What’s fueling the future of large scale fuel rewards programs?
For this episode of the Loylogic Podcast, Olivier Martinet, CEO of Posidonia Consulting and former Vice President of marketing at BP, joins us to discuss fuel loyalty programs and what’s driving any rethinking of customer retention, revenue generation and incentivized engagement strategies.
In this discussion, Olivier emphasizes the importance of tailoring fuel rewards propositions to fit each company's strategy and customer engagement capabilities. Key talking points include:
- Instead of searching for a universal best-in-class program, he suggests evaluating programs based on four lenses: ease to participate, relevance, personalization, and profitability.
- The level of focus on these lenses varies based on the company size and scope, with global organizations showing a greater inclination towards balancing customer advantage and brand consistency.
- How the increasing digitalization and shift towards electric vehicles in the fuel industry are driving organizations to rethink their loyalty strategies, recognizing that a loyalty scheme is not just a marketing tool but also a privileged data provider for long-term strategic adaptation.
- Why, as the industry moves towards becoming energy providers, the evolving landscape of mobility hubs and electric vehicles will impact loyalty offers, requiring companies to adjust to longer customer dwell times and the integration of home charging behavior.
- Why major fuel companies are indeed repositioning themselves as energy providers, and collaborations with other energy companies and investments in alternative energy sources are already taking place, signifying a shift towards a future of potential joint ventures and partnerships.
- Why loyalty program owners should keep earn simple but creative with the burn side, with the differentiator coming in terms of personalization, and how customer data is handled.
To hear Olivier’s thoughts on these topics and much more, listen using the link below, or read on for the full transcript.
(1:27) Olivier, in your opinion, what are currently the best in class fuel rewards propositions around the world? And what is setting them apart?
Olivier Martinet: "That's a good question. And maybe I won't answer that directly, because at the end of the day, there's one thing I really don't believe in is that there's a best in class program. Basically, all programs, or success of a program, is very much dependant on the fit between the program as it is with the company, the company strategy, but also the readiness of a company to be using it. To some extent, the best in class aspect is having the right program for the company, for the company's targets and what that company is able to do with engaging customers. Okay, so it's probably not directly answering your question, but I guess it's a key feature of the thinking and how I've been approaching loyalty schemes for about 30 years."
(2:28) So your approach there is very much steering away from a one-size-fits-all strategy and instead looking at a case-by-case basis?
Olivier: "Yes, absolutely. The KPIs I'm looking into, to decide what is where we should go. The first one is around ease to participate. And when I'm saying this, it's ease to participate on both sides, from the consumer angle, but also from a retailer or partner point of view.
"The second one, the second lens is on the relevance. How relevant is a program as a consumer on the receiving end, but also how relevant is this program to my strategy to be engaging customers going forward?
"The third lens is personalization. And when I'm saying personalization, what is the right level of personalization? And are we talking to groups? Are we talking to a segment of one? And this is very highly dependant on the capabilities you have as a company, in terms of what you are going to be doing with the data? How are you going to be engaging the customers? How far have you gone on the digitalization journey? And how smart are you with analyzing the data of your customer base.
"The last dimension I'm looking into is the profitability. When saying this I'm more thinking of financial sustainability of the scheme, because one thing is, you are not as a company entering into loyalty for the next two weeks, this is for the long run, so you bloody need to make sure that you can sustain this financially in the long run, and not going to be forced to deceive your customers, you know, 5/6/7 years down the road by decreasing the advantage you've been giving them.
"These are four lenses, I'm always looking into to try to find the right balance between customer advantage and what the company or my clients can do with that scheme and how far we can push the personalization journey."
(4:27) How common is it that you come across an organization, a brand company, whatever you want to call it, that shares that vision that that is able to look at its loyalty and rewards through those same lenses?
Olivier: "To some extent, it depends on the company you're talking to. If you're talking about a company who is in one market, covering one, it's very infrequent that you would be looking into these four lenses because basically very often, you find those really focusing on how relevant the offer can be for customers and how much digitalization you can put in your system. But, if you start getting into some other companies who are managing schemes across the globe, 20 different countries, or more four or five different continents, that's where often you can find some of this approach. This was where you need to balance how much you're giving to customers, to your targets, in terms of personalization, but also managing some kind of consistency in the approach for your brand."
