Mobil Bets Drivers Pick Cappuccino Over Low Prices
Jan. 30, 1995
With cappuccino in the convenience store, a concierge to assist customers and what may be the cleanest gas-station bathrooms ever, Mobil Corp. is going upscale at the pump.
The new amenities are part of a major overhaul in the company's marketing strategy. Two years ago, when Mobil's gasoline retailing business was gushing red, company executives began dissecting it to figure out why the sector was last among its peers. ``We had lost our way,'' says Borden Walker, a Mobil executive spearheading the new marketing approach. ``Some executives within Mobil _ many with big egos _ had gotten in the way of change.''
Now, after diagraming its retail operations on rolls of brown paper stuck to the walls at company headquarters and after visiting upscale service purveyors like Nordstrom's department stores and Ritz-Carlton hotels, the oil company is starting a nationwide program that ``could be revolutionary,'' says MacDonald Beavers, a gasoline retailing expert based in Tulsa, Okla.
When motorist Kathy Bales drove into an Orlando, Fla., Mobil station during a rainstorm recently, she was in a rush and wasn't looking forward to pumping gas in her work clothes. ``But then a young guy came over, pumped my gas, cleaned my windshield and took care of my credit-card transaction for me even though I was in the self-serve lane,'' she says. Since then, Ms. Bales has forsaken her Texaco station even though gasoline there costs two cents less a gallon.
In the 1950s, oil companies offered trading stamps, glasses, windshield washing and other lures to differentiate their brands. But more recently, wooing customers with low prices has been the basis of gasoline marketing, and vicious, unprofitable price wars have resulted.
Now, extensive research by Mobil, including tapping into the thoughts of at least 2,000 motorists, shows that a strategy of pandering to the price shopper may be flawed. According to Mobil's data, only 20 percent of motorists buy gasoline based solely on price. As a result, at Mobil ``the focus is no longer pricing competition,'' Mr. Walker says. ``The theory now is to blow the customer away with product quality and service.''
Mobil says it expects its retail gasoline prices to remain reasonably competitive but is no longer interested in pump wars. Mobil marketers believe that motorists will forsake the gasoline discounters in favor of a ``quality buying experience.''
Mr. Beavers calls Mobil's estimate of price shoppers way too low and maintains that Mobil's new approach ``is risky,'' but Larry Moore, an oil specialist for the marketing research firm NPD Group Inc. in Houston, agrees with Mobil. ``Twenty percent sounds right,'' he says.
Mobil's market research turned up five primary purchasing groups, tagged by the company as the Road Warriors, the True Blues, the Generation F3 drivers, the Homebodies and the Price Driven. Analysis of the groups' spending habits showed ``the price shopper spends no more than $700 annually, while the biggest spenders, the Road Warriors and True Blues, average at least $1,200 a year,'' Mr. Walker says.
Even a few extra cents on the gallon could mean a lot to Mobil, says Michael Mayer, an oil analyst and former Mobil marketing executive. Not counting promotional costs, an extra two cents a gallon across the board translates into an additional $118 million a year on the 650,000 barrels of gasoline the oil company sells daily. ``That's 30 cents a share more in earnings _ a hell of a lot of money,'' Mr. Mayer says.
The new strategy, dubbed Friendly Serve, has already proved to be a money maker. The approach raised revenue as much as 25 percent at some of the stations experimenting with the concept. Just cleaning up the facilities and making them safer by increasing the lighting sparked sales gains of 2 percent to 5 percent. One dealer put a red carpet, plants and mirrors in his station's bathroom.
Adding helpful attendants pushed sales up another 15 percent to 20 percent. At experimental sites, concierge-attendants dashed into the station's store to buy coffee or a soft drink for motorists, such as women with children who didn't want to leave their cars. ``It made the station feel warm and fuzzy,'' says James Krage, a Mobil dealer in Addison, Ill.
Of course, some other gasoline retailers offer freebies and extra services. But these programs are usually part of one-shot promotional programs lasting only days. Mobil's plan for superior service in a uniform nationwide program ``would be very aggressive,'' Mr. Moore says.
The company could run into trouble if dealers, who run their stations independently, don't cooperate. But Mobil says that as many as 85 percent of its 8,000 dealers have said they will get on board, and Mobil teams are already moving among them offering training and advice.
Mobil's research showed that Road Warriors and True Blues want classier snacks from the convenience store; human contact; quality products; top-notch, quick service; privileges for loyal users; attendants who recognize them; and a nationally available brand. They also want a reasonably competitive price, but that's not the most important consideration. ``Most people don't worry about several cents,'' Mr. Mayer says. ``They'd rather not have the pump nozzle greasy.''
Road Warriors, True Blues and Generation F3 (that's fuel, food and fast) are the motorists Mobil aims to please. The Generation group, young but upwardly mobile, is included because Mobil believes many of them are destined to become Road Warriors. All of the targeted customers, who account for 59 percent of the motorist customer base, either drive thousands of miles annually, buy more expensive top-grade gasolines or make heavy use of the convenience store and other facilities at the stations. In other words, they spend a lot of money while on the road.
In Orlando, Fla., where the program is just getting under way, specially hired attendants in blue pants, blue shirts, ties and black Reeboks are already at work, scurrying around looking for ways to help customers. ``We're going out there talking to our customers; we want them to feel like they're somebody,'' says Howard Armstrong, manager of the station on Alafaya Trail.