at a transition that requires consumer centricity driven by analytics and multi-brand and retailing competencies to enhance their business models. Gaurav Mehta, VP and Global Head – Alliances and Analyst Relations, Capillary Technologies adds, “Market dynamics expect fuel companies to transform themselves to energy institutions and leverage the available opportunity. The desire to know and improve consumer awareness is going to keep the fuel companies busy for the next 5 years.”

  Challenges faced by marketers while designing fuel retail loyalty programs

  • Disconnected consumer journeys: Fuel retail in the past has focused more on earn and burn loyalty programs without factoring customer journey flows. In order to build a seamless customer journey experience, it is important that brands focus more on enabling convenience than basic fuel needs. For instance, triggering push notifications though mobile loyalty programs for your customer while they are in the queue to fill their tank has higher probability of customer making a non-fuel purchase than a promotional offer which was shared a week before to the same customer.
  • Meet strategic objectives: Many fuel brands step away from implementing a dedicated loyalty program. However, knowing that fuel retail is moving to customer-centric model and fuel brands can generate revenue from fuel as well as non-fuel commodities, a well-laid out loyalty program can assure higher ROI and eventually build brand loyalty over a period of time. Capillary’s Loyalty Delivered Sales (LDS) framework has the unique potential to offer up to 20% topline revenue to brands.
  • Digitized offerings: Moving away from a card-based loyalty program to a digital loyalty program is the first step towards embracing digital transformation in fuel retail loyalty. It offers customer convenience by giving a varied purchase options in fuel and non-fuel commodities like selling lubricants, giving car-washing facilities, etc.

  Enhancing fuel retail experience with loyalty programs

  The effect of fuel loyalty programs appeared to have been evaporating as a result of the inevitable consumer shift following in the current pandemic scenario. Lesser movement of vehicles has further decelerated the fuel consumption patterns across the globe. Fuel retailers thus need to take a step back to reshape their customer strategy and attract loyalty, especially in these trying times. Emergence of new business models to induce loyalty is quite evident from following trends.

  

• Fueling and other services: Fuel is no longer the only commodity in the fuel retail market. Non Fuel Retail (NFR) is gaining prominence in fuel retail loyalty programs because it promises a reasonable basket value size. Convenience store purchases like ordering a cup of coffee, a tea-time snack, shopping daily grocery items; leveraging real estate for car washing, parking facilities are fast catching up in this segment.
• Increasing NFR contribution through C-store: Fuel retailers can either partner with food and product offering companies or introduce their own private labels of regularly purchased items by the consumer thereby building on their convenience store offerings.
• Treating fuel shoppers, one at a time: As the loyal consumer base differs – from a hurried driver to a group of college-goers setting out on a road trip, tiered loyalty programs offer benefits based on diverse demographics, facilitating omnichannel engagement at different touch points for different customer journeys. This also allows fuel brands to stay top of the mind as it builds a positive experience for customers.
• Leveraging digital technology: Moving to an app-based loyalty program with digital payment platforms not only assures increase in profitability but also enables customer convenience. These days, gamification features incorporated in loyalty programs assure high customer engagement.
• Other promotions – Fuel retailers are now roping in other retailers within the premise such as coffee shops or pizza outlets through cross-pollination of traffic to these outlets by offering coupons, discounts and a reason to visit again for fuel requirement or earn loyalty points if they are part of the partner eco-system.

• Building fuel retail loyalty through hyper-personalized experiences

  Fuel retailers have a huge potential to not only offer beyond fuel products but also create a remarkable shopping experience at their forecourts. Sushant Rabra, partner with a leading consulting firm shares his thoughts on the same, “For the fuel retailers, consumer experience is an upcoming competitive milestone. Fuel being an undifferentiated product, retailers need to come up with a strategy and opt digitalization techniques to stand out in the crowd by catering to upgraded forecourt experiences and benefits for customers.”

Since fuel is also a geo-based commodity, chances of customers returning to the same fuel brand are sometimes frugal. This is where hyper-localization has the ability to tilt the scales. With a comprehensive fuel retail loyalty program, a customer is more likely to return owing to numerous rewards offered by the brand. As brands engage and participate with their customers constantly, it builds up a credible data source encompassing behavioral patterns over a period of time and foresee customer trends.  A data-driven loyalty program is the plugin that fuel retailers would need to enhance their overall customer engagement.

The revolutionary Promo Engine by Capillary for enhancing fuel retail loyalty

At Capillary Technologies, we closely reviewed the purchase behavior of a group of fuel shoppers to understand their core buying patterns over a period of time. As our experts analyzed and distilled the findings, 3 consumer traits were called out in the customer decision buying process: (a) Rewards that enable agility (b) Rewards that allow convenience (c) Rewards that offer instant gratification

Keeping these traits at the forefront, an agile framework for fuel retail loyalty was created that enables fuel shoppers to avail the next best offer on their next transaction by auto-applying coupon codes. This agile framework enable customer convenience by giving them rewards in real-time. The need to introduce this framework stems from the fact that customers have lesser time to shop, a reason why, they would prefer an automated system which can pull the next best offer based on their recent transaction as well as their past purchase behavior.

Fuel retail experience: The road ahead

Keeping these traits at the forefront, an agile framework for fuel retail loyalty was created that enables fuel shoppers to avail the next best offer on their next transaction by auto-applying coupon codes. This agile framework enable customer convenience by giving them rewards in real-time. The need to introduce this framework stems from the fact that customers have lesser time to shop, a reason why, they would prefer an automated system which can pull the next best offer based on their recent transaction as well as their past purchase behavior.

As buyer requests and patterns change, fuel retailers need to essentially change the way they perceive customer loyalty. With forecourt experiences building up from strength to strength and data-driven personalization enhancing fuel shopping experience, fuel brands must look outside the basic earn and burn model from their exiting loyalty programs. Fuel retail loyalty programs no longer restrict to rewards, but they are a potential source to shape customer behavior and gain brand advocacy. It is increasingly becoming pertinent to drive consumer retention, and drive revenue for organizations over the world. While the 2020 pandemic posed many challenges for the fuel, oil and gas companies; it also laid a path for the industry to seek newer opportunities and create a frictionless world for loyalty programs.

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Writer, traveler, and a cold coffee addict, precisely in that order, Aditi Jindal is a storyteller. Whether it is slicing brands and their content marketing strategies or dabbling different genres of book writing; her keen interest in finding the unique idea for brands to deliver compelling stories keeps her on her toes.