Maximizing Profit: Increasing Competitive Advantage within a Highly Saturated Local Gasoline Market - Case Study Example

Maximizing Profit: Increasing Competitive Advantage within a Highly Saturated Local Gasoline Market By You Your Academic Organization Executive Summary This proposal highlights a profit maximization strategy at the Easy Stop Fuel and Food Center with an emphasis on increasing competitive advantage utilizing various strategic tactics. Easy Stop currently maintains a substantial presence in the local market, both in its size and in its focus on offering a quality convenience store experience. However, the location of Easy Stop Fuel and Food Center is nestled within a region where increased competition from rival gas stations has created a situation where Easy Stop must take significant, dominant action to lure customers to patronize the business. This proposal illustrates the methods by which the company will pursue an active strategy to boost profitability, increase consumer loyalty, and sustain forward growth within a heavily saturated gas station market. Introduction: Our Virtually Limitless Opportunities Where gas station ownership generally relies solely on lowering prices in order to sustain a competitive position with other service stations in close proximity, it is imperative to adopt a dominant strategy; one that produces better results regardless of what tactics an opposing firm uses (Boyes & (Melvin, 2005). The Easy Stop Fuel and Food Center recognizes competitive pricing as a viable business strategy, and will focus a portion of its efforts on this factor, however the magnitude of possibilities available for the business are made attainable by its location and its ability to provide additional consumer services based on its available acreage. The gas station currently rests on two acres of property, of which most is currently sitting idle waiting to be exploited for the construction of value-added services. Moreover, the business is situated on a very busy highway which sustains an ever-increasing volume of cars. Our philosophy is that as long as the potential consumer exists within close proximity, a plan exists to capture their patronage. As part of the profit maximization strategy, one significant portion of our tactics to establish consumer loyalty is to determine the customer orientation; finding out what customers really want and then being able to deliver it to them (Nickels et al, 2005).Easy Stop Fuel and Food Center has hired ABC Market Research Consultants who gathered primary data collected by hosting demographic surveys which offered valuable insight into local consumer preferences and has brought the business closer to providing these demands utilizing low-cost resources. Further, the company recognizes that petroleum products are a relatively undifferentiated product, therefore our efforts to increase profitability must move beyond product marketing strategies; which could create long-term costs which would outweigh the intended benefit. Property: The Often Under-Utilized Asset Offering the consumers the additional feature of a car wash gives a business another opportunity to set itself apart from its competition. Having a car wash increases gasoline volume, particularly when the the wash can be sold on the card reader at the fueling dispenser (Murphey, 2006). The Easy Stop Fuel and Food Center maintains significant acreage upon which to construct an easy access car wash as part of the profit maximization strategy. The business has researched the cost of this construction and believes it can recapture 100% of the expense within 14 months time, with long-term profitability generated from the wash sales at an increase of 15% each year thereafter. How will we do it? Research suggests that the car wash chemical industry has developed new scents, foams, colors and protectants to assure that customers are willing to spend extra consumer dollars which translate into significant profit for marketers (Fleenor, 2006).Traditional waxes and clear-coat conditioners have long been associated with lower-price washes, however these products are not as long-lasting as total car protectants, suggesting that the ideas for promoting these profitable car wash add-ons are virtually unlimited (Fleenor). Geographically, the Easy Stop Fuel and Food Center will be the only competitive entity to sustain a high-quality wash center. Further, in conjunction with the consumer poll results from ABC Market Research Consultants, the business believes this project is key to maximizing the stations profitability. The business is also considering utilizing additional acreage for the establishment of a tanning bed service business. The tanning industry has experienced substantial growth in recent years and the Easy Stop Fuel and Food Center believes the addition of a tanning service will generate average Monthly sales volumes of $20,000. Statistics indicate that average tanning facilities generate over 300 tans per day (in-season) and over 120 per day (off-season). The average growth rate of tanning services is 23% each year (Looking Fit, 2003)With these statistics in mind, our long-term profit maximization