Cheaper gas: Motiva aims to undercut competition with help of Google developers
Running a gas station is a cutthroat business. When a competitor across the street lowers prices, that forces nearby stations to slash prices, too. And at time when gasoline demand is flattening, competition is growing fiercer.
Houston oil refining giant Motiva Enterprises, which sells its fuel under the Shell and 76 brands, hopes to give stations that carry its fuel a digital leg up by partnering with a startup GetUpside founded by two former Google product managers.
GetUpside exploits how gas stations compete for customers by negotiating discounts on gasoline sold by individual stations and mapping out those discounts on a smartphone app. Drivers get personalized discounts based on their previous behavior - much like how Google personalizes online advertisements based on users’ browsing history.
The app already has 1.1 million users since launching in Washington D.C. in 2016. It recently launched in Texas starting with 500 gas stations in Houston. Austin, Dallas and San Antonio launches are forthcoming.
GetUpside has partnered with Motiva to give gas stations selling Motiva fuel access to the app to lure more customers. GetUpside also will launch a partnership with BP and Amoco at stations outside of Houston in March and wants to go nationwide by the end of the year.
Traditionally, gas stations compete on a street-by-street, highway basis-by-highway exit basis. That’s why prices can vary widely depending on where you are in town. GetUpside undercuts that system by only offering its services to one station in a given geographic cluster, shutting out other stations so that competitors without the app don’t know the station’s “true price.” Plus, each driver gets a different discount, reducing the risk of a price war by preventing rival stations from discovering the other station’s prices.
By tracking consumers history, GetUpside can calculate the incremental profit it brings to wholesalers and it takes a 35 to 45 percent cut of that profit, said Alex Kinnier, CEO and co-founder of GetUpside, which operates under the legal name Upside Services Inc.. On average stations have seen between a 2 percent to 6 percent increase in sales volume, he added.
Motiva has 90 percent of its wholesalers using the app, the Saudi Aramco-owned refiner said. So far Motiva-supplied stations have seen a 1 percent to 3 percent increase in fuel sales volume, although some individual stations have seen a 10 percent uptick in fuel sales, said Jeff Rubin, director of marketing and competitive intelligence for Motiva.
“We’ve seen new customers coming to our station that we’ve never seen before,” Rubin said. The more stations sell the more fuel they buy from suppliers like Motiva.
Under a traditional model, Motiva would have to arrange for more wholesale contracts and add gas stations to sell more gasoline and diesel to wholesalers. The goal of the app is to lift sales without significant capital investments.
“That is a far better return-on-investment than buying more supply contracts or more stations which are under utilized,” Kinnier said.
Kinnier and co-founder Wayne Lin ran Google’s advertising platform before launching a home energy analytics firm Opower. Cloud computing giant Oracle bought Opower for $532 million in 2016. Now Kinnier and Lin are getting advice and funding from chief Google economist Hal Varian for GetUpside. The startup is also backed by funding the venture capital firm Builder’s VC.
Although GetUpside started with gasoline, it’s also added grocery stores and about 225 restaurants too. The Houston refiner is leveraging its business relationships with gas station owners to help GetUpside expand into retail because many gas station owners also own fast food eateries and grocery stores.
Motiva said put resources toward the app’s development and spent $6.5 million on advertising to promote the app last year. Rubin said its partnership with GetUpside is part Motiva’s effort to be seen as innovative tech-driven company.
“It’s showing Motiva as an innovator and looking beyond just our business,” Rubin said.