well, yes we gas up at shell. and we noticed that shell runs back-to-back consumer promotions. that is strange.
the marketing idea behind consumer promotions is to pump up volume sales and market share over non-promoted months. consumer promos will either get new users to try the product and/or get current users to increase their purchase. getting a bump on those hopefully will enable to retain and convert new users into regular users and build loyalty among current users.
what is the point then of conducting consumer promotions 24/7?
first, how do you assess the success of the promos you conduct? all months are promoted, there is no way to determine one promo was able or unable to push up sales and market share.
the marketing expense will be extremely high. consumer promotions are expensive to conduct. having a consumer promotion 24/7 means the product margins will be lower.
instead of conducting consumer promos 24/7, i would instead take that marketing expense and lower down the gas prices of their products. oil products as anyone know is very price sensitive. consumers actually know exactly how much they paid for it the last time they filled up their vehicles with gas. lowering the price of gasoline we think is the most effective way to lure in new users and increase purchase of regular users.
shell and the other big 2 oil companies, petron and caltex are in direct competition with smaller oil retailers. the small oil retailers are always able to under-cut the big 3's pricing. the big 3 know that if their gas station is beside or near any one of the small oil retailers, they will need to keep their prices as low as possible as they know not doing that will mean consumers will move to the small players.
moving the consumer promo expense to lowering the retail price of their products will allow shell to better compete with these small retailers. but i will do a little more than just lowering the gas prices, i will do something more creative and more attention grabbing than just doing a universal price decrease. i would treat the price reduction like a consumer promotion but will be creative in implementing it so that it gets the most attention and surge they need.
what can these creative ways be? that is next here in WAWAM!
mount pinatubo erupts shooting ashes several kilometers high, then floating to blanket many other towns hundreds of kilometers away
Thursday, April 30, 2009
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I acknowledge your point on having months with no consumer promotion in order to measure effectiveness of promo during the times when promo is executed. But take note that there is usually a 15 day gap between successive promotions where sales can be measured and used as base of comparison. And trust me when I say that promotional costs hardly make a dent on the price at the pump. Mktg cost of more than 10cents/liter would surprise me. Also, given the sensitivity of the market, an oil company as large as shell cannot just drop prices. It will force the other big players to match and the small players to drop even further. in the end, nobody wins in a price war (except the consumer).
ReplyDeletea 15 day gap between promos in a gas station does not make sense at all and will not make a differenc. most private vehicle owners gas up every 2 to 3 weeks. so that means these customers will feel there is a promo 24/7.
ReplyDeleteon the other side, a very small marketing cost means the promo being offered is really nothing in terms of value to the consumer. if the value being offered is so small, it means it will not be attractive enough - whhat is the point of doing the promo then?
it's just wasting precious marketing funds. and neither will the consumers appreciate it as it's value is too small to encourage increase in purchase.