Optimizing Fuel Pricing: A Retail Case Study
The CompanyA leading US convenience retailer with over 1,000 locations
The ChallengeThe retailer suspected that they were leaving money on the table with their current fuel pricing approach, which consisted of store-by-store protocols aimed at maintaining high margin-per-gallon and a price position informed by nearby competition. The retailer wanted to maximize each site’s fuel margin and merchandise profit without driving away traffic, but was having a difficult time isolating the cause-and-effect relationship between changing price and total site profitability.
The SolutionUsing APT's Test & Learn™ solution, the client designed and implemented a price decrease in a subset of stores. Using APT, the client found that some sites performed better than others through the price decrease. Test & Learn™ also revealed that a 1¢ decrease in fuel price drove a significant increase in fuel volume and a modest increase in merchandise sales. The convenience retailer rolled out the penny price cut with confidence.
The ResultsThe retailer’s application of data from Test & Learn™ was worth $7K incremental annual profit for each store. Management’s choice to continue refining their pricing strategy with Test & Learn™ is generating about $4MM in incremental annual profit for the company.
Next Case Study: Optimizing Rewards Program Case Study