Driving Traffic with Gas Promotions

Discussion
Oct 10, 2005
George Anderson

By George Anderson


With the price for a gallon of gas continuing to go up (another 10 cents over the past two weeks, according to the latest reports), consumers are looking for ways to conserve the fuel they burn and spend less when they have to buy it.


Little wonder then that promotions offering discounts or giveaways of gas are proving so popular in driving traffic into stores.


As Jack DeLeo, president and chief executive of Hitchcock Fleming & Associates Inc. and chairman of the Northeast Ohio chapter of the American Association of Advertising Agencies, explained it to Cleveland’s Plain Dealer newspaper, “Everybody hates to buy gas. It’s something that you never have time to do . . . and the price keeps going up.”


Mr. DeLeo is familiar with the power of gasoline promotions to drive sales. His agency handle advertising for Goodyear Tire & Rubber Co. “We’ve been doing gas promotions for several years, saying ‘If you buy a set of tires, you get a $50 or $75 gas card,’ ” he said. “It’s been one of our No. 1 promotions.”


Rob Felber, president of Felber & Felber Marketing, said: “Gas is top of mind for many reasons. People are very aware of gas prices, more so than they are of prices for orange juice, bread or milk. If you drive down the street, every half-mile you see a different price.”


Perhaps it is because of consumers’ knowledge of gas prices that food stores have become prime beneficiaries of gasoline discounting and promotions.


Giant Eagle, for example, says its Fuelperks gas discount program had increased traffic to its stores since being launched last summer. Consumers who hold Giant Eagle’s Advantage cards earn a discount of 10 cents on gasoline purchased at gas stations located outside its stores as well as at its 19 GetGo convenience store locations (GetGo is co-owned by Guttman Oil Co.).


Rob Borella, director of corporate communications and sports marketing for grocery store chain, said, “The testimonials from customers have been absolutely tremendous.”


Mr. Felber offers one of those testimonials. “I always went to Giant Eagle, and I always use the Advantage card, but now I’m driving 20 more feet down the road and in a different direction just to use the GetGo.”


Competitors have been decidedly less complimentary about Giant Eagle’s program. Last spring, the Petroleum Retailers and Auto Repair Association of Pittsburgh charged that Giant Eagle’s discounts violate state law prohibiting retailers from selling goods at or below cost.


Pennsylvania’s Attorney General did not see it the same way. Last month, the protest was dismissed with the Attorney General’s office recommending a repeal of the 1941 Act cited
by the Petroleum Dealers in filing their complaint.


Moderator’s Comment: Are consumers more aware of gas prices at stations outside supermarkets, warehouse clubs, supercenters, etc. than they are of the
everyday goods sold inside the stores? Should all retailers be running out to create gas discount/giveaway programs with so much of the public’s attention on energy prices?


Dan Pastor, vice president of fuels and convenience for Giant Eagle, said of his company’s program, “This is not a gasoline promotion, this is a supermarket
promotion,” and a way to reward loyal customers, said Dan Pastor, vice president of fuels and convenience.

George Anderson – Moderator

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16 Comments on "Driving Traffic with Gas Promotions"


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Ryan Mathews
Guest
15 years 4 months ago

Of course everyone is watching the price of gas, but I think there ought to be a caveat to all these discount plans. If consumers — with the aid of the media — begin to feel that retailers have joined Big Oil in manipulating the price of gas to their advantage (what consumer believes ANY retailer sells ANYTHING below cost?) the promotions may backfire. Just a thought, but if they don’t trust us to price food correctly why do we think they’ll believe our gas prices?

Richard Layman
Guest
15 years 4 months ago

You get lots of publicity, but is it worth it? If it is true that a grocery store makes 1-3 cents/dollar of sales, then they have to sell $33-$100 of goods just to break even for one gallon of gas at $1/off. A $50 gas card costs $50 of profit contribution.

