?smart? Loyalty in Petroleum Retail

“Smart” Loyalty in Petroleum Retail 

By Kishore K Somaraju 

WIPRO TECHNOLOGIES

EXECUTIVE SUMMARY 

The old retail truism of having the right product at the right place at the right time is now being adjusted to 

include “for the right customer”. 

Modern Loyalty programs are ideal tools for achieving these expectations. Loyalty programs make a lot of 

sense for retailers: they allow rewarding best customers through discounts, special promotions, gifts, etc. in 

exchange for a better knowledge of his customers and new purchase patterns identification. 

This paper takes a look at the way Best in Class loyalty programs are defined (in terms of practices and 

processes). It also reinforces the obvious advantages of having a well-managed loyalty program in place. Also 

outlined are some best practice business levers for each stage of Loyalty program cycle. And finally a brief on 

Smart Loyalty & Customer Intelligence Technical Architecture & Process Flow is brought to light.

TABLE OF CONTENTS 

Introduction ................................................................................................................4 

Customer Retention – What difference it makes!!......................................................5 

Loyalty Card Programs Benefits: Customer Standpoint...............................................6 

Fuel Cost Savings..........................................................................................................6 

Security & Controls........................................................................................................6 

Exception Monitoring......................................................................................................7 

Flexible Billing Options.....................................................................................................7 

Loyalty Card Programs Benefits: Retailer Standpoint...................................................7 

Roadmap Levers in each stage of a Smart Loyalty Program.........................................8 

Smart Loyalty & Customer Intelligence Technical Architecture....................................10 

Integration at Point of Interaction.........................................................................................10 

Real-time Customer Data Store...........................................................................................10 

Customer Intelligence Analytics...........................................................................................11 

Operational Customer Segmentation.....................................................................................11 

Campaign and Loyalty Rules...............................................................................................11 

Data Quality & Integrity....................................................................................................11 

Loyalty Program Support Services........................................................................................11 

Measuring Effectiveness of Customer Loyalty Program...............................................12 

Emerging Trends...........................................................................................................13 

Conclusion....................................................................................................................13 

Appendix......................................................................................................................14 

References..................................................................................................................14 

About the Author..........................................................................................................14


Introduction 

Loyalty programs are a great way to entice customers to keep returning to your stores as they seek to gain rewards on 

routine purchases. Finding the right fit when it comes to a loyalty program will help store operators differentiate their 

offering and could generate a steady stream of repeat customers. 

The main purpose of a loyalty program is to retain regular customers, to increase commitment from occasional 

customers and to acquire new ones. 

Some of the expectations of the companies are: 

4 | www.wipro.com 

Lower price 

sensitivity 

Competitive 

differentiation 

Increase the 

amount of 

product 

purchased 

What is 

expected from a 

successful fuel 

card loyalty 

program? 

Greater 

consumer 

resistance 

to competitor 

offers 

Higher 

customer 

retention 

Increased single 

brand loyalty 

Parameters of a successful fuel card loyalty program 

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Loyalty programs are initiated by businesses with two main goals: 

• Primary goal: Acquisition of information relating to their customers' spending habits 

• Secondary goal: Actively cultivate loyalty amongst customers to ensure they continue patronizing the business 

Loyalty programs may offer benefits in a number of different ways. Many loyalty programs offer a sustained discount 

(such as 10%) for a period of time. Others offer a discount once certain criteria have been met, for example, a 20% 

discount on a single purchase at the convenience store once a customer has spent $50 at the fuel station. Others offer 

points which may then be redeemed for products which may or may not be directly related to the business. 

Loyalty programs are structured marketing efforts that reward, and therefore encourage, loyal buying behaviour — 

behaviour which is potentially of benefit to the firm. 

Ultimately, the success of loyalty programs depends on how well the business uses the data it gathers to further refine its 

policies and loyalty programs. 

Customer Retention – What difference it makes!! 

There are many reasons why retaining a customer makes business sense. Some of these are: 

Enterprise Loss is Competitor's Gain! 

