Pumping Up the Gas Card

  Private-label cards increasingly have come under the credit card industry microscope in an examination of their value proposition, both for issuers and for cardholders. And merchants are questioning why they should support a private-label program when general-purpose, cobranded cards keep growing in popularity.
  But several major fuel retailers have made the strategic decision to build up their cards. These merchants have decided to offer a premium blend of rewards on their private-label cards to attract new cardholders and to entice gas-guzzling consumers to keep coming back for more.
  Irving, Texas-based Exxon Mobil Corp. in February relaunched a redesign of its decades-old private-label credit card that features the two brands together and their familiar old-school logos-the Exxon tiger and the Mobil Pegasus. The card, which also features new-fangled security, is used for more than 15% of sales at the approximately 16,000 Exxon or Mobil outlets nationwide, says Bill Wang, global personal payments manager for the oil company.
  "We have made some enhancements in fraud protection, which provided an opportunity to reissue," says Wang, declining to reveal details on the security upgrades.
  The company could have gone with a mass automatic-replacement mailing, but that would not do much to encourage consumer use of the new cards. "If their old cards aren't expired, a lot of people will think their old cards are still good and stick their new cards in a drawer," Wang says.
  The decision was made to commit to a relaunch of the entire 8 million Exxon Mobil cards in consumers' wallets with a marketing and promotional campaign. The new card comes with the eye-catching new image, a zero-liability clause for victims of fraud and the cardholder option to set payment due dates.
  Card Promotions
  Exxon Mobil is working with card issuer GE Consumer Finance on a cardholder-acquisition campaign that began March 1 and will run through the end of May. It includes a $10 statement credit on first purchases, outdoor advertising, point-of-purchase placards in fuel station convenience stores and on gas pumps, direct-mail pushes, and incentives for fuel-station managers to gather card applications. Since the new card appeared on the scene, Exxon Mobil has received an average of 10,000 applications each week, according to Wang.
  In March, Houston-based ConocoPhillips introduced a so-called "tribranded" proprietary card for consumers with in-store and at-the-pump promotional materials, direct mail and radio advertisements in select markets. ConocoPhillips' brands include Phillips 66, Conoco and 76, and the logos of each are featured on the card.
  In keeping with the triple-threat theme, ConocoPhillips offers three tribranded cards-personal, commercial and premium-that can be used at any of its 13,000 stations across the country.
  "The ConocoPhillips family of card programs offers one of the best and easiest ways for our marketers and dealers to promote Phillips 66, Conoco and 76 products and services," says Mark Harper, ConocoPhillips president of U.S. marketing. "Our branded card programs provide our marketers and dealers the ability to reduce their credit card processing expense while capturing the loyalty inherent in proprietary card programs. Our payment vehicles link the consumer with the brand and create repeat purchase behavior."
  Harper's provision for ConocoPhillips station owners is no empty promise. Proprietary cardholders conduct more than twice as many purchase transactions each month and typically purchase about 20 percent more gas per transaction than do consumers who do not carry the private-label cards, Harper says.
  Citi Commerce Solutions, the retail and oil card division of Citigroup Inc., began issuing ConocoPhillips private-label cards in 2003, when the portfolio had nine cards.
  Citi and ConocoPhillips also run a cobranded MasterCard program that offers a consumer no-fee, a consumer premium and a commercial card. The two companies market card products and promotions at the gas stations, on pumps and on service islands with signs, banners and other collateral materials.
  Citi is the dominant third-party provider for oil marketers, partnering with Shell, BP and Citgo, along with ConocoPhillips. Last June it paid $94 million to Sunoco Inc. for the estimated 1 million consumer and commercial card accounts held by the Philadelphia-based gas company.
  Complex Business
  Citi Commerce's oil-card programs counted over 22 million accounts and generated over $13 billion in charge volume last year, according to SourceMedia's Card Industry Directory. Its deal with Sunoco included a multiyear agreement to handle the billing, issuing and processing of the accounts, according to CCM sister publication CardLine.
  A Sunoco executive released a statement that summed up why the company, and many others in the gas marketing business, decided to partner with a card specialist. "While Sunoco has managed its private-label program for over 50 years, the credit card business has become increasingly more complex from virtually every angle," said Robert W. Owens, senior vice president of marketing.
  That belief puts the onus on marketing divisions at gas companies to prove that running a private-label program actually makes the customer more loyal to the brand. Marketers across industries have learned in recent years that seemingly solid customers that visit merchants frequently and spend money will shift to a competitor for a better price, new technology or flashier ad campaign.
  One customer-relationship expert doubts that gas retailers have enough going for their private-label offerings to ensure their customers do not jump ship to other payment tools. "More and more people are using general-purpose and debit cards, but a high percentage are still using cash, even at the pump," says Kelly Hlavinka, director of consulting services for Colloquy, a Milford, Ohio-based marketing consultancy.
  Typically, oil companies do not offer point programs on their private-label cards. New reward programs on their cobranded cards emphasize the multiple points earned for each dollar spent.
  But offering those deals does not necessarily make the customer more loyal, says Hlavinka. Instead, it continues the cutthroat price competition that gas retailers wage through their street signs that showcase their prices down to the decimal point.
  Private-label gas cards are "in an all-out competition against each other and general-purpose cards," Hlavinka says. Competing on price is a dead end because of the tight margins under which gas station owners operate.
  "You take a situation with such thin margins, and it's difficult to put together a value proposition," says Hlavinka.
  But there are powerful reasons to run a private-label program. Gas cards account for 14% to 18% of sales industrywide for gas stations, a GE Consumer Finance spokesperson says.
  Indeed, the private-label card remains Exxon Mobil's core card because it develops long-term customers, says Wang. And by tradition, private-label cards, including the oil division, are the first credit card many consumers receive.
  "Certain segments of customers do look at private-label as a stepping stone," Wang says. "It has an easier credit approval process."
  That first card often brings a nostalgic preference to mind for the consumer, and marketers can play on that to influence purchase decisions. "A lot of consumers have been with us 20, 25, 30 years," Wang says. (Some consumers, as their credit histories mature, become more interested in general-purpose cards, says Wang. Exxon Mobil then attempts to enroll cardholders in the cobranded MasterCard program it runs with Citi Commerce.)
  Private-label cards also offer budgeting convenience. Moreover, they also may be less susceptible to fraud, according to a spokesperson for San Ramon, Calif.-based ChevronTexaco Corp. "They offer consumers greater security in that they can only be used for purchases offered by the retailer," says the spokesperson. "General-purpose cards, which can be used almost anywhere, may be more vulnerable to unauthorized use."
  The cards also reduce the need for cash on hand, a benefit appreciated by both cardholders and station managers. Additionally, station managers, along with franchisees and station owners, appreciate the proprietary card program because they pay lower fees for transactions conducted with the cards. The difference may be small, but "those pennies mean a lot to fuel retailers, given their business model," Hlavinka says.
  Pennies add up to a lot more if that customer keeps coming back for additional purchases. Hlavinka suggests the merchants initiate two-way relationships that include communications outside of monthly billing statements and impersonal pump toppers.
  Oil companies also should work with partners on both sides of its card program. That means snagging investment dollars from the financial partner, the card issuer. And they should leverage that with the money invested in marketing programs from retail oil distributors, says Hlavinka.