C S P October 2012 183

Given the choice between a rebate

of $2 or $1.20, most Americans

would pick $2, right?

Not at the gas pump. For some rea-

son, 10 cents off 12 gallons of fuel is a

better deal to consumers than a larger

equivalent in cents off a fountain drink

or deli sandwich—or even $2 cash.

California retailer M.J. Castelo has

seen it happen. “We tested where you

could buy a car wash with a fill-up for

$2 off, but found a rollback of 10 cents

with a car wash worked better,” he says.

“People would rather save 10 cents on

an average 12-gallon sale vs. saving $2.

It’s an oddity.”

That’s one of the reasons consumer

packaged goods companies gravitate

to pump-related rollbacks, says Dan

Little, North American fuels marketing

manager for Houston-based Shell Oil

Products U.S.

“Suppliers have existing marketing

dollars for activities they would have

promoted or discounted,” he says.

“They’re taking those activities and

converting them into a cents-per-gallon

(CPG) [approach]. Manufacturers are

telling us there’s greater behavior change

for less investment … because it’s such

an emotional [appeal].”

With rollbacks as a central hook,

major-oil branded programs also appear

to be evolving, incorporating retailers

from other channels, as well as online

shopping. Here’s a short list of the oil

companies participating in pump-based

loyalty programs:

▶ Shell: Evolving to include a

coalition-based program, Shell ties its

program back to the gas pump, allowing

shoppers to redeem rollback CPG off by

shopping at affiliated retailers.

▶ ExxonMobil: Testing with Shop-

kick, a Palo Alto, Calif.-based provider

that uses smartphone technology to

identify loyal customers as they physi-

cally walk into stores. Customers can

Rockin’ the Rollback

Oil brands reshaping loyalty as pump-discount formula evolves

By Angel Abcede || aabcede@cspnet.com

Pump Incentives: Loyalty strategies often give incentives to move from the pump to the store.

C S P October 2012 185

redeem rewards in the store and with

cross-channel partner retailers.

▶ BP: Launched earlier this year,

the rollback program offers rewards for

purchases at BP stations.

▶ CITGO: A rewards program tied to

a Visa messaging platform, designed to

increase store traffic, volume and sales.

For Castelo, a 32-store operator

doing business under the Shell Food

Mart banner who is several months into

his brand’s program, success comes on

two fronts: registration and uplift. Cas-

telo, managing member of Peninsula/

Humboldt Petroleum, Eureka, Calif.,

says as a relatively new participant, he’s

been pleased with the growth in loyalty

program registrations, reward issuance

and redemption.

He’s also seen a “meaningful” uplift

in sales tied to the program. “In an

industry where one percentage point is a

lot, we’ve seen significant improvement

within our network as a result of the

program,” he says, elaborating on how

location also plays a part. “We may have

a site next to a [partner supermarket], so

it’s hard to generalize.”

But despite any notion that rollbacks

have blanket cachet with manufacturers,

Castelo says, “We work this really hard.”

A New ParadigmCastelo’s zeal started before Shell’s cur-

rent offer. Going back to the late 1990s,

there was an enthusiasm for rewarding

customers using promotional strategies,

some tied to vendors, some not.

In recent years, Shell has introduced

CPG discount offers focused on promot-

ing its V-Power fuel or Shell gift cards.

Castelo embraced these programs, which

evolved into Shell Rewards. Part of that

credit-card-tied program was a 2009

move to partner with Cincinnati-based

Kroger, linking fuel-rollback rewards to

what customers spent at the grocery store.

Though not in a Kroger market,

Castelo would take advantage of a

similar relationship when Shell brought

Modesto, Calif.-based Lucky’s/Save Mart

Supermarkets into its program.

Shell made what Castelo calls a “quan-

tum leap” last year by partnering with

Irving, Texas-based loyalty service pro-

vider Excentus Corp., which launched a

program called Fuel Rewards Network

(FRN). That program expanded the base

of non-competing retailers and added an

online component.

Little of Shell says the company is

Excentus’ exclusive national fuel part-

ner for redeeming network points and

rewards. The program is in the middle

of a national rollout, with more than 100

markets on line so far and 200 markets

planned by the end of the year.

After a pilot of 10 stores in Mon-

terey and Santa Cruz counties, Castelo

expanded the program north into

Eureka, Calif.