If an enterprise doesn’t retain its customer, competitor will gain the customer. 

It Costs You More! 

It is 6-9 times more expensive to get a new customer than to retain one. 

Loyalty reaps Rewards! 

A loyal customer base could contribute nearly 40% of the enterprise turnover. 

5% makes the Difference! 

Companies can boost profits by nearly 100% by retaining just 5% more of their customers. 

20/80 Rule applies here too! 

20% of customers contribute 80% of the turnover (currently analysts are speculating a 20/65 

scenario-but the big picture remains). 

Retention decreases Churn! 

Customer retention decreases churn-rate (rate at which customers change service providers). This is 

especially critical in technology driven industries. 

Retention increases LTV! 

The estimated Lifetime Value (LTV) for a combo store with fuel & grocery/supermarket of a customer with a family of 

four in the US is approximately $350,000. Value surrendered by not retaining a customer could severely erode top and 

bottom lines. The implications are thus, obvious. 


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Loyalty Card Programs Benefits: Customer Standpoint 

Today’s loyalty card schemes empower the customers to get the 

most out of every drop of fuel they buy. They are simple and easy 

to use, which is important for busy customers on the move and 

they leave the station with an experience of getting quality fuels 

whilst earning rewards. 

There are many key advantages and reasons to choose the fuel 

loyalty card: 

• Fuel cost savings 

• Security & controls 

• Easy to check your daily fuel transactions and spending! 

• Exception monitoring 

• Flexible billing options 

Fuel Cost Savings 


Apart from the key benefits discussed in 

this section, there are some more generic 

benefits of fuel card customers: 

• Saving money 

• Convenience factor with ease of 

payment (speed and simplicity) 

• Special offers/discounts for card 

holders 

• Feeling of belonging to a membership 

community 

• Possibility of receiving other financial 

services (For Example, Barclaycard 

Freedom, Tesco Club card, etc) 

The fuel cards have one of the most robust fuel saving programs. Using fuel cards usually saves customers 1-5% or more 

on their cost of fuel. This is attained through administrative savings as well as a discount on the cost of fuel. Fuel card can 

offer customers a cost plus pricing model or retail minus pricing at several locations. 

Security & Controls 

The fuel card is as secure as an armoured car for your fuel purchases: 

• Assign fuel cards to vehicles, drivers or any combination 

• Lock to pay at the pump only to restrict fuel purchases inside the store 

• Driver ID & odometer prompting protects from unauthorized fuel use 

• Block after hours or weekend fuelling 

• Restrict purchases to specific stations or brands 

• Fuel Only, Fuel & Maintenance or Fuel, Maintenance & Other 

• Spending limits can be set for each fuel card, per day, week or even month 

• Fuel transactions can be restricted by dollar and/or gallon amount or transaction per day, week or month. 

The high level of controlled spending limits & restrictions which can be customized from card to card will help promote 

spend savings and enhance card security. Full internet access to all transactions through online management tools help 

customers to track, control and record their spending with respect to fuel and conveniences. 

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Exception Monitoring 

Exceptions such as time of day variances, excess fuel tank capacity, pattern discrepancies, product variances, and excess fuel 

purchases made to the account could be automatically e-mailed to key contacts or the card holders themselves. 

Flexible Billing Options 

Today’s fuel card has flexible (including weekly, bi-weekly, monthly) billing terms. Customers will receive an e-invoice 

for their transactions. 

