by Ian Thompson, Executive VP, Global Solutions Consultancy
Automated pricing processes can feel like a risk. How will you know if your prices are optimized? Can you really depend on a software solution to boost profit? And how will you feel giving up some control over pricing tactics?
The ambiguity of emotions aside, automated fuel pricing adds countless benefits to your bottom line. Here's how.
Automated Pricing Processes and Profit Gains: They Go Together
When it comes to fuel pricing solutions that allow for automation, selectiveness is paramount. The best-in-class solutions will deploy a range of pricing techniques from straightforward rules to algorithms that optimize profitability within your pricing ecosystem. What can these automation tools really do for location?
1. Respond to past trends
An important step in growing fuel profitability is understanding past trends. By paying attention to historical data you can dictate future strategies and tactics in order to capture more profitable volume.
To get started, take a close look at sales and pricing data along with your customers’ purchasing behavior. Create comparisons over different time periods – same day, different weeks, week-to-week, month-to-month, etc. – and include fuel volumes by grade and by site to accurately evaluate past trends. Then ask yourself: are there days of the week with higher or lower sales? What seasonal effects may have impacted prices or purchasing behavior?
For many retailers, there is no lack of such historical data, but making sense of it all can be a different story. This is where an automated pricing system can provide deep analysis and actionable insights quickly and consistently. Investing in a tool such as this will not only determine price by what's yielded at the highest profit in the past, but also what will yield the highest profit in today's fuel retail environment.
2. Understand how price aligns with strategic objectives
When you can react quickly and can easily track results of your pricing decisions, you have the ability to improve accuracy significantly. Not only that, but also use that accuracy to better understand which prices help your company deliver its daily pricing tactics and its overall strategic objectives. If a price (and the pricing tactic that led to it) do not appear to contribute to those objectives, you have the opportunity to shift focus.
3. Increase in-store spend
With automated, optimized fuel pricing comes increased individual spend. Why? When customers can accurately predict — or even be surprised by — lower cost, they will move to spend the money elsewhere. So when fuel prices are right, your c-store will see the results.
5. Create consistency via speed
Getting prices to both individual sites and your entire network is a faster, more efficient process when you automate. That speed means no fraction of a cent is left at the pump, and gives you a competitive advantage. You never want to be known as the store or brand who always prices higher than competitors. Indeed, your pricing reputation should be one of speed and reliability. If a nearby competitor changes its price, your automated process should immediately alert you to changes in the market so that you can accurately and quickly respond.
6. Help avoid data errors
The concept of shifting some pricing work off of people and onto computers is part of what many executives, analysts and store managers find off-putting about an automated process. The fear lies in loss of control. In practice, though, pricing technology provides more control over important decisions through providing the insight into how, why and where purchases happen. Best-in-class business intelligence tools will allow you to both receive and process data and automate the optimization that typically follows, while still leaving room for analysts to make the tough decisions and execute on recommendations they agree with. Data errors can lead to misinformed decisions, which can lead to unnecessary profit loss. Avoiding those errors leads to the opposite.
Additionally, avoiding data errors helps maintain brand promise. In other words, your brand won't be undermined by poor pricing execution.
7. Save time, increasing ROI
Removing the human element from the more straightforward pricing decisions has another positive impact on profit: increased ROI through decreasing resources allocated to these tasks. That doesn't mean your analysts will go the way of the dinosaurs. It means they'll be able to develop more strategic, bigger picture initiatives rather than devoting their prowess to daily pricing concerns. With more time, these analysts will be able to throw their full weight behind those more difficult pricing decisions that demand acute, detailed market knowledge.
Automation: The Final Fuel Frontier
Automation has long since permeated our daily existence. Fighting it is a natural reaction — we all desire control over the processes that we're responsible for, and automation can feel like a threat to that control. But it's the opposite. It's an enabler, a tool for empowerment. In fuel, automation performs the heavy data lifting, allowing you to devise and execute highly effective pricing strategies you've never had time for in the past. It keeps your brand and organization on the cutting edge of fuel pricing performance. And, if you recognize its value and use it well, automation will more than pay you back in kind.