For one-off sales, hmm, I wouldn’t do it. If this is about customer acquisition and the building of a customer relationship with long term profit prospects, maybe, but my brain freezes upon thinking that people whose greatest concern is price will ever become loyal customers. (e.g., I once saw an “Entertainment Passbook” that had so much use that it looked like it had been attacked by thousands of moths. Clearly that customer never frequented an establishment more than once, until the next year’s coupon book came out.)

I just don’t see how these kinds of promotions generate loyal customers and repeat business.

M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
15 years 4 months ago

While checking out at Safeway last week, my checker reminded me that my purchases had qualified me for a one-time, 6¢ per gallon discount at a Safeway gas station. I asked if there were any stations nearby, and she said she didn’t know where any were at all. Thanks, Safeway.

Frank Abrams
Guest
Frank Abrams
15 years 4 months ago
Gas stations are generally attached to C-stores, not grocery stores, so allow me to comment about C-stores. Seems to me that not only do consumers know the gas prices, they also know the prices of the goods inside the C-store, or at least the C-store’s overall pricing strategy. As gas prices climb, I believe consumers will frequent the C-stores that adopt a lower pricing approach – otherwise consumers will increasingly fill up and then drive to a mass merchant to save $. In addition, C-stores that advertise “deals” at the pump that are not competitive, but supposedly convenient, are only reinforcing their unattractive pricing strategy. Although gas prices are out of the merchant’s control, gas is a component of the cost of a wallet-lightening visit to a Gas Convenience Retailer in the consumer’s mind. IMO, today’s high prices are an opportunity for C-store marketers to gain share and build awareness of their brand; with more focus on visit frequency and less on trying to maintain consumer loyalty. If focused on frequency, the objective should be… Read more »
George Anderson
Guest
15 years 4 months ago

New question: Do consumers equate lower prices at the pump (those located outside big box stores) with there being lower prices in the store? If no, do they think that their savings at the pump justify the prices paid for other goods inside the store?

Mark Burr
Guest
15 years 4 months ago

They work in building sales both in the fuel station and in the supermarket. Programs may vary depending on market location. However, regardless of the program, as long as it meets the market, it works. It works very well. Giant Eagle, Kroger, Safeway, etc. would likely all report very positive results. Meijer has been slow to get in the game, but are now also.

In response to George’s second question, I think at this point the big box stores have been at a ‘one low price’ program one or two cents below the street. That may equate to a low price image. However, when with other competitors you can earn substantially more than that in rewards, they will soon be at a disadvantage unless they react.

Fuel will be a major part of the new offering for both conventional and big-box retailers well into the foreseeable future. Thus, fuel promotions will continue to grow and change the dynamic in the way we buy gas.

Ben Ball
Guest
15 years 4 months ago

On the original question: Yes, consumer’s find gas prices relevant today (duh!) and the key to promotional success is relevance. So supermarkets and all other retailers do well to take advantage of that.

To the second question George poses: Without hard evidence, I believe the answer is yes. C-stores are perceived as having higher prices in the store — but they aren’t perceived as being particularly cheap on gas either. A supermarket, club, or superstore operator looking to reinforce a good value positioning with consumers could do no better than to offer value on gas right now.

Art Williams
Guest
Art Williams
15 years 4 months ago

The cheapest local gas prices that I noticed yesterday were at a supermarket that has the highest overall prices inside the store. How many gas customers bought groceries? This chain has a 43% share of the local market according to Sunday’s Chicago Tribune so something is working well for them. It makes me wonder how many of these gas customers might also think that they will get the lowest price inside too. If milk and bread prices were displayed on huge outdoor signs like gas prices are, it would definitely increase customer awareness and lower the prices on these items. Constant media attention doesn’t hurt awareness levels either.

Mark Lilien
Guest
15 years 4 months ago

Pricewise, the only 3 products people talk about are energy, real estate, and health insurance. All make headlines constantly, and the headlines aren’t going away soon. Even without recent inflation, gas prices would still be high-awareness, because people buy gas every week. People automatically learn the price of anything they buy 50 to 100 times a year. The first 100 retailers who offer gas promotions will be noticed. The next 5,000 retailers who copy them are too late.