Loyalty Card Programs Benefits: Retailer Standpoint 

Benefits 

Increase customer acquisition 

Increase customer spends and 

Increase frequency of spend 

Increase customer satisfaction 

Stimulate customer reactivation 

Maintain customer retention 

Increase customer referrals 

Increase customer lifetime value 

We can summarize the value as below: 

Value for the Retailer 

Drive Bottom-line sales growth 

Understand how customers shop to drive 

desired behaviour 

Save marketing dollars by reducing waste on 

low-return promotions 


Impacts 

Customers identification enables deeper relationship 

marketing 

Identification of market trends and customer behaviors – 

who buys, what, when, where, how much, how, etc 

Increasing in sales volume and margins 

Triggering other opportunities (For Example, financial 

services) 

Triggering of one of the most important marketing 

weapons, the “word of mouth” – this happens 

automatically if the deal is really good 

Differentiation 

Reduce markdowns 

Value for the Customer 

Get more for every dollar spent 

Receive promotions that reflect individual 

buying preferences 

Easy to use; register and participate with a swipe/dip/ 

tap of a credit, debit or store loyalty card 

Increase redemption rates Instant rewards are simple; no paper coupon clutter, 

and everything is conveniently accessed through the card 

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Roadmap Levers in each stage of a Smart Loyalty Program 

Stage Lever Collect & Cleanse Analyze & Deploy Interact & Optimize 

Stage Description 

Process Details & 

Organizational Alignment 

Technology Requirements 


Develop Data Model & 

Collect Customer Information 

Conduct focus groups & 

customer research 

Develop loyalty roadmap 

& strategy 

Develop data model & 

populate with customer data 

Explore organizational 

re-alignment & cross 

functional metrics 

Investigate the use of 

consulting firms in strategically 

developing the program 

Formulate a committee 

comprising marketing, 

merchandising, IT and 

consulting vendors 

Create the program 

technology framework 

& budget 

Define functional 

requirements & identify 

software vendors 

Define & implement 

operational customer database 

Leverage data cleansing 

software or service 

Analyze, Segment 

& Implement Program 

Analyze customer product 

& transaction information 

to establish customer 

segments 

Finalize customer intelligence, 

loyalty roadmap & strategy 

Establish loyalty program 

rules, thresholds, policies 

& success criteria 

Train customer facing teams 

to implement the program 

and explain the benefits 

to customers 

Create & execute mass 

advertising, batch promotions 

& in-store/location collateral 

Provide customer facing team 

incentives for registering 

new customers 

Implement & integrate 

analytical planning, 

operational segmentation, 

campaign management & 

loyalty rules applications 

Leverage Customer Data & 

Increase Pervasive Interaction 

Marketing & merchandising - 

leverage customer data 

to determine product mix, 

promotional strategies & 

investments. 

Customer facing teams to 

become an extension of the 

loyalty and promotional 

strategy by providing assisted 

selling, enhancing service & 

recommending appropriate 

products 

Integrate the program into 

advances selling technology 

framework 

Deploy & format loyalty 

program interfaces for multiple 

devices viz. kiosks, digital 

signs & mobile technology 

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Stage Lever Collect & Cleanse Analyze & Deploy Interact & Optimize 

Stage Description 

Measurements 

Customer Interaction 


Develop Data Model & 

Collect Customer Information 

Analyze, Segment 

& Implement Program 

Data collection ratio New members New members 

Customer expectations Conversion Conversion 

Brand awareness Frequency Up sell 

Market Basket Service Levels 

Leverage Customer Data & 

Increase Pervasive Interaction 

Dormancy Employee productivity 

Margin 

Turn 

Lifetime value 

This roadmap provides details regarding process, organizational alignment, technology requirements, key 

measurements, and customer interaction for each of the stages. Retailers will need to tweak existing processes and 

procedures and invest in technology to support these activities. 

Retailers should understand that the loyalty program journey will be undertaken in parallel with other initiatives, 

particularly the high-level strategy of enhancing customer interactions with advanced selling technologies and building 

a demand driven supply network. All these initiatives are tightly integrated and rely on each other. Thus, these initiatives 

must move together. 

