David VanWiggeren has a warning for fuel brands and convenience store chains that have not adopted some type of digital engagement with their customers: the car has already left the garage.
“The time is now to begin the journey,” says VanWiggeren, CEO of Drop Tank. “We’re past the first mover phase. The march of the followers has begun in fuel and c-store loyalty, and missing this window could have significant implications.”
Drop Tank sees many of its fuel brand clients using extensive digital solutions to engage and build meaningful relationships with customers. VanWiggeren says as technology has advanced at gas stations over the past few years, it’s become possible for consumers to authorize the pump, drop the price per gallon, earn points, view in-store offers, order ahead and pay, all from the comfort of their vehicle.
“In the future, we see this type of digital engagement infrastructure unlocking further frictionless commerce opportunities for our clients,” he says.
Leveraging Loyalty Solutions
The problem with the adoption of these new strategies, though, lies in the fact that over 60% of gas stations in the United States are owned by independent operators or those who own four or fewer locations. VanWiggeren says these operators’ margins are thin, hours are long, and digital engagement is not a high priority, so many of them leverage the loyalty solution of their fuel brand, which greatly simplifies execution and gives them access to fuel brand offers and partnerships they could never achieve on their own.
But there is a downside to this, VanWiggeren says, as fuel brands struggle to build relationships with their customers for two main reasons.
“First, they often don’t own the gas stations, so they have little control over the store experience and cashier training,” he says. “Second, gas is considered a commodity. Its price is displayed on towering signs, reinforcing to consumers that price is all that matters when purchasing gas.”
But the biggest challenge to fuel brands and convenience store chains may be inconsistent legacy retail technology, which includes everything from the point-of-sale to the pumps to the site networking, all of which makes it a challenge to create loyalty in the fuel and c-store industry.
“It’s getting better slowly, but this technology gap has squashed many great loyalty ideas over the years,” VanWiggeren says.
Delivering Consistent Digital Loyalty Solutions
Drop Tank’s deep industry experience and custom technology in this area allow them to maintain a network of over 6,000 active gas station locations, delivering consistent digital loyalty solutions. But the real win is getting the people at the top of the companies to buy into the need to build brand loyalty.
“It’s a cliché in the loyalty marketing industry, but it’s true: if the c-suite doesn’t share the vision for brand loyalty, any success will be short-lived,” VanWiggeren says. “Building and maintaining meaningful consumer relationships requires examining consumer touchpoints across many parts of the business, from on-site experiences to digital experiences, to brand advertising, to payment, to cashier training and more.”
Once there’s senior level buy-in, successful consumer launches require buy-in from front line employees, like cashiers. Drop Tank encourages brands to engage their cashiers and customer service reps, so they become advocates for the loyalty program. Why not create a special segment of the loyalty program for cashiers and customer services reps? After all, VanWiggeren says, they are consumers, too.
“By experiencing the program and being recognized for their contributions, we find they become some of the program’s biggest advocates, with or without training,” he says.
Meaningful Incentives Add Up
With margins so low on fuel purchases, it can often be difficult to incorporate a loyalty program in an industry fraught with such price sensitivity. But as with any loyalty program, VanWiggeren says the secret is to leverage what works.
In the fuel industry, where margins are low, frequency and share of wallet are high, and locations are convenient, which can be a successful tandem.
“The industry has found cents-off-per-gallon to be a meaningful incentive,” he says. “Consumers have been trained to look for low prices on fuel, and 5¢ off per gallon may only be a 2% discount, but when frequency and share of wallet are high, consumers understand that adds up.”
Breaking Old Habits, Forming New Ones
VanWiggeren adds that — to a large extent — loyalty strategy in low-margin, high price sensitivity industries is about breaking old habits and forming new ones as efficiently as possible. He points to the fact that the cost per acquisition (CPA) for loyalty members in the fuel and the c-store industry is typically below $10, while CPA for many other industries is north of $100.
In light of this unique opportunity, Drop Tank tends to recommend small, meaningful rewards for members who demonstrate positive habit changes in the fuel space. And that plan will work even better after things begin to return to normal, since the coronavirus broke many consumer routines across the globe.
“Brands with the right loyalty offering and messaging in place today stand a good chance of winning the war when new consumer routines emerge post-COVID,” VanWiggeren says.