(5:43) My logical next question there is, you've got these four lenses, and what challenges are rewards loyalty program owners facing? What's driving any rethinks of the strategy? And how are people going to regard and look at their loyalty programs?
Olivier: "Very often, what is forcing the rethinking is the digitalization of it, coming in with a mobile application and then kind of suddenly saying, here is the 'ta-da' moment for customers. You start realizing that to be getting there, you need to be upgrading your IT, you need to be making sure you're going to be dealing with your consumer data. What are you going to be doing it? And what is the analytical solution you're going to be applying to it? And then, what are the use cases you're going to be applying to it?
"Very often, what I see is that companies would go through part of his process, and we'll start getting into, "Okay, my use case for this, obviously, is I need to talk to my customers, I'm going to be communicating to my customers, because that's a marketing tool, I need to do this". Very often, what I see missing is that comms or marketing, even on a segment of one, is only one part of a value, which a loyalty scheme can generate. The number of use cases which can come from the data arising from your privileged customer base is much wider. And it can go into various strategic things like category management, if you're a retailer, what are your pricing policies, where are you going to be investing, what is the range of your assortment you're going to be offering to customers in what sites etc etc., which are much, I would say, wider use cases, than only looking at the marketing side.
"Obviously the marketing side, to some extent, is the bread and butter, because that is what makes sure your customer base keeps coming back, keeps generating the income, but also keeps generating the data you're after. A loyalty scheme is not only a marketing tool, it's also a privileged data provider for companies to be adapting their strategy in the long term."
(8:31) So it's fair to say that it is more than marketing?
Olivier: Yeah, absolutely. As anyone who has known me for some time will know, I always say that your loyalty scheme shouldn't be left only to loyalty managers. It should be sitting on a boardroom table. It's where we honestly should be sitting, not so much the engagement or marketing part, but for all of the rest, which is getting into the long term benefits of launching and participating into a loyalty scheme."
(9:06) One question I've got to ask you, given we're talking about fuel, is where does the shift to electric vehicles come into play?
Olivier: "I guess it's an indirect impact. The shift to EVs is a strategic shift for fuel retail, for networks, and we see, not all, but most of the companies working on shifting on moving away from being a fuel or let's say a fuel provider, to becoming an energy provider. So that's a fundamental strategic shift, which is happening to most of the fuel retailers. To some extent, that's the driver. That means, though, that there is going to be some adaptation required to the loyalty, so it's more of a consequence of the strategic shift, which needs to happen and obviously will need to be impacting via schemes at some point in future."
(10:06) Okay, so in London, as in many other cities around the world, we're seeing the creation of mobility hubs that are about more than fuel. It's about enjoying time out of good cup of coffee and maybe do some shopping. So how is that impacting fuel loyalty?
Olivier: "It will impact the overall offer to the consumer, so it will need to impact loyalty. Basically, there's a fundamental shift here, which is to say, in the past, you had customers coming to fill up with a get me in, get me out as quickly as possible, and by the way, as cheaply as possible, attitude. And if on my way, in and out, you can sell some other stuff, you know, being impulse items, coffee, fine.
"There are two ways which I would say the EV will impact loyalty. The first one is, it will force customers to stay longer on the forecourt, because there's a charging time, which means it's less of loyalty. You then get into how, I can make sure as a customer when I'm getting to a site, I will be able to charge, I will be able to get some coffee or make sure that the 10/15/20 minutes I'm going to be there are also going to be very valuable. That's one thing.
"The second thing is, how does this relate to me charging my EV when I'm home, because at the end of the day, for an EV to be financially attractive to customers, one of the big underlying thing is that a big share of the charging should happen at your own house. And to some extent, that's where the impact of loyalty schemes is going. How do you deal with customers staying longer on the forecourt? Then, what is the kind of behavior you want to reward? And the second thing is, how do you relate that on-site interaction with what is happening when customers are filling up at home?”
(12:09) Do you therefore see fuel companies becoming energy companies?
Olivier: "So that's what they are claiming. Look into what BP or Shell are claiming, Total is doing the same thing. They are very much claiming to be a future energy company, energy provider for mobility.
(12:29) Is there a case there that we'll see more collaboration between fuel companies and other energy providers?