Data is collected via reverse 

append of credit card 

or telephone number 

Customers may receive 

promotions that retailer 

is testing which may not 

be affiliated to a loyalty 

program, but used to test 

offers and help create 

segments 

Customers register for the 

program, be it manual 

application, kiosk, online, 

telephone etc 

Members have online access 

to order history, applicable 

promotions, services & 

product recommendations 

Members will receive mass 

advertising and can redeem 

rewards, discounts 

and promotions 

Source: AMR Research 

Customers receive 

electronically and card 

is optional 

Consistent and individualized 

promotions, discounts, 

services and recommendations 

at every interaction across 

channels 

Optimized self service 

and assisted selling experience 

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Third Party 

Network 

Web enabled 

Corporate 

Portal 

SAP 

Enterprise 

BW 

Successful technology architecture to support a smart loyalty program requires the following components: 

Integration at Point of Interaction 

Integration component manager new/revised customer data flow into operational customer database and allows real-time 

integration of loyalty rules through any point of interaction media viz. POS, in store kiosks and Web etc. 

Real-time Customer Data Store 

This data store acts as a central repository for customer data, standardizing, cleansing, aggregating and organizing the 

information to enable analysis and syndication. 

Customer Intelligence Analytics 

This component provides predictive modelling, data mining and analytics to enable users to extrapolate information about 

customers and better understand marketing, merchandising, and promotion activities that will likely influence behaviour. 


Frirewall 

Loyality & Customer Intelligence Technical Architecture 

Loyality Program Rules Engine 

Customer 

Intelligence 

Analytics 

Operational 

Customer 

Segmentation 

Real-time Customer Data Store 

ETL 

Middleware 

Loyalty 

Customer 

Data 

Warehouse 

Source: AMR Research 

Data Quality & Integrity 

Point of Interaction 

POS 

Kiosk 

Mobile 

Web 

Call Centre 

Partner Service 

Loyalty Program 

Support Services 

Data Quality & 

Integrity 

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Operational Customer Segmentation 

This component sits on top of the real-time customer data store to provide segmentation in preparation for campaign 

execution. It allows business users to create slices of different customer segments based on answers to predefined 

attributes without deep analytical regimen or time consuming data crunching. (For Example, “show me customers that 

purchased 1000 gallons of fuel in March”.) 

Campaign and Loyalty Rules 

This component enforces program design and rules by using a complex set of business rules to process incoming data. 

These rules define program characteristics such as: 

• A number of points any customer can earn on each type of transaction 

• The start and expiry time-lines of a rewards program to which a member is linked 

• The rewards that a particular member is eligible to redeem 

• Additional bonus opportunities for members 

• The thresholds that trigger applicable offers and discounts 

Campaign rules set the parameters for outgoing marketing programs such as e-mail, kiosk advertising, etc. Loyalty rules 

set the parameters for incoming customer redemption of applicable rewards. 

Data Quality & Integrity 

This component is responsible for cleansing customer information and cross-referencing this information with third party 

databases. 

Loyalty Program Support Services 

This component creates and fulfils loyalty cards, marketing material and rewards. This component also allows contact 

centre operations to support operational enquiries from customers. Fulfilment and service functions are often 

outsourced by retailers to third party service providers. 


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Measuring Effectiveness of Customer Loyalty Program 

Once the customer loyalty program is in place and running, the enterprise needs to monitor various parameters so as to 

measure the effectiveness of the whole exercise. 

These various parameters could be: 

• Subscription Rate – actual number of sign-ups versus the budgeted figure for a given period 

• Sales -Total member spending versus non-member spending for a given period 

• Average bill value – member versus non-member 

• Member Retention rate – Number of members active after one year of subscription 

• Profitability 

• Member Life Time Value (LTV) – An increase in LTV indicates a successful CLP 

A research project was conducted for a major fuel loyalty program pioneer in the US. 50,000 loyalty customers and 4.8 

million transactions were analyzed for a period of 14 months. Highlights of the research are given on the right. 

The study clearly shows that a smart loyalty program is effective in increasing purchase frequency and basket size from 

loyalty customers. In addition, the retailers would see the success of the loyalty program in getting fuel only customers 

back inside the store to make store purchases as well. 

Loyalty customers spent 36% more than regular customers. 

Average transaction size of loyalty customers grew 25% over the period. 