“You never have to pay full price for

gasoline again,” he says. “We’ve sur-

passed the idea of saving a penny. People

are saving dimes, quarters, dollars.”

A customer may spend $100 to $150

at the grocery store and earn 15 CPG

off his or her next trip to the gas station.

The next day, that customer may buy

something online from a retailer in the

coalition. More CPG off. A $50 dinner

from a coalition restaurant may add

another nickel.

On average, Little says, customers

are earning 33 CPG off their fueling

purchases. Many of Castelo’s customers

have saved 75 cents cumulating rewards,

many of which come from buying

energy drinks, car washes and propane

at his stores. “The idea is create grav-

ity to our stores and the Shell brand,”

he says. “We save internally, while you

save on the fuels you need by buying the

products you want.”

Virtual Box: The potential of coalition-based rewards lies in extending the parameters of the traditional c-store box, bringing in shoppers who may not have initially intended to come in.

C S P October 2012186

Program LogisticsTo participate in Shell’s program, cus–

tomers pick up their free FRN card in

store and register it online, or they can

request and register a card fully online.

Customers can go online to review the

account and, through a portal, review

the breadth of offerings. The coalition

players vary by market and are in flux

as new retailers see its value and join in.

In terms of physical infrastructure,

Castelo says he had been working with

Shell to upgrade his site for payment

card industry (PCI) data-security stan-

dards. Those deadlines came to a head

about two years ago, and with the equip-

ment upgrades came the software and

hardware necessary to participate in the

current loyalty program.

He descr ibes the upgrade as a

“splitter box” that separates the loyalty

interchange of data from other transac-

tion information. A user interface on

the store computer allows the retailer

to populate the program with specific

promotions.

Castelo does pay a fee associated with

the program, but with his customers

averaging 30 CPG in discounts, he says

it’s a “minuscule portion” of that reward.

“When you look at actual customer

value, it’s far, far in excess from our fees,” he

says. “And it’s what’s driving the program.”

Loyalty InsightThrough its work with grocery partner-

ships, Shell discovered that the program

attracts a new customer base, including

female shoppers, customers who hadn’t

considered the Shell brand before and

those who now come in more often so

they can redeem their rewards.

The Kroger relationship initially gar-

nered a 35% to 40% penetration into

Shell markets, Little says. Now with ties

to more regional grocers, the program

is hitting 65% to 75% of its markets. So

far, he says, customers have saved more

than $200 million in reward discounts.

The beauty behind this type of

marketing alliance, Little says, is that

rewards are largely paid by third parties

and other retailers issuing the rewards

redeemed at gasoline stations—be it a

grocer, online retailer or restaurant.

The value, again, is a better use of

marketing dollars, he says.

“We keep using two terms: relevancy

and frequency,” Little says. “We know in

this business that gas prices are relevant

to everybody and it does change behav-

ior. There are loyalty programs across

the retail industry, and what makes this

program [unique] is the currency—that

CPG discount.”

To stay relevant, the program acts in

both a passive and an active way, Little

says. Passively, it allows customers to go

to the website to learn about the pro-

gram and ways to earn, but actively, it

also reaches back to customers.

E-mails and texts address members

by name and introduce them to new

promotions, restaurants and other dis-

counting opportunities relative to the

area. In the near future, the program

will allow customers to tailor the site to

what’s relevant to them, he says.

Another ApproachMajor-oil loyalty programs typically

have ties to CPG discounts, with many

focusing on increasing sales at the

c-store or site-related business such as

car washes. ExxonMobil announced in

March that it is testing a relationship

with Shopkick, a coalition-based pro-

vider that uses proximity-based technol-

ogy. The loyalty provider ties to people’s

The incremental sale on a candy bar may ultimately not be enough to offset supporting a fuel rollback.

Loyalty TendenciesTo determine the appetite for loyalty programs in general, Houston-based Shell sponsored a study by Washing-ton, D.C.-based StrategyOne that the research firm conducted this past June. Here are a few of its findings:

85%Would sign up for a program that

cut fuel prices by giving them rewards on purchases of everyday items.

82%Are participating in a loyalty

rewards program, with 68% using these programs most or some of the time.

76%Have a tendency to be brand loyal

based on the specific rewards programs they participate in.

87%Believe there is more they could be

doing on a daily basis to save money, with 73% trying to cut down on spend-

ing overall.

