The oil and gas retail industry is exposed to multiple challenges. While fossil fuels still supply 80% of the world's energy, shrinking world oil reserves, electrification efforts, and new laws passed on the sector have forced a significant shift in the industry. To keep the momentum going, fuel retailers have to face up to those challenges by finding new revenue streams.
On the other hand, we can see new fueling alternatives, such as hydrogen technology developed by Hyundai and Toyota, and fast charging stations for electric cars. These can attract new customers and retain existing ones at gas stations. A clever loyalty program may be the right solution to drive profits in this challenging transitional period between the old and new ways of doing business in the fuel industry.
The future of oil and gas retail in numbers
The industry is changing. More than 110 countries have committed to a net zero emissions target by 2050. China has pledged to get there before 2060. Meeting this target is a challenging task, and it is reflected in ambitious regulations, such as the EU ban on the sale of new petrol and diesel cars from 2035. The summarized effort and costs of the transition will be enormous:
“Capital spending on physical assets for energy and land-use systems in the net-zero transition between 2021 and 2050 would amount to about $275 trillion, or $9.2 trillion per year on average, an annual increase of as much as $3.5 trillion from today."
This change will bring effects over time. Predictions show a slowdown in petrol energy demand that contrasts with the quickly growing potential of electric energy. A report from the 13th International Energy Forum analyzed scenarios for the next 10 to3 0 years and came up with a couple of predictions:
- Fossil fuels will still account for 62-77% of total primary energy demand in 2030. It was about 80% in 2021.
- Oil’s share of total primary energy demand is expected to remain flat or grow in four of the six scenarios.
- 75% of scenarios see higher oil demand in the petrochemical sector in 2045 vs. 2021.
- Most scenarios show electricity demand growing by 80% by 2050. More ambitious net zero scenarios show up to 200% growth vs. 2021.
- Many scenarios show electricity’s share growing from 20% in 2021 to 30% in 2050. More ambitious scenarios show a 50% share.
Those numbers suggest that new energy sources seem to have a higher growth potential, and they might be a safer bet than relying on fossil fuels. Now, let’s see how to support your sales during this transitional period.
What a modern loyalty program can bring to the table
The main goal of a loyalty program in the oil and gas industry is to retain existing customers and help smoothen the transition from regular to new-era fuels, whatever that ultimately is, by acquiring new customers. That’s because transportation will continue to be particularly important no matter what fuel customers buy. Correspondingly, it will be essential to maintain customers' habits of shopping at gas stations.
It’s a challenging task. To make it easier, you can create a coalition with, for example, car manufacturers or power producers and build a comprehensive loyalty system. It will allow you to deliver a broader customer experience by being able to fulfill a variety of needs. To achieve that, you need to build a smart and multi-faceted loyalty program as a long-term project with, potentially, different business partners. The most important thing is to start this type of project with the current situation in the oil and gas retail industry in mind and, step by step, after deep analysis, hone the final idea.
In the end, fuel retail has all it needs to be a perfect ground for loyalty solutions. It deals with recurring sales, price-conscious customers you can win over with a proper value proposition, and non-fuel products with high-margin upsell possibilities.
Benefits of a loyalty program in the oil and gas industry
Implementing a loyalty program in the petrol and gas industry can offer several advantages. It can help you enhance customer engagement, build brand loyalty, and differentiate a business in a competitive market. Here are some reasons why loyalty programs can be valuable for a fuel company:
Increased customer retention
As we’ve mentioned before, recurring gas sales are the core of the gas station business. Loyalty programs are designed to stimulate it and reward repeat customers. You can encourage customers to choose your services consistently and increase customer retention rates by offering incentives such as discounts, points, or exclusive deals.
Gaining a competitive advantage
It’s hard to provide better gas than the station next door. In such a saturated market with similar products and services, a loyalty program can be your unique selling proposition. It can set your business apart from competitors and deliver additional value beyond just fuel.
Improved data collection and customer insights
Loyalty programs open a way to collect valuable customer data. It can be analyzed to gain insights into customer behavior, preferences, and spending patterns. With this information, you can tailor your offerings and marketing strategies to meet customer needs better.
Increased customer spending
You can use the loyalty program to incentivize customers to spend more to earn rewards. This can lead to increased overall spending per customer and boost your revenue.
Opening cross-selling opportunities
Cross-selling opportunities are becoming a crucial strategy for maximizing revenue for gas stations. You can offer discounts on convenience store items, car wash services, or partner with other businesses to provide additional benefits.
Loyalty programs provide an ongoing channel for communication with customers. Whether through emails, mobile apps, or other channels, you can engage with your customers to keep the brand top of mind.
Petrol and gas companies can use the data collected through loyalty programs to create targeted and personalized marketing campaigns. This improves the effectiveness of marketing efforts and increases the likelihood of a customer responding.
How loyalty programs become a crucial element of fuel retail
While legacy revenue streams are important, loyalty programs can complement these streams by fostering customer loyalty to increase customer lifetime value and provide a competitive edge in the petrol and gas industry.
Your competitors already know that. Loyalty marketing is a prevalent element in a fuel retailer's toolkit. According to the Gartner Consumer Community survey, half of respondents use loyalty cards or apps to receive gas price discounts, and general-purpose rewards or cash-back apps are currently experiencing explosive growth. Loyalty professionals suggest that loyalty scheme transactions can constitute from 50% to 70% of all sales at gas stations.
Due to this demand, it’s not about “to have or not to have” in terms of loyalty programs anymore. You need one. Unless your customer is stranded in the desert on an empty tank with only your fuel station in sight, they can quickly go across the street to get virtually the identical product from your competitor who provides better incentives.
Final thoughts: the struggle for innovation
It’s no longer enough to offer the same per gallon or liter discounts as before because they don’t stand out to your customers anymore. The industry calls for innovation and fresh ideas to ignite customer loyalty. You’re locked in an arms race with your competitors to deliver better value and offer precisely what customers need when they’re ready to purchase.
Modern loyalty tech vendors know all that well enough. They keep developing innovative tools to attract your customers, engage them, and nourish customer relationships.
If you want to discover those new revenue-generating approaches, download our eBook. Whether you are a seasoned industry veteran or a newcomer aiming to carve your niche, the knowledge and inspiration provided within these pages will empower you to cultivate lasting bonds with your customers and achieve unparalleled success.
Published November 17, 2023