Tom Zatina
Guest
Tom Zatina
15 years 4 months ago

The short answer to the question is “Yes!” All of us are paying attention to the price of gas, so why not acknowledge that focus and grab some of it to draw attention to your store.

By the way, it is interesting that so many people will drive out of their way to find cheaper gas. Drop the price a few cents below your competitor and the station is almost guaranteed an endless line of cars. Save 75 cents on a fill-up and all is right with the world…even if you spend the savings on higher prices for items inside the store.

Michael L. Howatt
Guest
Michael L. Howatt
15 years 4 months ago

People like to complain about the weather, but they still deal with it. Similarly, people will complain about gas prices, but that won’t stop them from buying it. Sure, some consumption is down, but I suspect it won’t last too lang.

Retailers offering promotions is a nice benefit, but I don’t live anywhere near a Giant Eagle so it doesn’t help me. A tire company in my community is offering a $50 gas card with the purchase of a new set of tires, but my tires are fine so why should I spend $350 to get a discount on gas?

Point being that convenience still rules. Most people aren’t going to alter their normal routine for a few pennies off their gas. If it fits into that routine, then great! It’s an added benefit (like 1/3 more shampoo free).

John Rand
Guest
John Rand
15 years 4 months ago

Of course gas prices are more memorable – few of us buy 40 gallons of milk every week. It is an item we all have to buy, it has been a news-focus story for over a year, and the prices are highly visible everywhere.

But most consumers are smart enough to do the math – if you save three dollars on gas and it costs you ten dollars more to buy higher priced goods to earn the discount, there will be little or no loyalty to be gained.

On some level everyone knows “TANSTAAFL” – There Ain’t No Such Thing As A Free Lunch.

Mark Hunter
Guest
Mark Hunter
15 years 4 months ago

Without a doubt, people are more likely to know the price of a gallon of gas than a gallon of milk. We also consume a whole lot more gas than milk so it only makes sense for a retailer to push gas sales via a promotion. If I can get a customer onto the premises to buy gas I have a good shot at getting them to enter the store.

Stephan Kouzomis
Guest
Stephan Kouzomis
15 years 4 months ago

First, it depends on the market or geographic areas of the U.S. Even local fast food and family style operators are promoting “bring the family in for dinner, and spend $50, and you can receive a five dollart discount, or gas coupon for $5.”

Some supermarkets are paying out an extra $10 for every $100 dollars spent on groceries… ex liquor, cigarettes, and pharmacy items; besides the normal best food day deals! Doubing their cost to get traffic?

Haven’t seen a Walgreens Macy’s, Best Buy, or even Wal-Mart’s Sam’s Club advertise any type of deal on gas.

Dean Cruse
Guest
Dean Cruse
15 years 4 months ago

Sure, consumers are more aware of gas prices than they are of prices inside the store for all of the reasons mentioned – the high prices themselves, the need for most consumers to buy gas every week or so, the timeliness of the issue due to the hurricanes and the signs on every corner announcing the prices. My kids have even had fun watching the signs change everyday and betting on how high they’ll get!

It’s a great time for retailers to look to promotions on gas as a way to drive in-store traffic/sales — if for no other reason than to offer a sympathetic point of view for consumers who are struggling with $40-60 tank refills. Consumers may even remember the break and be more likely to return loyalty to these retailers in the future.

John Williams
Guest
John Williams
15 years 2 months ago

The problem with these promotions is that they all go the wrong way.

The margins for the retailer on gasoline are usually razor thin. (I said the retailer, NOT the oil company.) Rewarding customers with a commodity they have to buy and that you haven’t got any margin on doesn’t make a heck of a lot of sense.

The more intelligent way to do things would be to give discounts on groceries to customers that buy gas.

The link below is from a retailer that has been doing this successful in the Tennessee market.

Merchandising at the Fuel Island

wpDiscuz

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