Grocers are finding that offering fuel rewards can boost loyalty, spend and gift card purchases.
According to AAA, consumers spend approximately 5-12 percent of their incomes buying gasoline, a consumable product with no lasting consumer value. It’s no surprise, then, that gas incentive programs have quickly become popular with consumers.
These programs have expanded over the years in many retail locations with a focused message: Shop here and receive discounts on fuel. The programs are simple: The shopper gets points by shopping with a loyalty or rewards card.
After a certain level of points or purchases is reached, the customer is eligible for a per-gallon discount at affiliated gas stations.
The inclusion of gift cards has ramped up the appeal of the gas rewards program since shoppers can use their gift shopping to gain rewards for themselves, or as some savvy consumers have learned, they can buy gift cards for their own purchases and earn fuel rewards at the same time.
Benefits to the Grocery Retailer
When shoppers buy gift cards that participate in a gas rewards program, they tend to buy more gift cards, more often and for more occasions.
Gas Plus Gift Benefits All
In many cases, gift cards, sold at most grocery stores, qualify for points in fuel rewards programs.
Blackhawk Network, a prepaid products company and a leader in third-party gift cards, decided to learn more about the consumers buying gift cards in these fuel reward programs. We conducted a research study and found that offering gift cards in a fuel program increases awareness of the gift card retail brands and creates higher brand recognition and new customers for the retailers with the gas rewards program. Retailers selling the cards and retailers where gift cards are redeemed benefit from incremental sales.
In March of 2012, we surveyed consumers across the United States about participation in gas rewards programs. In the initial sample of 1,472 people, one-third (33 percent) said they had participated in a gas rewards program. The 490 consumers who had participated in a gas rewards program were then asked questions regarding their purchasing and redemption of gift cards within the gas rewards program.
The study showed that offering gift cards in a gas rewards program is beneficial to both the grocery store selling the gift cards and to the retailer where the gift cards are redeemed.
Ninety-two percent of consumers surveyed said they were likely to shop at grocery stores with gas rewards programs. Additionally, gas incentive programs tended to entice customers to shop more often, spend more and become loyal to that store.
For many (62 percent), the gas rewards program encouraged them to shop more often. Thirty-seven percent said they shop much more often at stores with a gas rewards program. And, 41 percent said theyspend more at retailers with gas rewards programs, with 11 percent saying they spend “considerably” more.
Gas rewards also can convert shoppers to being “regular shoppers.” Eighty-eight percent said they definitely or might change stores to make the grocer with gas rewards their “regular” store.
Consumers also tended to think more positively about grocery stores with gas rewards programs. Sixty-five percent thought the grocery store with gas rewards was consumer-focused and creative, and 69 percent thought the store was innovative. Eighty-five percent thought the grocery store with gas rewards was keeping up with the competition.
Gift Card Buying
Gift cards are the No. 1 requested gift at winter holidays and are popular gifts year-round, according to the National Retail Federation. Our research showed that gas rewards influence shoppers in terms of where they choose to buy gift cards. Eighty-five percent said a gas rewards program was influential in deciding where to buy gift cards. Of those, 56 percent said it was “very” influential.
Fifty-nine percent said they bought more gift cards, 51 percent said they bought them more often and 48 percent said they bought them for more occasions compared to buying gift cards at a store without a gas rewards program.
Over one-third of respondents said they had purchased six or more gift cards in the last year.
Some retailers that offer gift cards suspect that the increase in gift card sales is due to shoppers stocking up on gift cards through a gas rewards program then using the gift cards for their own shopping (as opposed to the traditional concept of giving the gift cards as gifts).
We found that although some shoppers are purchasing gift cards for self-use, some are not. Two-thirds of respondents had purchased at least one gift card for their own use. However, rather than shoppers just using the gift card gas rewards program as a discounted form of payment, these self-users tended to spend more than the gift card’s value when they redeemed the gift cards they purchased for their own use. Most (90 percent) said they spent more than the gift card’s value on at least one occasion and almost half (49 percent) overspent all or most of the time.
Self-users also tended to redeem the gift cards to buy items they would not normally buy. Two-thirds (66 percent) said they purchased items they had not planned on buying but decided to buy (due to a gas rewards program). Fifty-seven percent bought a more expensive version of an item than they had planned on buying, but splurged due to the gas rewards.
With the current economic conditions, consumers are seeking out any new ways to stretch their dollars. Combining fuel rewards with grocery shopping is a natural combination and it’s especially effective when gift cards are on the list of purchases eligible to earn rewards.
Retailers selling the cards as well as the retail issuers benefit from increased gift card sales and more lucrative redemptions.
* Republished with permission from Paybefore, as published November 2012.
ABOUT THE AUTHOR
Tammy Durston is senior director of research at Blackhawk Network, a Pleasanton, Calif.-based provider of prepaid and financial payments products. Her research helps guide Blackhawk’s strategy for its diverse product lines and geographies. She can be reached at tammy.durston@bhnetwork.com.
EDITOR'S NOTE
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In Viewpoints, prepaid and emerging payment professionals share their perspectives on the industry. Paybefore endeavors to present many points of view to offer readers new insights and information. The opinions expressed in Viewpoints are not necessarily those of Paybefore.
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