March 1, 2018

Managing Volatility Using Science, Automation and Experience

Fuel Retailing, Fuel Pricing, Deregulation

By Anila Siraj, EVP of Research and Applied Data Sciences

Life is full of unpredictability and variability, often leading to growing pains. Navigating a period of volatility inspires change and growth. Usually this is for the better, but nobody should try to grow up too fast, especially if they don't have to! The same can apply when steering your fuel business through the stages of market maturity. The harmful effects of rushing to change and grow at the first sign of volatility in a market will not produce steady success and growth. The key is to keep a level head and move through fuel pricing and market volatility using science, experience and automation to grow at a steady rate.

As we have previously noted, fuel markets progress through four key phases in the transition from stable to volatile — from young to mature. If you're unfamiliar with these phases, begin here.

If you are aware of how markets progress, and some of the reasons why these transitions occur, read on to learn how you can help your brand progress at the right rate.

Science

Have a system in place that you can enact when your market shows signs of change. There's no exact formula or one size that fits all, but your system should be attuned to indicators such as an increased number of competitors entering your market, what's occurring upstream with other suppliers, or what competing brands surround your market. Consider the perspective of your consumer as they experience the fuel market. What are they seeing when they are trying to purchase fuel and convenience goods. A perception of market volatility can have just as much impact as any of the factors that influence fuel price changes.

Implement a goal, a strategy and a hypothesis, then use measured tactics to execute on them. Consider why you are changing your prices and by how much you plan to raise or lower them. Are you testing new strategies, or just changing prices to keep up with the change? What changes are you considering and how do you plan on measuring them? Override emotional decisions with science to make measurable insights and implement actionable takeaways. Just remember... Don't panic. Don't overreact. Don't lose focus.

Experience

You've become established through the first phase of growth, moving steadily away from market stability, all while building your value proposition and solidifying your brand. Your prices have been stable, but with volatility comes the opportunity to alter your fuel pricing. Being proactive during this change is not going to benefit you as much as taking a slower, more measured approach.

Understanding your motivations can inform you of your next steps to navigate through volatility. Take this opportunity, but don't throw all you've learned and developed out the window. Don't forget your value proposition. Those are the factors that built your loyalty and your brand. Instead, factor your unique offerings into your consideration for fuel price changes.

If you don't have the experience to keep a balanced perspective during market volatility, enlist the help of a fuel pricing expert. Partnering with a consultant who has decades of experience in global markets that have moved through this phase of volatility ensures you'll have a clear picture of what to do when indicators of volatility arise.

Automation

Automation can be a trusted and reliable tool in the face of a volatile market. However, you cannot rely on blind trust. You need to understand your inputs and the meaning of the data outputs that follow. For example, which stores down the street are being included to determine a price change cadence? Have a strategy for the way you want to use data, so when changes start to occur you have a handle on the way your data tactics will align with your overall automation goal. Data is useless unless there is a goal behind it and an actionable way to use the outcome. Try to find your automation sweet spot that combines data and your goals.

Volatility in life and in business is difficult to manage, but we often exit times of change the better for it. Don't grow up too quickly — but put a plan in place to create flexibility within your processes and strategies that allows for change, and the insights that come from that change.

 

Talk with a Kalibrate Strategy Specialist

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