Can Groupon-Style Discount Schemes Work For Fuel?

Filling up car with fuelHigh fuel prices mean that the daily commute is now an expensive business for many drivers.

Could a group buying scheme work and provide drivers with access to discounts on fuel — rather like Groupon does for other goods and services?

The founders of Filler App believe that this could work, and are trying to make it happen.

Filler App is a new scheme aimed at ‘pledging’ one million litres per week of fuel buying power, in return for discount vouchers from major fuel suppliers.

The idea is simple:

  • Sign up, with your phone number, email and how many litres of fuel you use per week
  • Receive vouchers by email or through a phone app that can be used to give you a discount next time you buy fuel

The Filler App scheme won’t necessarily be tied to one fuel supplier, allowing companies to offer promotions and tie in discounts to their marketing campaigns.

It sounds simple and logical, but I fear that like all other previous schemes of this kind, it will fail. Here’s why.

No Loyalty

Fuel suppliers have never offered discounts to small-scale fuel buyers like private motorists — because they don’t need to. Very few drivers are ‘brand loyal’ when it comes to fuel — most drivers fill up wherever it is cheapest and most convenient.

If fuel suppliers want to increase their market share, all they have to do is price match the cheapest supplier in their local area.

In this context, offering a discount makes no sense, as the main purpose of discount vouchers is customer acquisition and retention — neither of which will be successful with petrol and diesel.

Supermarkets

Supermarkets are the only fuel suppliers that sometimes offer discounts to retail customers. These usually take the form of discount vouchers for fuel, if you spend enough in their stores.

Deals such as Tesco’s ‘spend £50 and get 5p per litre off’ promotion are a good example — but don’t be fooled. Supermarkets don’t mind slashing their margins on fuel, as long as you buy the more profitable goods in their stores.

Customers also tend to be quite loyal to supermarkets, so it makes sense for the supermarkets to keep customers hooked with fuel discounts.

Unrealistic expectations

The Filler App website talks of discounts of up to 20p per litre. I think this is unrealistic.

The retailer’s margin on forecourt fuel is usually no more than 5p per litre. I cannot imagine that any major fuel supplier would be willing to give 5p+ discounts to small-scale retail customers who will show them no loyalty.

It simply doesn’t make sense to me.

It’s been tried before…

This isn’t the first time someone has tried this, of course. Around 2007 (I think), Ben Scammell launched the Pipeline Card, which was supposed to provide buyers with a discount with a major fuel supplier.

The original plan was that 100,000 members would be needed for it to take off, but despite membership reaching 500,000 (apparently), no discounts ever materialised. Today, the Pipeline website has been shut down, and as far as I can tell, the scheme no longer exists.

A more recent effort is Vote With Your Wheels, which seems even more optimistic, if not downright deluded. Here’s how it’s supposed to work:

  • All the Vote With Your Wheels members will switch their allegiance to Texaco, which has been chosen because it’s big enough to have a national network but small enough to grow.
  • As a result of this widespread switching (with no financial benefit to the drivers), Texaco’s profits will rise. Once 350,000 drivers have switched, Texaco’s profits will have risen so far that they can afford to  afford to cut their fuel prices by 2p per litre without cutting their profits.
  • Once this has taken place, all the other fuel companies will be forced to cut their prices to match, or they will lose even more customers.

This scheme seems utterly hopeless, to me. Here are a couple of objections that immediately come to mind.

  1. Fuel prices vary widely around the country and between different companies. Even if Texaco cut their prices across the UK by 2p/litre, they wouldn’t necessarily be cheaper than neighbouring filling stations, especially not those run by supermarkets.
  2. Secondly, it’s unlikely that 350,000 drivers will voluntarily maintain an unswerving loyalty to Texaco with no financial benefit for long enough for Texaco’s competitors to notice any difference.

Fuel companies are still in charge

Fuel companies sell a highly-standardised product that almost all of us have to buy, locally, when we need it.

As a result, most motorists have little brand loyalty and simply buy the cheapest fuel available.

The fuel companies occasional make noises about trying to encourage brand loyalty — Shell’s Fuelsave promotion was a good example — but I don’t think they really care that much. They all face similar supply costs, similar forecourt costs, and similar duty rates, and make similar profits on the sale of fuel in the UK.

Quite often, they share refinery and storage facilities, too — often, the only difference between different companies’ fuels is the additives package that has been added to it when it is loaded into the tanker for delivery.

You can save money on fuel

The good news is that you can still save money on fuel. The bad news is that you have to do it the old-fashioned way, by using less or making it go further:

  • Own a modern, well-maintained car
  • Ensure your tyre pressures are correct at all times
  • Drive carefully, without excessive acceleration and braking — look ahead
  • Stick to the speed limit
  • Don’t use your car for short journeys

Everyone wants to get something for nothing, but when it comes to petrol and diesel, it ain’t going to happen.

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