Let’s face it; this question is on a lot of marketer minds. As the petroleum industry continues to experience massive consolidation, anyone who runs a small distributorship can’t help but wonder, “Is it possible to stay small and remain profitable?” So let’s explore the issue from both sides and then I’ll give you my conclusion.
The fate of small marketers lies in how and why people buy
To know whether small marketers can survive in the future requires understanding how and why people make buying decisions. Buying behavior research continually shows that purchase decisions, even at the corporate level are first emotional, then rational. Let me emphasize that point – the buying decision is EMOTIONAL! Why? Because human beings are doing the buying! And buyers are genetically wired first and foremost to avoid pain, and second to seek pleasure.
While business schools teach the value equation – you know – quality, benefits versus costs, what they miss is the emotional component of buying behavior. And yes, this means that something as mundane as a fuel buying decision is still emotional and later supported rationally by the buyer.
The Emotional Components of Buying
If you agree with the theory that human being buyers are pain-avoiding, consider these painful possibilities from the customer’s perspective taken from real life situations in the various segments of the industry:
• I ran out of fuel which cost me money and embarrassment and it’s your fault
• When I went to order, your people didn’t even know who I was – I’m just a number
• I bought your fuel and it turned out to be 2 cents higher so my boss thinks I’m an idiot.
• The oil guy drove over my new garden area
• When I filled my car, the nozzle splashed out (or dripped) and I got fuel on me
• The place smelled horrible (or looked bad)
• The cashier was on a cell phone while I stood waiting to pay
• The pump was so slow it took me forever to get fuel, not coming here again
• I got my bill and it was wrong AGAIN after I finally figured it out
• You promised delivery by noon and showed up at 3:30, I’m sick of waiting on you.
• I switched to the grease you recommended and now my machine jammed
• I can’t believe I had to wait that long!
Now I could go on and on, but I think you get the picture. Our buyers are feeling human beings!
Now, let’s explore the pleasure-seeking side of our buyers:
• I looked smart to my boss because buying from you saved us a ton of money
• My accounting department loves your consolidated billing, it’s saves us a ton
• You guys know me when I call and always take care of me
• Love going to your store – friendly people, clean, fast in and out
• Your automated program has saved me tons of time now that I don’t have to order
• Thanks for making sure I always get the best price
• Your driver was sure friendly, left my place spotless and explained everything really well
• I never worry about running out like I did with those other guys
• I enjoyed seeing you at the game last night
• Your lube engineer was a lifesaver on that equipment problem
• You guys were fast!
There is no doubt that larger marketers have price advantages and frequently also have automation advantages. What they haven’t mastered is how to keep stellar customer intimacy and service as they grow. In this high-tech world, human beings, your buyers, still crave high touch.
This craving we humans have for high-touch hit home with me recently in a study of a national service company. For years, this company had drilled efficiency to their techs. Get in and out quickly. Increase the number of stops per driver. But as their efficiency improved, they noticed their customer satisfaction scores were getting lower and lower. At the same time, their referral business started drying up.
Seeing these changes and not knowing the root cause, they hired an outside consultant to find out what was happening. The consultant group began their fact-finding by riding with the most profitable technicians in the company to see what they were doing. (Much to the driver’s dismay, by the way. After all, most drivers drive because they love solitude!) What the consultants discovered was counter intuitive.
While most of the techs were diligently trying to minimize time at each stop, the most profitable techs actually took extra time at each stop! And what was the consistent behavior? Explaining to the homeowner in very simple terms what they had done and why. The customers so appreciated the personal time spent that it ended up in referrals. Another discovery was the most profitable techs earned the trust of the homeowner by suggesting alternative, less-costly solution choices, explaining the pros and cons, and always honoring the choice with no pressure. It’s no wonder these high-touch, look-the -customer –in-the-eye techs won out in profitably over their slam, bam efficiency-driven peers.
So this brings me to my answer to the question, which I will support with an example from the banking industry. I firmly believe the answer to “Is there a future for the smaller marketer?” is a resounding “YES!” While there is no doubt the smaller marketer will be plagued with buy-side disadvantage (how often do you hear “my competitors are selling for a price I can’t even buy at?”), they can and will win by understanding and leveraging the emotional aspects of buying decisions.
To stay in the game over the next decade with supply price disadvantage, however, they will have to bring service and customer intimacy to a whole new level. The smaller marketers who do that in the future will not only survive, but will gain market share.
If you need proof, look at the banking industry since their consolidation trend is about 20 years ahead of petroleum. What you’ll see is massive consolidation with massive loss of customer intimacy. The behemoths created all the automation bells and whistles, but they lost the personal touch. The result? A slow but steady growth of community banks filling the void.
According to a report by the Kansas City Federal Reserve, community bank numbers declined by 43.9% in the 22 year period between 1980 and 2002. Yet while the numbers declined from consolidation with the emergence of megabanks, community banks led the way in small business lending, farm lending, and retail deposit services during that same period! What is truly remarkable according to the Fed study is that community banks enjoyed faster growth in deposits and assets (loans) than their mega competitors. And more importantly, community bank Return on Assets exceeded that of megabanks during the same period.
While the megabanks went for mega-automation, community banks went for high touch, relationship driven transactions. And, more importantly, they were highly successful as the Fed report concluded. So, if you think about it, community banks succeeded then, and continue to succeed now, because they fully understand the emotional component of buyer behavior.
So, smaller marketers, be of good cheer! You can succeed! I’ve always had a special place in my heart for smaller marketers, which is why we started our Success Tactics for Smaller Marketers webinar-based business coaching program to help marketers capitalize on what they already do best. (To find out more about this new program, go to www.SmallMarketerSuccess.com.)
I can’t help but conclude this article without the theme song from the old TV show, Cheers, running through my head. You know it too – that jingle where they sing “Where Everybody Knows Your Name.” Well, small marketers really do know their customer’s name. And that is why I firmly believe small family marketers will continue to have not only a future, but a brilliant future in petroleum marketing, right beside their also brilliant mega-competitors.