Australian retail petrol outlets all essentially provide the same products to the customer whether the service stations are privately owned and operated or managed under agreements with the supplying oil companies such as BP, Shell, Caltex, Mobil etc. The difference is in their ability to position themselves in the market as having an understanding of their target markets needs, wants and desires and delivering on these to create customer satisfaction and ultimately maximising their return. A useful tool to ensure successfully positioning of their offer is the use of the four marketing mix elements. The four marketing mix elements, collectively known as the four P’s include Product, Price, ...view middle of the document...
The core benefit of petroleum being that it enables the consumer to fuel motored devices like cars for travel. The actual product which is the petrol itself that the consumer purchases including the type of petrol (leaded, unleaded, diesel, etc.) and the brand (BP, Shell, Caltex, etc.) The augmented product is the supporting features of being able to pay via credit card, ATM accessibility and the availability of friendly and helpful sales assistants.
Petroleum is classified as being a non-durable good as it is sold as a consumer product that provides benefits for a short time because it is consumed (Solomon, et al. 2011, p. 186).
A products price is defined as ‘the value that customers give up or exchange in order to obtain a desired product’ (Solomon et al. 2011, p. 221).
‘Successful price planning includes a series of orderly steps’ (Solomon et al. 2011, p. 223). This six step process begins with developing pricing objectives, the objective of a pricing strategy is to maximise sales, either in dollars or in units, or to increase market share. Although profits are an important when pricing a good or service, they are critical if the product is a fad. (Solomon et al. 2011, p. 222). Products are subject to a life cycle. Their initial growth phase is followed by a maturity phase, subsequently resulting in a decline as sales fall. The petrol industry is in a decline phase of its life cycle, characterised by a falling number of participants and a low level of overall profitability (Convey 2011, p. 11). After establishing pricing objectives, marketers now need to estimate the demand of a product. Petrol is a requirement for almost all modes of transportation and as such ‘the retail demand for petrol is expected to expand at an annualised 0.6% during the five years through 2016-17’ (Convey, 2011, p. 9). The third step in the process is determining costs. When determining costs marketers need to understand both variable costs; the costs associated with production that vary depending on number of units produced and fixed costs; those that do not change with the number of units produced (Solomon, 2011 et al. p. 229-231).
‘A service station typically earns no more than three or four cents from each litre of petrol sold, thus requiring a high volume of sales to both cover operating costs and earn an adequate return on the capital invested’ (Convey 2011, p. 6). Evaluating the pricing environment is the next step and looks at the external variables such as ‘the economy, consumer trends and the types of competition, as well as demand and costs’ (Solomon, 2011 et al. p. 234). Convey (2011, p. 13-17) explains that the economic downturn is reflected in reduced demand for petrol and that if one service station offers petrol at a discount, other retailers in the area must do the same or be prepared to lose sales. With their pricing objectives in mind, setting and implementing a pricing strategy are the final steps in the process. The most...