NPN Magazine April 2013

National Petroleum News (NPN) has been the independent voice of the petroleum industry since 1909 as the opposition to Rockefeller’s Standard Oil. So, motor fuels marketing and retail is not just a sideline for us, it’s our core competency.

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The private label approach is open to virtually any marketer or retailer, provided some hardware and software upgrades are in order. "Setup is fairly minimal," said Jefferson. "Usually there are some technology updates that are required, but nowadays PCI requirements have led to POS systems and dispensers being updated. Most of the fuel sites that we work with are essentially already equipped and ready to go for loyalty. So it's really just a matter of getting a tech on site to turn on the loyalty options." In terms of the actual financial liability associated with the markdown on the gasoline, that is usually handled by the issuer of the reward. For example, the supermarket would reimburse the site for the markdown. However, there is a range of specific agreements and some companies might share that liability. Nothing is charged for an award getting issued, but a transaction fee is charged when the actual reward is redeemed that goes back to Excentus. As noted, Shell participates directly in Excentus' FRN program as the fuel partner. "Shell is doing a program that we actually own and administer called the Fuel Rewards Network," said Jefferson. "This is designed to be more of a coalition program or you have multiple retailers that issue a common loyalty currency, and Shell has the exclusive rights to redeem that loyalty currency at their participating sites. What we do with most of our other programs – such as the Safeway program where it is really their loyalty program that they brand and market – we provide the technology and licensing." FRN coalition partners include roughly a dozen supermarket chains across the country such as WinnDixie, Roundy's and Save Mart. There is also an online community so the shopper can purchase goods online through the Fuel Rewards website at vendors such as Home Depot or Best Buy, and there is a dining program for earning fuel rewards at a network of restaurants across the country. At Shell, customers can purchase items at the convenience store and earn rewards for those purchases. As Shell noted in a release on the program, since its launch in 2012, consumers have been discounted more than $68 million saving on average $0.31 per gallon. The FRN program is now available in nearly 200 cities nationwide. "Forty four percent of FRN Members are new Shell customers who are pleased to see their fuel savings become a reality by earning rewards on the items that they are already buying," said Dan Little, Shell North American fuels marketing manager. "These consumers have experienced the savings power of the FRN program allowing them to combine their rewards instantly at the  n  NPN Magazine pump so they can save as much as one, two and even three dollars off or more per gallon on high quality fuel at Shell." Chevron and ExxonMobil operate private label versions of the program. "One of the nice things about the program is that we are leveraging an existing loyalty program that has been created and operated by Safeway," said Cary Knuth, Chevron's general manager of Americas Products Marketing, Sales & Services. "They already have a large number of Safeway customers that are used to getting the points, and the frustration they have had is that they did not have enough locations to redeem the points. For example, when we rolled out Phase 1 in Southern California with Safeway's Vons brand, I believe they had around 17 stores that actually sold gas. So the bulk of their over 300 stores did not have a mechanism to redeem those points. Immediately, we were able to offer them a solution where you earned your points at Vons and you could redeem them at over 900 sites. For the gasoline marketer/retailer, suddenly you have a bunch of customers that might not have been visiting you, and now they have a reason to seek out your station and get a discount." Knuth noted that approximately 90 percent of Safeways have a Chevron within two miles. Marketers and retailers that have signed up for the program are pleased, overall. "Most of our (retailers) signed up for an initial three years and almost all of them opted in for additional terms," he said. "Once they begin to use it, it becomes a successful marketing tool that they want to continue to use." For those looking to start up a private label program, Fuel Rewards has a range of relationships where they can help facilitate putting together a program with the retailer and the grocer. Unfortunately, on some occasions a fuel retailer may be looking to join the program, but there simply is not an appropriate partner. For example, distance can be an important issue. Even in those cases, the fuel retailer can run the program linked to sales in the convenience store. Companies such as Rutters in Pennsylvania, Spinx in South Carolina and United Dairy Farmers in Ohio operate the program using this model. And, scale is not necessarily critical for the program's success. "It really depends on the market," said Jefferson. "If you are a small operator with five stores in Chicago, it probably does not make sense for you because you probably cannot rise above the noise in a market that size to really promote a loyalty program. But if you are a five store operator of a small town in a rural area, you may very well be a good candidate for the program." April 2013 23

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