What business are you really in? Lessons in marketing

What business are you really in?

We had the opportunity to speak with some of the top performing financial planning businesses in the country over the last few weeks and when posed this question the first answers were:

- we're in the financial planning business

- we're in the superannuation and investment business

- I sell insurance

Really?

We thought that because of what it is that financial planners and insurance professionals that they maximise the possibility that people live well and look after their families. That they provide a plan to deliver hopes and dreams.

Maybe we need to illuminate what we are trying to say here by looking at another industry that for too long and perhaps still today is product focussed.

In our coming blogs we will talk about financial planners deliering hopes and dreams but for now, forget abour FOFA and take what you can out of the evolution of marketing strategy from the humble petrol station.

The modern day model, of a retail petrol station, is dramatically different to the humble four pump driveway positioned next to the motor mechanics workshop and payment kiosk, that greeted motorists thirty years ago. The stations primary role, at that time, was fuel delivery to motorists. Over time, items such as chocolates and beverages were offered, and the store space allocated to these items expanded, as well as the range of items on sale, to a point today where the primary role of the petrol station is to deliver convenience. Satisfying the needs and comforts of drivers has become a major profit centre for outlets, with non-petrol items offering the retailer higher margins than petrol(Azimont & Araujo, 2010). Theodore Levitt argued in his 1975 Harvard Business Review article, “Marketing Myopia”, that no-one really buys petrol, rather, people buy the right to continue driving their cars, thus enjoying the freedom that mobility of transport brings. And with research showing that many customers stop at petrol stations and buy food and beverages without necessarily buying petrol (Azimont & Araujo, 2010), the retail petrol marketing strategy has evolved so that the four P’s of the marketing mix, product, price, promotion and place have been re-mixed to better satisfy the needs and wants of the convenience seeking motorist.

Without a differentiated product, (ignoring the various octane blend formulas promoted by competing retailers), there is no detriment or cost to the consumer to switch brands of petrol(Attri, et al 2010). That problem, of a lack of loyalty to the core product, petrol, has meant that for a petrol retailer the product needs to encompass not only petrol, but factors that can enhance loyalty to the retailer. At a store level, Helgesen et al, (2010), found store satisfaction, which embodies both service and cleanliness, is in the control of the store manager, and was a strong
driver of loyalty. Consequently retailers have changed the focus from selling petrol as the product, to selling convenience, and in order to do so they have needed to respond to what it is that customers define as convenient. Azimont and Araujo (2010) found that convenience meant different things and demanded a different product focus based on another element of the marketing mix, namely place. This changed the product into a range; from the availability of
toilets, wi-fi, hot food options, coffee stations through to shower and change facilities or in another store format: a mini-market providing last minute needs such as groceries, flowers, dvd sales and rentals, and even gifts. Consequently a retail petrol station has shifted from a fuel delivery station, to a retail outlet that can provide for a customer, items that are more important than petrol (Azimont and Araujo, 2010).

Those customers respond, not only then to the mix of products but, to how the available products fit into where and when the customer needs to purchase them. Place, then becomes a vital component of the marketing mix that needs,from the perspective of the marketing strategy, to be redesigned in conjunction with product, to provide the right mix for the frequenting customers. Rosenbloom and Dimitrova (2011) identified the necessity to re-mix the mix to reflect the changes desired by target markets. For the petrol retailer the P of place can be multi-faceted: customers who need a break whilst on a long drive but not necessarily to refuel; truck drivers needing shower and rest facilities; everyday commuters going to and from work; customers needing convenience and shopping for products that are last minute purchases (Azimont and Araujo, 2010). For the everyday commuter , place is often defined as the retail outlet that is on route; to either home or a place of work, with a key satisfaction feature being the relationship with the outlet staff (Attri et al, 2010). In their study of classification of store subtypes, Azimont and Araujo, 2010, identified the need for up to seven store styles based on; the geographic positioning of the store, the type of customers likely to frequent the store, at what times of the day they would and based on the characteristics of their travel, what other services and products they would need. The importance of petrol was of varying priorities and accordingly has resulted in multiple styles of outlets.

Understanding that diversity in product and diverse store configurations are required to meet the needs of the modern motorist is one thing. Attracting the motorist to the store and obtaining repeat business, in other words, loyalty, is another. How the store is promoted, the P of the marketing mix that encompasses communications, advertising, publicity and reputation, becomes an important consideration, as the success of this P, often becomes a trust exercise and a proxy for product quality (Attri et al, 2010). Helgesen et al, (2010), found that retail brand image and individual store image were two different things and suggested that a two tiered approach (overall brand eg: Shell, and individual store eg: Shell, Main Road Eltham) was a vital ingredient for successful petrol retailing. In their study, they found that store satisfaction, was a stronger driver of loyalty than discount cards and overall they determined that brand image is a positive contributor to store image and satisfaction, and in turn store image positively impacts on loyalty and satisfaction. Communication and promotion therefore needs to create a perception
that is tailored to resonate with the needs of the target consumer. With the multi levels of store types required to cater for the different types of motorists, a single message is insufficient to speak to the diverse needs of motorists. A promotion strategy that communicates service quality, and variety of services was found by Helgesen et al, (2010) to be a significant positive driver of chain (brand) image. This multi-dimensional promotional approach is demonstrated by BP Retail Australia. Cricketer Michael Clarke is the face of BP with the tag “when it comes to
performance, it’s what’s inside that counts”. BP service stations are promoted highlighting:the Wild Bean Cafe “providing food and beverages for people on the go”; convenience stores, “from magazines to groceries, our stores have the essentials you need while on the road”; and the BP car washes, “In, Out, Easy”. The promotion of this diverse offer, gift cards and store locater applications for smart phones, further create the connectivity to customers that builds brand loyalty.

In contrast Shell Australia’s promotional language and content focuses heavily on the final P, price. Product and service is highlighted by Shell as being centred around fuel and oil. The major promotion focus on the Shell Australia website is the price benefits of the use of the Shell card. The pitch for Shell is aimed at small business and major fleets with cash flow and cost control highlighted as the key benefits. Online tools are provided as part of the Shell Card to assist businesses manage fuel consumption and pricing. These types of programmes are
described by Helgesen et al, (2010), as packages of benefits aimed at repeat purchases and providing an economic benefit and barrier to switching retailers, that on its own petrol does not provide. These programmes also enable the retailer to build via a client management database a more complete view of its customers. The data however gathered by Helgesen et al,(2010), showed only a small albeit positive effect on store loyalty with these programmes. BP Australia’s approach looks at engendering positive emotions with its customers by fulfilling their needs and wants and in so doing generates store loyalty based on the service experience and convenience, thus tempering the impact of price. Quality, of convenience, of produce, of experience and of the range of services, enables BP Australia to attract customers with a proposition that is not pre-disposed to saving its customers money.

Theodore Levitt, suggested that businesses should answer the question, “What business are you really in?”. For petrol retailers the answer has historically been a distinctly product based answer: the business of selling petrol. Today the retailer that re-mixes the marketing mix is attracting customers to petrol stations by offering convenience and products associated with, the myriad of needs of the travelling motorist. Marketing then is about optimising the 4 P’s in a way that reflects and answers the needs of the target market (Rosenbloom and Dimitrova, 2011). The humble petrol station of thirty years ago has transformed, as a result, into a complex offer that is able to present different propositions to different audiences (Azimont and Araujo, 2010), and in so doing offers customers convenience, sometimes more important to the customer than the fuel in the bowsers.