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English Español Useful methods for fuel retail pricing to make life easy

In this article, Evgeny Korotin, from the consulting company Competition Technologies Center, takes a look at different methods to improve site sales.



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Author: Evgeny Korotin. Competition Technologies Center Ltd

Price signs are one of the most beautiful parts of a petrol station – almost like the “voice” of the brand. It catches the attention of busy drivers with its slick design and colourful fuel prices, and it is hard to find a more important customer driver in today's market.

Let’s talk about retail pricing. Here are some findings that we discovered through a fuel market study that could be of use for your daily routine.

You have probably heard about fuel pricing software, and some of you might have even spent a good bit of money to get a “beautiful tool that brings you more money with every hour price changes.” But when you try to evaluate the gains that fuel pricing software brought your company you will probably find out that it only provides between 1 and 1.5 percent of sales increase. Now you’ve spent a large amount of money on a software that provides next to nothing.

Life goes on so now we will discuss how to become a good driver of “pricing machine” regardless if you bought a software or if you still prefer an Excel.

Manage prices when it is worth it

Check the price difference in the city or highway where your petrol station is located. If the difference between maximum and minimum price is less than 3% of the average, it will be very difficult to gain a benefit from price manoeuvres. If the difference  is less than 1.5%  that means that using price as a marketing tool is useless. It is time to switch off your PC and relax. Drink a glass of wine or do some yoga – whatever works for you. Now you can start to think again. For example, about non-pricing marketing tools you know.

Bingo! Promotions. Don’t listen to useless slogans such as “discounts kill the business” – just go and develop some promotions on the non-fuel retail side that will provide a far bigger benefit than any fuel pricing strategy. Another advise on fuel promotions: Skip the discount scheme “three for the price of two”. All other promotion programes will work.

Follow micro market prices for each of your locations

Micro markets are an integral part of urban city areas with continuous traffic flow around them. Spend some time evaluating the borders of these areas and you will get an incredible tool for efficient pricing. Even with an Excel sheet you will be a challenge for competitors.

By using the simple logic of evaluating average micro market prices for fuel, you can calculate your petrol station price position with the average micro market price.  Always keep your price at the same position when some of the competitors change theirs. Easy and efficient.

Monitor the elasticity (if you know what is this)

Skip this part if you need Wikipedia to understand what is “elasticity”. You need to remember that elasticity on the price of fuel is unstable and it varies. Anyone who told you otherwise does not know how to calculate it properly or keeps misinforming you for some reason. Get rid of him and think: If you know when elasticity will change from "-" to "+" you will manage the world of fuel retail as it is time to increase prices… Be patient and keep monitoring.

 

Written by Evgeny Korotin. Competition Technologies Center Ltd. is a consulting company which provides marketing support on the field of fuel retailing and creates technological solutions for the increase of the volumeof fuel sales on markets with fierce competition.

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