Almost 90%Would be interested in earning

rewards from online shopping, but only 34% currently do so.

Source: StrategyOne, Shell Oil Products U.S.

C S P October 2012188

smartphones and gives them points for

merely walking into a store.

Live in three markets—Washing-

ton, D.C., Miami and New York—the

program uses a sound frequency heard

by cellphones to check in customers.

Customers collect “kicks” and turn them

in for electronic gift cards to be used

instantly, according to Jim Kurp, global

brand adviser for Irving, Texas-based

ExxonMobil’s global cards and loyalty

programs.

“By leveraging cutting-edge technol-

ogy that appeals to today’s tech-savvy

consumers, Shopkick increases foot

traffic into the store and potentially

increases the total amount a consumer

spends per visit,” Kurp says. The tests are

“operating as we expected.”

ExxonMobil, according to Kurp, is

the first oil company to roll out this type

of program, “and we’re learning signifi-

cantly from the process.”

Shopkick augments ExxonMobil’s

“return and earn” rollback program,

which began in January 2011 with its

branded wholesalers. “What’s unique

about the program is that we offer them

the ability to individualize the customer

offer,” Kurp says. “It is not one size fits

all.”

For example, retailers have flexibil-

ity when selecting types of promotions

and can leverage their own alternate

profit centers. “For the consumer, they

save money on fuel,” Kurp says. “It’s

simple and easy and enhances the loy-

alty between the fuel business and the

c-store.”

Jury Still Out?While other oil companies such as Shell,

ExxonMobil, BP and CITGO continue

to push loyalty programs, some believe

the power of rollback programs may

be cyclical. An industry resource who

requested anonymity says success hinges

on the enthusiasm of the one holding

the biggest bill. If a grocer or a manu-

facturer sees numbers falling or failing

to meet expectations, it may not return

next year, leaving retailers to face cus-

tomer wrath.

Coalition-based programs can help,

the source believes, with more parties

“throwing money into the pot” to pay

for the discounts.

“But when you talk about manufac-

turers, they’re typically willing to invest

in a new promotional activity for a time

period,” he says. “If it’s successful, they

will reup or increase spend if they think

it’s more efficient.”

Inevitably, at some point consultants

will tell the company it doesn’t need to

give that much away, the source says.

For manufacturers of consumer

packaged goods, the incentive may be

far less than those pushing bigger-ticket

items such as $100 grocery spends or

trips to restaurants. The incremental

sale on a candy bar may ultimately not

be enough to offset supporting a fuel

rollback. In addition, companies often

find demand exceeding supply.

“They have to look at the capacity

of the plants they have and ask: What

is their optimum capacity?” he says.

“Are they near that? And if so, they can’t

deliver.”

Other factors include product recalls

and the volatility of raw materials, any

of which could go up in price during the

year. “I can see partnering with [com-

puter maker] Dell and advancing people

money on a rollback of gasoline,” he

says. “But if you’re talking [energy drinks

or candy bars], I don’t know whether

that model is sustainable.”

A year or so down the road, kinks in

the program will begin to show, he says.

For instance, loyalty programs in general

have redemption stipulations ranging

from lenient to harsh. Fuel rewards may

expire after a certain time period. While

on one hand it may stimulate frequency

with shoppers trying to redeem rewards

before they expire, on the other hand it

may stifle customer enthusiasm.

In this vein, some fuel retailers

may opt to increase street prices on

days when rewards are set to expire, in

essence manipulating the value of the

reward.

“When you start looking at the

long-term big picture, it may or may

not influence consumer buying and

whether they will accept it,” the source

says. “They may feel like they’re being

controlled by ‘the man.’ ”

Tech TwistStill, whether or not rollback programs

continue to help retailers, current

technologies appear to be pushing the

boundaries of the traditional store.

“You’re expanding the box virtually,

through cross-promotion,” Little says.

“So instead of building a hyperbox,

you’re linking with multiple partners

and expanding your reach, making

[your store] relevant.”

Castelo agrees, saying, “Like any other

business, the c-store industry has been

getting more competitive. We’re always

looking for tools to create value for cus-

tomers and give opportunities to enhance

customer satisfaction and loyalty.” n

“People would rather save 10 cents on an average 12-gallon sale vs. saving $2. It’s an oddity.”