Loyalty members purchase frequency more than doubled from 1.79 to 4.08 times per month. 

29% of non - loyal fuel purchases were paid in the store while 58% of loyalty fuel purchases were 

made in the store. 

The percentage of double category buyers (Fuel & Store) increased by 22%. 

38% of loyalty fuel purchases in the store included store items. 

26% of non - loyal fuel purchase in the store included store items. 

Between 1,500 to 2,500 consumers enrolled into the loyalty program per store. 


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Emerging Trends 

To spice up loyalty programs, more chains are crafting partnerships between non-competitive entities. Grocers sending 

people to fuel retail outlets as part of their reward mechanism, a win-win for both of them, is one such example. 

Also on the horizon of this decade, we can expect to see more channels integrating an ongoing cause with a loyalty 

program. One great example is Shell and Safeway partner with a coalition called Air Miles in Canada, which integrated 

the cause of going green and being more eco friendly into their program. Customers can earn rewards from buying green 

products at certain retailers, get a bonus for buying that product, and can redeem points for ecologically responsible 

items. This also encourages more socially responsible behavior, which is also an overall consumer trend. 

Another emerging trend is a shift in how the data is being used to communicate promotions. Data gathering reveals a 

wealth of information about customers, but a lot of companies don’t look at that data for insight. In the next five years 

the companies that are going to do the best in this space are going to be the ones who turn their attention to the treasure 

trove of data they’ve gathered. This data provides insight provides about your most profitable customers and how you 

can market to them more effectively. 

Many marketing chains are sending coupons, special offers, bar codes to mobile phones in order to reach customers 

where they are, but it is important for them to see that this strategy works as the risk is the customer most of the times 

write-off such offers as SPAM. 

Conclusion 

Rewards offered through loyalty programs will continue to be a key differentiator. With so many loyalty programs 

available to consumers through multiple market channels it will be a necessity to offer creative and personal rewards. 

Consumers will increasingly demand more offers that are relevant to their personal needs and interests. 

Loyalty programs recognize and reward the best customers of a business. Nearly one-third of U.S. consumers (32.3%) 

consider their participation in retail rewards programs to be “more important” as they seek to stretch their household 

budgets in the recessionary economy. 


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Appendix 

References 

• [2005]. James A. O’Brein, George M. Marakas. Management Information Systems. 

• [2006]. AMR Research Survey. Loyalty Programs that actually create Loyalty – Retail Imperative. 

• [2009]. Barry Berman, Joel R Evans. Retail Management. 

About the Author 

Kishore K Somaraju works as Senior Consultant, Oil & Gas, within the Energy & Utilities vertical of Wipro Technologies. 

With over 16 years in downstream retail automation, Kishore brings with him rich experience from companies like IBM 

and Reliance and adds a synergistic value to Energy & Utilities vertical of Wipro. 


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ABOUT WIPRO TECHNOLOGIES 

Wipro is the first PCMM Level 5 and SEI CMMi Level 5 certified IT Services Company globally. Wipro provides comprehensive IT solutions 

and services (including systems integration, IS outsourcing, package implementation, software application development and 

maintenance) and Research & Development services (hardware and software design, development and implementation) to corporations 

globally. 

Wipro's unique value proposition is further delivered through our pioneering Offshore Outsourcing Model and stringent Quality 

Processes of SEI and Six Sigma. 

WIPRO IN ENERGY & UTILITIES 

The Energy and Utility division of Wipro Technologies is one among the Top 10 IT solution providers to the E & U industry across the globe. 

The Energy & Utilities business unit has worked with over 75 top Energy and Utility companies across North America and Europe in 

regulated as well as deregulated markets providing solutions in areas such as Customer Care, Billing and Settlement, Work and Asset 

Management and Grid Operations covering all industry sectors --- Electricity, Gas, Oil and Water. 

The cumulative experience of over 5,500 person years spans IT Consulting, Systems Integration, Business Process Outsourcing, 

Application Development and Application Management services. 


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?smart? Loyalty in Petroleum Retail

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