Insight into your demand, margin and competition will help finetune your fuel pricing strategy.

It’s safe to say 2020 has been an unpredictable year, and that’s certainly been the case with fuel. Back in April, when shelter-in-place restrictions and general consumer caution relegated people around the world to their homes, demand for fuel took a tumble. According to data from our fuel trends report, on average, fuel volumes around the globe decreased by around 35 percent.

Using historical data to power a fuel pricing strategy during unprecedented times is a bit ineffective. So, we published a blog to help retailers get back to basics and thrive. Take a look.

After that period, volumes began to recover. And while many regions haven’t fully returned to pre-COVID-19 fuel consumption levels, there are a few additional fundamental questions retailers of any size should ask themselves to finetune their fuel pricing strategy:

What does demand look like?

Looking at how your volumes are doing is a great place to start, but the data must be accurate and timely to be effective. Ideally, having access to yesterday’s volumes—as well as real-time visibility into today’s fuel sales—should inform your pricing decisions. You can then use that information  to track against the plan or the same period last week, month or year.

In addition, it’s best to observe volume trends over the short, medium and long term across the whole network and for each individual site.

What do your margins look like?

To understand margins, you first need to know what’s happening in the underlying commodities markets. There are many published market indices such as Platts and Argus, and if you’re outside of North America, you’ll need to throw in the foreign exchange rate markets for good measure. These indices drive your costs which directly impact your margins.

No matter what’s happening, try to understand what’s going on right now, and anticipate the likely future direction.

What is your competition doing?

Some theoretical purists argue that you shouldn’t factor competitors into your pricing strategy—that all you need is your own price and volumes data. In that case, if volumes fall beneath target, you would drop your price; however, if volumes exceed expectations, you can increase prices. At best, this position can be described as simplistic, but at worst, it can be dangerous. When COVID-19 first caused volumes to fall by more than 60 percent in the UK, this strategy would have led many retailers to drop their price, forever chasing the elusive volume that just never materializes.

Here’s the truth: competitor price positions do impact your volumes, so understanding competition is a necessary component within the mix. It helps you navigate a complex, changing situation and keeps you in tune with each of the markets in which you operate. The trick is to understand which competitors within each local market area impact you and to what extent.

At PDI, we call this process ‘marker selection’ and use advanced data science techniques make those determinations for our customers. This way, you can position your sites to best achieve your business objectives and deliver on your brand promise and value proposition.

Few things in a retail operation have as dramatic and immediate effect on the bottom line as fuel pricing decisions. This is especially true for retailers with a large number of sites where thousands of pricing decisions are made every day. Answering these fundamental questions with a sophisticated fuel pricing platform that can consume, organize, analyze and present this data visually is critical to helping your busy pricing team make the best possible decisions and hit the pricing sweet spot.

You can thrive in today’s digital economy. Contact us today to learn how we can help you transform your business.