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brandchannel.com: Pumping Energy into Gasoline Branding (with comment by Paddy Briggs)

By Barry Silverstein
October 1, 2007 issue

That was when gasoline brands meant something. Esso (later Exxon) promised to “put a tiger in your tank.” Texaco’s logo was so well known that it became the name of a US television show, “Texaco Star Theater.” Mobil’s flying red horse, the “Pegasus” symbol, was universally recognized.

Today, however, most consumers around the world pump their own gasoline. They probably think more about octane ratings than the gasoline brands they put in their automobiles. People now travel far and wide, typically choosing gasoline products that are the least expensive, and stations that are the most convenient.

In the US, most gasoline sales are through convenience stores. In 1971, says NACS, the Association for Convenience and Petroleum Retailing (formerly the National Association of Convenience Stores), less than seven percent of convenience stores sold gasoline; now, over 80 percent sell gasoline. While gasoline brand names may be featured on the signage, less than three percent of those stores are owned and operated by a major oil company, says NACS. The shift has clearly been away from the traditional company-owned, branded, full-service station to gas as a convenience product.

So the question becomes: Do gasoline brands matter?

Let’s start with this basic fact: There are so many gasoline brands because there is simply no business as large as oil. In 2005, for example, Exxon Mobil reported a whopping US$ 10 billion in net income… just in the third quarter! That year, ExxonMobil’s profits were up 75 percent over the previous year. They weren’t alone. BP’s profits were up 34 percent, and ConocoPhillips’ income was up 89 percent.

Still, oil companies have been consolidating, so all those gasoline brand names are now owned by fewer companies. BP-Amoco, Chevron-Gulf-Texaco, ConocoPhillips and ExxonMobil are examples of corporate mergers that have changed the complexion of the oil industry—and the ownership of brand names. Some companies maintain separate identities for their gasoline stations, others sell branded products under a different corporate name, and still others abandon former brand names altogether.

There are also new brands that occasionally enter the market. In late 2000, Lukoil, the largest Russian oil business, acquired the Getty brand. In 2004, Lukoil purchased nearly 800 Mobil stations. Lukoil now has some 4,700 gasoline stations worldwide, with more than 2,000 of them in the US. Over 400 in the US carry the Lukoil name.

Lukoil introduced its brand in the northeastern US with bold red-and-white signage and an advertising campaign centered around the theme “We [heart] cars.” It will be interesting to see if consumers [heart] Lukoil. With no brand awareness and susceptibility to price increases, just like other gasoline marketers, Lukoil has a significant challenge ahead.

In fact, the challenge for every gasoline brand is simply this: Gasoline is a commodity. There are few rational reasons a consumer would show brand preference when another brand’s pump sporting a competitive price is staring him or her in the face. When gas prices are high, consumers tend to seek the lowest price they can find—demonstrating preference for price, not brand.
  
So is there anything that influences the consumer’s gasoline brand purchasing decision?

Maybe it’s performance. Oil companies have, over the years, attempted to convince consumers that automobile performance is linked to specific gasoline brands. Chemist Tom Johnson says: “Oil companies swap base gasoline all the time. … while the base gasoline may be the same, the additive is different, and hence the brand of gasoline you use is different because of the additive, not the base gasoline.” Chances are those additives are not compelling enough to create strong brand preference.

Maybe it’s gasoline credit cards. Take the BP Card, for example. It offers no annual fee, a 2 percent rebate on all Amoco Ultimate fuel purchases, and charge privileges at over 11,000 BP locations. Or the BP Visa card offers a 5 percent rebate at all BP locations (10 percent rebate for up to the first 60 days). But do consumers really want another credit card?

Maybe it’s the advertising. Let’s see: Chevron is telling us to “think differently about energy.” ConocoPhillips is talking about “developing alternative fuels.” Exxon Mobil says it is investing “to meet the world’s growing energy needs.” BP is asking “What size is your carbon footprint?” Honestly, would any of those messages make the consumer buy one gasoline brand over another?

Some oil companies are betting that a long term branding strategy will ultimately pay off for them at the pump. BP is a case in point. In 2000, the company embarked on a major branding initiative featuring a new green and yellow sunburst logo and the phrase “beyond petroleum.” BP’s intent was to legitimize its position as a provider of alternative energy, such as solar power, and be perceived as a protector of the environment.

Says Jackson Mahr in his brand profile: “Smart brands such as BP and Toyota recognize that to have a sustainable future, they have to find innovative and clever ways of putting themselves out of the traditional gasoline and motoring business…” (For more about BP’s new direction, see Dr. Arlo Brady’s Brandspeak article, “The Greenrush: Eco-branding.”)

But in the end, gasoline may be one product category in which the power of the brand is trounced by the reality that consumer preference is based on just two attributes: price and convenience. These factors, more than the strong pull of one brand over another, seem to be the driving force behind gasoline purchases. If market conditions remain consistent and gasoline prices continue to rise, most oil companies’ gasoline brands, regardless of what they offer, will just be running on empty.  
   
Barry Silverstein is a 25-year advertising and marketing veteran and co-author of The Breakaway Brand (McGraw Hill, 2005).

RESPONSE BY PADDY BRIGGS
 
Thursday, October 11, 2007
Response to article on Brand Channel re gasoline brands

http://www.brandchannel.com:80/start1.asp?fa_id=388 (the above article)

The substantive point about gasoline brands is that marketing is only an incidental activity for oil companies – nearly all of their efforts are on the “upstream” (the search for and exploitation of oil and gas reserves). As a 37 years service Shell veteran, now retired and active as a brand consultant, I can assure you that the chapter on marketing in the average oil executive’s memoirs would be one blank page. This is not to say that there aren’t competent marketers in the oil companies – just that they linger low in the hierarchies and that they have no prospects of reaching the top if marketing is “all” they can do. When the boards of Shell or BP or ExxonMobil and the rest meet the agenda items are rarely if ever about customers, brands, channels of distribution, market share, communications and the other imperatives that drive the business in proper branded marketing companies. The discussions are about exploration, production, refining and all the other key business activities – the so-called “upstream”.

The irony of the almost complete ignorance of oil company top executives about branded marketing is that these companies are amongst the world’s biggest branded retailers. Shell has more than 40,000 Shell braded gas stations in over 100 countries, but in a recent extensive interview for the London Guardian newspaper Shell CEO Jeroen van der Veer didn’t even mention Shell’s marketing business once – see: http://tinyurl.com/ytxhjf . Everything in an oil major is top down and that top is so far removed from its consumer customers (motorists for example) that they probably wouldn’t recognise one if they saw one. This leads to minuscule and wholly inadequate amounts of money being allocated to advertising and other brand promotion initiatives. The culture of the men at the top is essentially a cost minimisation culture. When you drill for oil you can secure a completive advantage by doing it more efficiently (cheaply) than your competitors. As any marketer knows this is a mindset which leads for disaster in marketing. It is 35 years since the late Stephen King’s seminal “What is a brand” (recently reprinted by JWT here in the UK and circulated with Campaign magazine) which showed (even proved) that brands which invest consistently over time prosper and those that do not fail. That is a lesson that the oil industry has forgotten.

I believe that the only way that oil companies can properly exploit their brand potential is to separate completely their “upstream” from their marketing business. And I mean completely – not just some fudged separation within the same corporate structure. Only when the main preoccupation of the top management of Shell or BP is with the brand and with the customer will we start to see proper and focused branded marketing in this important sector. Please see my article in “Market Leader” magazine for the development of this argument: http://tinyurl.com/3dau4e .

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