Loyalty programs in the fuel sector, and the gas station business in particular, have very specific features. Gazprom Neft Regional Sales Director Alexander Krylov shared with R&L his experience in creating, implementing, and further developing a loyalty program called “We’re going the same way” for the Gazpromneft gas station network.
— How often do customers use bank cards at your company’s gas stations? Is there any noticeable tendency for the relative amount of non-cash payments to increase?
— In the first quarter of 2013, the percentage of customers who made their purchases in the Gazpromneft gas station network using bank cards was about 8 percent—not very high. Russian consumers are only beginning to get used to paying with their cards and to the advantages of using them. Nevertheless, we are seeing growth in the relative amount of card payments at our gas stations. In comparison, in the first quarter of 2012, it was 3 percent.
— Non-cash payments are considered to be significantly more convenient for the retailer itself. They do away with a number of problems, for example, transporting and depositing cash, security measures, etc. Is the company taking any measures to increase the relative amount of card payments in its network?
— You are right that there are fewer difficulties involved with non-cash payments and fewer costs from transporting and depositing cash. The costs of servicing cash flow as a whole are reduced. Given these conditions, we are definitely very interested in increasing the share of non-cash payments. One of the steps we have taken aimed at incentivizing customers to pay with cards is that we have launched a co-branding program with Gazprombank. Program participants use their bank cards both for making non-cash payments and as a bonus card for the Gazpromneft gas station network’s “We’re going the same way” program. Furthermore, under our loyalty program, the holders of such cards get an irreducible “gold” status in our loyalty program. I will speak about the benefits that status offers a little later.
International payment systems are also interested in increasing the percentage of non-cash payments. We partner with them in implementing joint marketing projects that incentivize the use of bank cards for payments.
— How have you implemented the contactless payment system at your gas stations? What is the economic effect of that system?
— The technology of PayPass payments is only gaining ground in our network. We are currently running a pilot project to test acceptance of MasterCard PayPass cards across the Gazpromneft gas station network in Moscow.
For motorists, speed of service is important. For the fuel business, it’s important to have a high throughput. Therefore, in this context, the growing number of proximity payments has a positive effect on our business performance. We intend in 2014 to increase the number of terminals in our gas station network that support the Visa payWave and MasterCard PayPass technologies.
— In your view, are loyalty programs in the retail fuel business largely a marketing tool, or are they a real way to improve business performance?
— It’s a business necessity, because the frequency and volume of purchases made by loyal auto enthusiasts impact the company’s business performance. Essentially, the loyalty program is a set of marketing measures for increasing sales among existing customers and attracting new visitors. We are forming an attachment between motorists and the brand name. And we’re doing this not just by providing bonuses to cardholders. The primary basis for this is the quality fuel and high level of service at our gas stations.
— How does Gazprom Neft’s loyalty program differ from its competitors’ similar programs?
— One of the main features is that the more loyal the customer is, the more incentives he can get. Loyalty program participants get bonuses for each purchase. For every 20 rubles spent at a gas station, 6, 8, or 20 bonus points are added, depending on the status of the card: “silver,” “gold,” or “platinum.” The status changes depending on the total purchases made during the previous month. The more purchases, the higher the status of the bonus card. The software at the gas stations is set up so that it also counts the type of purchases (i.e. petroleum products or auxiliary goods) as well as the size of purchases. Premium bonuses are added for large purchases.
Participants of the “We’re going the same way” program can accumulate points for buying not just fuel, but also auxiliary goods at our gas stations. In contrast, certain companies are incentivizing sales of petroleum products exclusively. The most popular option for our customers is to buy fuel and goods in the gas station stores using their bonus points. Other gas station networks, as a rule, limit the choices of their loyalty program participants by giving them a limited range of goods from the stores at their gas stations.
— Many consumers believe that the main advantage that fuel retailers can provide is discounts on fuel. What else can you offer to loyal customers?
— We are consciously avoiding use of the word “discount.” A discount program is unlikely to retain customers. You can always find somebody who will give you a bigger discount. What’s worse, customers begin to take the discounts for granted. So, the emotional incentive for buying goes away.
We give bonus points and talk about the specific advantage for customers. For example, customers with “gold” status who regularly fuel their automobiles at our gas stations and participate in campaigns that offer extra bonus points will be able to pay for their fifteenth refill using their accumulated bonus points. It all depends on auto enthusiasts’ activity and desire. But we are also ready to help them with it. We make regular personalized offers to program participants and thereby incentivize customer activity and raise the speed at which they accumulate bonus points.
It’s telling that over 85 percent of program customers are consciously participating in it. In other words, they understand why they’re saving their bonus points, how many points they’re getting, and most importantly, what they will spend them on.
— What kind of results have the “We’re going the same way” loyalty program produced for you? What percentage of your cash flow and profits are accounted for by loyal customers? Do you have such information?
— Definitely. The program’s performance indicators are important for us. Loyalty cardholders have a higher average receipt, nearly
— Are you planning to expand the loyalty program? If you are, then what changes await Gazprom Neft’s loyal customers?
— We are focused on improving the program technically. Our task is to reduce the time it takes to service a customer using a card to the greatest extent possible. There is an idea to implement the loyalty card using proximity technology. For customers who use our branded fuel, we are planning to create a premium loyalty program with additional privileges and exclusive offers. They will be assigned to personal managers available by telephone hotline. Such customers will be able to attend closed auto manufacturer test drives, use special mobile applications, and other opportunities.
The co-branding project with Gazprombank will rise to a new level. By using the card for any transactions at hypermarkets and other stores, possessors of co-branding bank cards will be able to receive additional bonus points and then spend them at our gas stations.