Retailers are caught inan endless battle at the gaspumps—fending off high payat-the-pump processing fees on credit cards, while trying to keep their customers from floating over to lower-pricedbig-box competitors. To do this, retailersare taking advantage of a proven profitcenter that has withstood the test of time: fleet card programs.
By concerting their efforts to attractthese high-volume fuel consumers, whichincludes car and truck fleets, chains aregrowing a destination that is exemptfrom commercial processing fees and pricing wars.
For example, United Refining Co.(URC) of Pennsylvania, based in Warren,Pa., is one company that is basking in thebenefits of a strong fleet card service. Thecompany operates 291 stores under theKwik Fill, Red Apple and Country Fairbanners, all of which accept the fleet card.The chain began offering the card almosteight years ago, after identifying a nichein the market that needed to be filled.
“We wanted to find a way to keepour customers from heading over to thecompetitors,” said Peter Conley, vice president of retail marketing for KwikFill/Red Apple. “At the time, there werea lot of businesses that needed to removetheir underground storage tanks dueto environmental regulations and liabilities, leaving them without their fuelsupply.” URC realized dozens of fleetaccounts were desperately trawling thestreets—including to its competitors—forlocations that accepted fleet cards. Thisis when the company decided that thebest way to compete was to begin its own fleet program.
Building from the ground up
The program started off slowly. URC’sKwik Fill stores offered companies a fleetcard that could be used at all of its locations, which was a perk for fleet mangersbased in the area. Each month, the chainwould give its fleet customers monthlystatements detailing the use of each cardin the fleet, helping the company that purchased the cards make sure employeesweren’t using them for personal reasons.
The chain’s fleet card service has grownquickly, especially in the last year when itintroduced its own proprietary “Kwik Fill”fleet card. On top of moving all of the program’s processing measures in-house, thenew card offered a key characteristic: a 5cent per gallon discount for all users.
“We had to find a way to stay competitive, especially in the fleet market,” saidConley. “There’s always somebody outthere who wants to have the lowest price,and by offering this discount, we have away of not only competing with them, butalso beating them.”
To increase interest in the fleet cards,URC has made an effort to spread theword. The chain invests in signage aswell as print and TV ads to help promote the card. The chain also encouragesemployees to push the card, rewardingthem with $5 gift card for each application accepted and another $25 for each application approved. And it’s worked, with Conley sharing that morethan 10% of its fuel sales come from fleet customers.
Like URC, Knoxville, Tenn.-based PilotOil has also been able to reel in extra salesby implementing a fleet card program.The 325-store chain also offers various discounts to its fleet card users, the extent of which depends on the amount of volumea customer purchases.
Pilot’s proprietary fleet programoriginated in 1985 at the company’s convenience stores as a way of clinchingbusiness from a niche that needed to befilled, much as URC did. The card wasa success and was quickly worked intothe company’s travel plazas, where it isnow used by more than 4,000 customersthat make up about 5% of the company’svolume.
“What led our company to developinga fleet program was a request from ourcustomers who were looking for a solution like this for their businesses,” said JayStinnett, regional sales manager for Pilot’sfleet card program. “We wanted to provide local business customers with a clearopportunity to use our products.”
Though much of the fleet sales comefrom accepting outside fleet card servicesintended for large trucking fleets, the proprietary cards work to build local loyaltyto the Pilot brand, as well as provide thechain with an opportunity to upsell to its customers.
“One of the most important parts of thefleet service is that it gives us an opportunity to bring more people into ourstores,” said Stinnett. “We accept all themajor billing fleet card programs, whichmake up the majority of our diesel business. But what makes it really important is that it gives us a chance to increase store sales.”
Accepting outside billing fleet cards,such as Wright Express or Comdata, is away for the chain to push large amountsof fuel while keeping the transactions feeslow, since the fees are waved through thebilling company. It has also helped to keepthe niche profitable.
Bye-bye to the big boys
Pilot recently made headlines when itannounced it will no longer accept Visaand MasterCard over-the-road truckingdiesel customers in the backend due tothe high processing fees that come withthe mammoth amounts of fuel it takes tofill trucks. Fleet cards have been a way forthe chain to still accept an alternate payment while maintaining margins.
To further protect profits as well asquell the complaints it’s received fromtruckers affected by the Visa/MasterCardban, Pilot has just launched another proprietary fleet card intended specificallyfor small diesel truck fleets. The cardnot only provides a payment alternativeto customers, but it also helps to furtherinsolate Pilot’s margins thanks to the low costs involved.
“With our private label cards, everything is taken care of in-house,” saidStinnett. “The processing fees are minimal,and by doing all the work ourselves we’reable to save money by avoiding costs.”
Shell Oil is another chain that has beenusing an in-house fleet card to strengthenits brand and increase its volumes.
“One of the advantages of our card isthat we have the single largest nationalfootprint, which makes it attractive to a lotof fleets because of our vast station coverage,” said Bob Butler, manager of creditcard development. “Good coverage is abig selling point to these fleets because ifthey’re paying workers by the hour, thelast thing they’ll want to do is have the worker driving around for an extra hourjust to find a station that accepts the fleet card.”
The chain sells more than 700 milliongallons in fleet fuel per year. Because ofthe vast amount and variety of fleet customers, it offers two different fleet cardsto accommodate them. The standard cardoffers consolidated billing and reportinginformation to help the retailer controlpurchases, while the chain’s Fleet Pluscard offers a much more detailed methodof billing, as well as a rebate that allowscustomers to earn 3% of up to $10,000 amonth. Offering rebates and keeping thefleet customers happy are vital to Shell’soverall success, Butler said.
“What’s attractive about fleet customersis that they tend to buy more gallons pervisit,” he added. “Our average customerbuys about 11 gallons per visit, while ouraverage fleet customer buys more like 19 gallons.”
Butler added that like Pilot, a majorperk of the fleet card comes from theincreased in-store traffic.
“Convenience stores offer a lot of meals and items that are considerably appealingto a fleet worker,” Butler said. “Our storesbecome a fuel destination for fleet cardusers, and this gives us an opportunityto take advantage of the other productsthey’ll need on the road for themselvesand their crews.”
Conley, of URC, also feels that becoming a destination for fleets is vital to acompany’s long-term viability. He contributes a lot of the chain’s fleet card success not only to the consumer’s desire to paythe minimum per gallon, but also the ability to buy from a fuel bra
nd they trust.
“It used to be that a lot of customers would gravitate towards thebigger-named, better-known retailers, butnow a lot of them are more interested inbuying from the place where they can getthe best price, the best service and the bestconvenience, and we fit that niche for a lotof people.”