This report has been compiled in order to describe the four most common elements of the marketing mix which are described by Elliot, Rundle-Thiele and Waller (2010 p.18-21) in the following few sentences. * Product – “A good, service or idea offered to the market for exchange.” (p.18) * Price – “The amount of money a business demands in exchange for its offerings.” (p.20) * Promotion – “The marketing activities that make potential customers, partners and society aware of and attracted to the business’s offerings.” (p.20) * Place (Distribution) – “The means of making the offering available to the customer at the right time and place” (p.21) In conjunction with these descriptions, all four marketing mix elements will be analysed and shown how they can be applied to retail petrol outlets and the products which are made available to customers.
The Marketing Mix
Elliot et. al describe the marketing mix as “the different elements that marketers need to consider.” (2010 p. 18) When using the marketing mix to market retail petrol outlets such as Caltex Woolworths or Coles Express, marketers need to consider the Product, Price, Promotion and Distribution (Place) of not only petrol, but many other consumer and specialty products which retail petrol outlets offer.
It can be seen in retail petrol stations that other than the expected fuels like unleaded and diesel which are generally relatively low in terms of their profit margin, “some oil firms claim that supermarkets sell petrol at a loss in order to attract customers.” (The Economist, 1996 p.58) Other products are required in order to boost profits for the retail petrol chains’ owner. These other products are mostly the convenience type and can range from the daily newspaper and chewing gum, to a bottle of orange juice or a loaf of bread.
There are three categories of convenience products outlined by Elliot et al. which are all found in retail petrol outlets and include staple products, impulse products and emergency products. (2010 p. 207) * Staple products – These are considered to be everyday grocery products like bread and milk, purchased regularly by consumers and therefore aren’t heavily promoted * Impulse products – These are considered to be only purchased when seen, like confectionary or magazines which are eye catching and are usually found around the cash register. * Emergency products – These are considered to be those products which are only purchased when really needed, like a raincoat or an umbrella.
Although there are a lot of products sold by retail petrol outlets like Caltex Woolworths and Coles Express, the obvious product centred on all retail petrol outlets is the fuel supplied to consumers. The varieties of fuels which can be purchased can include:
* E10 – 10% Ethanol.
* E85 – 85% Ethanol.
* E95 – 95% Ethanol.
* Unleaded – Standard fuel.
* Hi Octane – Offered for high performance vehicles.
* LPG – Alternative to liquid fuel, a Gas product.
* Diesel – More efficient lower sulphur producing by product. There is a vast selection of fuels for consumers to choose from and although the blends of fuels stay similar, the names and descriptions of these fuels tend to change from outlet to outlet. For example, when you drive into a Caltex Woolworths you are confronted with the choice of “Caltex Vortex 95 or 98,” both are hi octane blends offered to a prospective purchaser. (Woolworths fuels, Website.) Price
When dealing with topic of pricing in retail petrol stores, the outcome of the price has to be both beneficial to the seller, and seen as a good deal to the buyer, otherwise no trades will take place. As stated previously, petrol itself tends to have a lower margin for profit which means the strategic pricing of other products in-store needs to be addressed as well as ensuring that the price of petrol is not seen as out of balance with other suppliers. There is an obvious demand for petrol, as almost everyone who is able, drives or rides a vehicle which requires fuel to run. So it could be argued that retail petrol stations don’t necessarily set their own prices, but go off supplier guidelines which base their fuel pricing strategy on demand, “Demand based pricing sets prices according to the level of aggregate or individual customer demand in the market.” (Elliott et al. 2010 p. 250)
Elliott et al. also continue to write that both Caltex Woolworths and Coles Express hold more than 60% of the Australian fuel market share (2010 p.268) so high demand from their suppliers will enable them to lower their fuel prices and therefore gain more customers, earning higher profits. Pricing of other products offered by retail petrol outlets such as bread or milk tend to have the opportunity to be competitive and more fairly priced than a standard petrol station, the major grocery companies behind retail petrol outlets like Woolworths and Coles focus on gaining more ground off one and other, price drops are reflected in store and this also proves more profitable, because consumers are drawn into purchasing something they wouldn’t normally associate with their petrol.