Olivier: "You can see already things happening. You can see already partnerships happening between electric companies, oil companies, energy companies. You can see also that BP and Shell and Total are investing highly in alternative energy, be it solar, wind, etc, etc. And to some extent that's something which is already happening. Whether then you are going to see some of the big companies joining up in future in the long term, probably yes. Is it happening? Is it going to happen in the short term? Honestly, I have no clue. I would suspect not. Because you still have the weight of the oil production and distribution, which is still driving significant value for shareholders. So it's not in the short term. But in the long term. You know, probably yes. That's me guessing, you know, it's probably more for an evening, you know, a beer conversation!"
(13:41) If only we knew Olivier will be richer than we are now! Does this changing landscape of loyalty, and you've touched on it a little bit earlier, does it require more personalization of rewards now, as well as greater choice of rewards?
Olivier: "There's a long term trend anyway, which is for hyper personalization or on getting to segment of one. And obviously, you know, digitalization is forcing this into a conversation. So, yes, you're aware, but at the same time, there is also a very clear thing to say, don't make it too complicated for customers. So, probably, if you're on your earn side, you know, keep it as simple as possible, make it very understandable for customers. You don't need to start creating tiers to achieve something, which only complicates the conversation.
"Probably focus more on the burn part, on giving a wide choice of options for customers. And that's where, to some extent, the attractiveness of a scheme is happening. How big is the choice? To some extent, give the customer the choice of how they want to burn and don't force them to do it in a limited way.
"Talking about the key features of a scheme, that's probably where I would focus. On top of burning, how much more are you offering to customers? If you're part of a loyalty scheme, your customer journey on site is going to be much more simplified, you have privileged access to a cashier, quick in and out. Starbucks is one of these examples. Money can't buy experiences, etc, etc. Earn and burn being the traditional thing, but how much more can you personalize to the customer's aspirational lifestyle, in terms of getting rewarded or getting some kind of benefits or recognition of participating into a scheme?”
(15:57) Does that then also bring into play the possibility for programs to look at profit margins use innovative ways to burn points through raffles, the play model, etc?
Olivier: "To some extent, the worst thing for a loyalty scheme is to have customers sitting on a big amount of points, or value or currency, whatever it is, basically, and not being very clear about what we're going to be doing with it. That's, to some extent, the worst of what you can do. And therefore, you know, there is always a balance to be done in terms of, yes, obviously, I need as a brand to have part of my customers come back to me to get rewarded, which needs options for the customers in terms of freedom of burning, or using the currency. And that's where you will have some customers say, you know, absolutely, to have a partnership with a supermarket. Others will say yeah, you know, I love gamification, while some of us say, I want to pick from my computer the reward I've been always dreaming and want this to be delivered to my home. You have all of these options, which needs to be offered to the consumers."
(17:37) So coming back to the whole development of thinking around electric vehicles, are there any regions or brands that you think could go first in this transition, or any leading the way?
Olivier: "It's the usual suspects, obviously, you're going to have Europe, UK, parts of the US, because to some extent, legislation is forcing the OEMs to electrify cars. Basically, if you're talking about, by 2035, to only sell electric cars, for example, which is, you know, part of what we've seen in UK or in Europe, this means that adaptation will need to happen quickly. I would say, look into wherever legislation is pushing the most. And then you will very quickly find where this EV shift will impact the market."
(18:34) So wrapping things up, what are the key takeaways for from this conversation for anybody involved in fuel loyalty, looking to adapt to current trends? And what recommendations can you give to those looking to set up new loyalty rewards engagement programs in this changing landscape?
Olivier: "Three things. The first one is make it simple for your customer base to participate, you're only one out of X number of schemes in the market. So make it simple for them, because we shouldn't be spending the next 25 hours reading into what can I get out of it, understanding it.
"The second thing is make it attractive to customers. And when I'm saying attractive, it's probably not so much on your own. It's more of a Burnside make it relevant to him. But these are hygiene factors.”
"The differentiator will come in terms of personalization, and how you're dealing with consumer data, what you're going to be doing with consumer data, that's probably wherever focus should be. This means quite a dramatic shift in terms of teams capability in terms of data analytics. How do you make decisions? That's where the value is going to be going forward."
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