projection is a boost in gross annual income of over $1 Million in four years. Capturing Loyalty: Increasing Customer Service Through Additional Investment The Easy Stop Fuel and Food Center currently maintains a quality convenience store which prides itself in offering a vast variety of staple goods and additional food products designed for the hectic lifestyle. Though the convenience concept is not a unique concept amongst the competition, the business is actively working on a plan to incorporate fresh deli sandwiches to increase consumer patronage. Unbranded food products allow Easy Stop more flexibility in menu options without disruption to the business profit margin through expenses toward royalties, licensing, or any other cost associated with a branded partnership. The company believes that the addition of new delicatessen-quality foods will add a new dimension to the convenience concept and offer added incentive to choose Easy Stop Fuel and Food Center to adequately provide all of the consumer needs. Utilizing a reward model to encourage a fuel customer to enter the store is another viable opportunity for the business (Reid, 2002). A discount program inviting membership for the sake of offering member discounts on food and fuel items would bring Easy Stop to a new level of service offering. Such a program would be relatively inexpensive to maintain, using a punch- card method, which demands an in-store patronage for the receipt of loyalty rewards. This would allow the company higher profitability since customers would be more inclined to purchase items in our convenience store section by being forced to walk inside to accumulate reward "punches". The redemption of rewards discounts will allow Easy Stop to track the consumer purchasing habits to effectively apply reward discounts to the items that customers purchase most. Improving the customer experience is a far more powerful lever to enhance overall operating profit (Rosenblum, 2006). Providing an enhanced food offering in conjunction with customer loyalty cards will set Easy Stop a step ahead of our local competition in providing superior customer service. Price Wars: Competitive Pricing as a Viable Strategy to Maximize Profitability Offering competitive pricing in a market where the product is relatively undifferentiated can be substantially tricky as price reductions on gasoline often results in diminished per-unit revenues (Boone & Kurtz, 2006). Thus, it is suggested that price reductions should further consist of a contingency plan to offset the diminished revenue. It is the strategic initiative of Easy Stop Fuel and Food Center to actively pursue the price reduction strategies of our competitors and aggressively pursue price lowering beyond that of other local gas stations. The business believes that the revenues from additional car wash, tanning, and delicatessen items will adequately recover the expense of superior price reductions utilizing these value-added services. Moreover, research suggests that many drivers are quick to defect to another station to save just a penny or two (Kiviat, 2006). Because of the high volume of competition in direct proximity to Easy Stop, the business must recognize this consumer attribute and remain as price-conscious as possible without sacrificing profitability. It is the companys firm assessment that securing additional products and services will increase our total volume of consumer patronage which will allow Easy Stop to actively engage in price competition with zero loss to operating income. Conclusion: Enhancing Consumer Perceptions Of The Easy Stop Fuel and Food Center The majority of the plan to maximize profitability is focused on maintaining positive consumer relations with the heart of our business: The customer. Easy Stop Fuel and Food Center is committed to providing both excellence in customer service and in providing additional services which will increase our overall visibility in the minds of the consumer. Our belief is that through the utilization of our talented leadership, it is possible to build a community reputation of quality and convenience that is unsurpassed in our local market; thereby promoting growth for our business. References Boone, Louis E. & Kurtz, David L. (2006). Contemporary Marketing. Thomson South-Western: p. 633. Boyes, William & Melvin, Michael. (2005). Economics. 6th ed. Houghton Mifflin Company, New York: p. 622. Fleenor, Gail D. (2006). Turning Pennies into Dollars. National Petroleum News. Chicago. Vol. 98 Iss. 7, p. 40. Kiviat, Barbara. (Jul 3 2006). Cash Can Buy You Cheaper Gas. Time Magazine. New York: Vol. 168 Iss. 1, p.18. Looking Fit. (2003). Tanning: Growth Amid a Difficult Economy. www.lookingfit.com/articles/322feat1.html. Murphey, Mary. (Nov 2006). Investing in the Future. National Petroleum News. Chicago. Vol. 98, Iss.12, p. 21. Nickels, William G., McHugh, James M. & McHugh, Susan M. (2005). Understanding Business. 7th ed. McGraw-Hill Irwin, p.399. Reid, Keith. (2002). Is loyalty in my future? National Petroleum News. Vol. 94, Iss.12, p. 20. Rosenblum, Paula. (Nov 2004). In-Store Tactics Drive Value. Chain Store Age. New York. Vol. 80, Iss. 11, p. 56. Read More