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FUELING THE TOP LINE

By now, it's no secret that supermarkets have set their sights on capturing a chunk of the retail gas trade. No doubt, it is just one of the methods that will be used to add top-line growth.However, just installing pumps may not be enough. Establishing an effective marketing campaign will be key.A recent study conducted by Energy Analysts International, Westminster, Colo., pointed out that cross merchandising

By now, it's no secret that supermarkets have set their sights on capturing a chunk of the retail gas trade. No doubt, it is just one of the methods that will be used to add top-line growth.

However, just installing pumps may not be enough. Establishing an effective marketing campaign will be key.

A recent study conducted by Energy Analysts International, Westminster, Colo., pointed out that cross merchandising and loyalty programs at hypermarts [a category that includes large food retailers who sell gas] are able to offer tremendous savings to customers without having to post a low price.

"Gasoline vouchers issued as part of the hypermarket's cross-merchandising program have a much higher redemption rate because they are perceived as having more value than coupons," the study said.

In addition to providing shoppers with discounts on gas at checkouts, EAI said more hypermarts will use "smart cards" to marry loyalty programs to the tracking of buying behavior.

Supermarkets with gas pumps already realize the significant cross-marketing potential to get their loyal grocery shoppers to purchase gas, and vice versa.

Large chains, such as Albertson's, Kroger and H.E. Butt, are effectively rewarding loyal shoppers with dollars-off gas purchases already.

Many chains have tested other promotions, such as dollars-off groceries, or a free gallon of milk when the customer purchases a tank of gas, but have found that discounts are most popular.

"Gas is so expensive, they can identify with saving 60 cents or whatever on their next tank," said Jim Phipps, vice president of the two-store Skagway in Grand Island, Neb., which is partnering with a regional convenience store chain to offer gas rewards.

"People could probably tell you how much they paid for gas, but may not be as sensitive about [the price of] a gallon of milk or a pound of ground beef," said James Aulds, director of petroleum marketing, H.E. Butt, San Antonio.

H-E-B's Fuel Rewards program, which provides dollars-off gas when consumers buy certain brands, has also been successful, and the retailer plans to expand it to more stores this year.

H-E-B has promoted the program in both print and broadcast advertising, in-store signage, shelf-talkers, and ads at the gas pumps.

The chain's strong promotion, along with consumers' price sensitivity on gas, has resulted in strong sales increases at stores with gas pumps. Sales of one dry grocery item rose by 50 percent when tied in with a gas promotion, compared to sales at stores without a gas operation.

H-E-B's program is attractive because the retailer does not pay for the discounts given to its shoppers. The receipts are sent to a clearinghouse that itemizes the rewards, then manufacturers are billed, and the funds are sent to retailers.

Albertson's Gas Rewards program allows consumers to receive from one to 10 cents off per gallon of gas, after buying certain products.

At the Boise, Idaho-based Albertson's checkouts, the discounts are added together and printed on a voucher. Customers enter their voucher number at the pump, which is electronically verified against Albertson's records.

Albertson's is one of the most aggressive supermarkets in the gas business, with 100 gas centers open, and plans to add 60 Albertson's Express outlets by next February.

Catalina Marketing Solutions, St. Petersburg, Fla., is testing a similar program with a large supermarket chain.

"So far, results look strong. The retailer has done a good job communicating with shoppers, and customers find it a real value. Gas is something you don't ever buy on sale," said Sue Klug, president of Catalina Marketing.

The next marketing advancement, Klug says, is driving shoppers from the gas pump back into the supermarket.

"We're looking at several things, including their behaviors, to close the loop from the pump to the store."

Smaller grocery chains are teaming up with local or regional gas companies on promotions.

Even though its stores do not have gas pumps, Skagway has been successful with its Great Gallons Giveaway program, in partnership with Pump n' Pantry convenience stores in central Nebraska.

Similar to other chains, the promotion offers consumers points for buying certain products, then those points translate into cents off each gallon of gas.

Farm Fresh, Norfolk, Va., is conducting a similar program with regional gas chain Miller Mart. Farm Fresh customers can redeem coupons for gas at Miller Mart stores.

Farm Fresh shoppers can receive a coupon for a discount at one of the 60 Miller Mart locations in Virginia. However, the discount is often as low as 20 cents, leading to low redemption rates.

"We didn't have a lot of vendor support, so the offer wasn't strong enough for the consumer to feel like he should bother. The coupon needs to have a larger value, around $1.00, especially when the gas station is not right in your parking lot," Johnson said.

However, Johnson predicts redemption rates will jump when the two companies relaunch the program in early June.

Working with Fuel Marketing Solutions, the renovated program will include vendor support, obtained by FMS.

"The hope is that vendor funding will pay for free gas. The vendor wins because they sell more merchandise, we win because we sell more gas, Farm Fresh wins because they sell more program and the customer gets more gas [at a reduced cost]," Johnson said.

The new program will include monthly fliers on gas and grocery savings -- particularly when a customer buys more than one of a certain product, distributed in both Miller Mart and Farm Fresh stores.

Recently, Publix, Lakeland, Fla., and Kroger Co., Cincinnati, became the latest supermarket operators to add or expand gas pumps.

Publix said last month it will build gas-convenience stores in front of its supermarkets.

Publix has not set a date that the stores will open.

Kroger, meanwhile, said last month it was partnering with Radiant Systems to implement fuel management solutions at its stores with gas pumps.

The hardware and software rollout will include an interface that enables integration of the fuel kiosks with Kroger's existing POS system.

Hypermarts (supermarkets, mass merchandisers, membership clubs, discount stores and nonconvenience stores) will account for about 16 percent of total U.S. gas sales by the end of 2001, according to the study published in Oil Express.