An important aspect in the success of retail petrol outlets is in their promotion, or the way in which their fuels and other products are portrayed to potential customers. There are many numbers of ways in which retail petrol outlets use promotional tools to make the public more aware of what their outlet has to offer. Using the Coles Express website for example, it can be seen that promotion plays a major role in the marketing of retail petrol outlets, on the homepage can be found five key promotional campaigns designed to catch the eye of potential customers. The opportunity to win “the ultimate weekend Ferrari drive experience” or “two Cadbury chocolate bars for four dollars” (Coles Express, website) are two examples of how Coles Express use promotion as a tool to gain the interest of potential customers.
The use of shopper dockets and rewards cards are also a major way in which retail petrol outlets have promoted themselves, using incentives of cheaper fuel by spending amounts of money in store or purchasing earlier in their supermarkets and bringing the docket to the petrol station in order to gain the fuel discount. In the recent past, retail petrol outlets have encouraged shoppers to buy big in store in order to earn big discounts off fuel “motorists who spend more than $300 during one supermarket visit during the next three days receive a 40 cent per litre petrol discount.
Shoppers who spend more than $200 or more receive a 25 cent a litre discount, while those who spend $100 or more get a 10 cent a litre discount.” (Cranston 2009) Woolworths have the “Everyday Rewards” program, and Coles have the “Fly buys” rewards program. Both these programs offer rewards point in exchange for purchases made in their outlets. Another way in which retail petrol outlets can promote their product is through sponsorship, Coles Express for example are sponsoring Daffodil day, a program not normally associated with fuel but this can help to grow an organisations image, by supporting such a worthy cause, Coles express may gain respect from the community and in turn boost their profits. Place (Distribution)
The transportation and distribution of products including fuel to retail petrol outlets operates under the marketing mix category of “Place.” “The science (or art) of ensuring products are in the right place at the right time in the right quantity is known as logistics and the various partners that contribute to the process make up is called the supply chain.” (Elliot et al. 2010 p.21) Retail petrol outlets operate somewhat differently to conventional service stations, the retail petrol outlets are often situated near to a parent supermarket company (in the same complex) which makes supply of products other than fuel relatively easy as the distance for stock to travel is minimal.
When looking at the fuel aspect, it can be seen that the logistics tend to become a lot more involved and a more defined supply chain emerges. * First fuel is sourced from their respective supplier (Caltex or Shell) on a relatively routine basis, as fuel is a required product for most of the community. * The fuel is then transported by truck from oil refineries which are based in more coastal areas (Caltex oil refinery in Kurnell NSW) which makes it easier to transfer oil from overseas oil barges when new shipments arrive. * When the trucks reach the retail petrol outlet the fuel is then pumped into underground holding tanks, where the fuel can now be distributed to the customer via the petrol pump and now exchange of fuels can be made for a profit.
This report was compiled in order to describe the four elements of the marketing mix:
* Place (distribution)
The descriptions of these marketing mix elements were also shown in application; how they are applied when breaking down the four aspects in relation to retail petrol outlets. Focusing on the Caltex Woolworths and Coles Express partnerships it was able to be shown how the marketing mix elements are applied. Products have been broken down into specific fuels and other items which are available to potential customers, these products have also been categorised as either: Staple, Impulse or Emergency. Price has been shown to be of vital importance, and the outcome of the price has to be both beneficial to the seller, and seen as a good deal to the buyer.
Promotion has also proven to be of high importance to the overall marketing of retail petrol outlets, the use of shopper dockets for discounts, and sponsorship for awareness and image are important promotional tools outlined above. Place (Distribution) outlines the logistics and supply chain which is in place for retail petrol outlets to gain their product in order to forward it onto the paying public to gain an overall profit. All four of these marketing mix elements play their own equally pivotal role in ensuring the successful operation of retail petrol outlets.
Coles Express website www.colesexpress.com.au
Cranston, B. (2009) NSW: ACCC investigating supermarket petrol promotion. AAP Australian National News wire
Elliott, G. Rundle-Thiele, S. & Waller, D. (2010) Marketing.
Pump Action, The Economist. (1996) Vol. 338 Issue 7950, page 58
Woolworths petrol website www.woolworthspetrol.com.au