Prepaid gas cards popularity

All About Prepaid Gas Cards from npnweb

The gift of gallons
Savvy marketers use the popularity of prepaid gasoline cards to increase profit and strengthen loyalty

Prepaid gasoline cards are hot, setting the industry on fire with opportunities for increases in profit and customer loyalty, usually with a relatively small investment.

This year began with news that prepaid gift cards were a hit with U.S. consumers. In addition to gift cards for Starbucks, Barnes & Noble and Applebee’s, consumers purchased prepaid fuel cards. Until marketers issued prepaid cards, gasoline could not be given as a gift.
As fuel prices continue to rise, more consumers are giving gallons of fuel as a gift. The number of prepaid gasoline cards purchased during the 2005 holiday season was more than triple the number purchased in 2004, with some stations even running out of cards before Christmas. The uses for fuel cards are endless, from graduation presents to company incentive bonuses, from quick gifts dropped in the mail to cards for discounted fuel. These cards are not just for special occasions. Sunoco has reported that its prepaid fuel card sales have seen double-digit growth in recent years as consumers realize that they facilitate pay-at-the-pump purchases, just as credit or debit cards do.

Prepaid gasoline cards (also called stored-value closed-loop merchant cards) can be used to increase loyalty and boost visits. For example, some marketers add a bonus amount to stored-value cards at the time of reload and others add bonus amounts to new cards when customers purchase a specific dollar amount. Prepaid or stored-value cards can also be used by marketers in swipe-and-win sweepstakes which can encourage frequent store visits.

Enhancing Loyalty
SVM Cards, Inc., Des Plaines, Ill., is an industry leader in the sale of prepaid gasoline cards. Beginning with only one prepaid card (Mobil GO), SVM’s portfolio has grown to over 60 of the most popular gift cards offered, including those of the largest oil companies.

SVM has relationships with various companies, including online marketing and order services, fulfillment to retail locations and customer service. These relationships allow the company to provide full-service choices to clients. SVM has two operations models for prepaid gasoline cards.

“In one model, SVM stands as the third-party issuer,” said Marshall Reavis, the company’s managing director. “We contract with the processor who holds a database of all card numbers and we hold funds until cards are redeemed, then settle with the oil companies such as ExxonMobil, ChevronTexaco and Sunoco. In the other model, we do almost everything; the only difference is we do not hold the funds. Cards are resold through an agreement with the oil company. Shell Oil does this. In some cases, we’re not involved at the service station level at all, such as at BP/Arco. We are simply reselling the cards business to business.”

The company is willing to handle as much or as little as a client requests or needs. “We pride ourselves on our flexibility. Companies can outsource the entire card project to us and we’ll take it all,” Reavis said.

Reavis, who was once employed by Mobil, said SVM’s primary clients are oil companies. SVM supports programs down to the station level when asked, providing card displays, point-of-sale signage and pump-toppers. Stand-alone counter displays at checkout are popular for marketing, although these can get in the way, according to Reavis. End-cap displays or “card malls” with other non-competing prepaid cards also displayed are very successful, he said.

Holiday times are the biggest for sales of prepaid gasoline cards, according to Reavis. Spikes in sales are seen not just at Christmas or Hanukkah but also at Easter, Valentine’s Day, Father’s Day and graduation time. “There’s always a spike, too, in the early fall when college students head back to campus,” Reavis said.

The largest percentage of SVM’s sales is business-to-business promotional incentives that are four to five times larger than direct sales. One example would be a car dealer’s promotional incentive to buyers — buy a vehicle and get a year’s worth of gasoline free, or an employee incentive with free gasoline as a bonus.

“Don’t worry about the investment when you’re selling prepaid cards because what you’re really selling is loyalty,” he said. To have a truly successful card program, Reavis recommended also selling the prepaid cards outside the service station, such as working with local companies on bonuses for employees or customers. While Reavis said that card margins depend on the individual oil company, he has seen the range go from zero to a high of 3 percent.

Speedy Success
Speedway SuperAmerica, a chain of more than 1,650 convenience stores headquartered in Springfield, Ohio, is very satisfied with its dual prepaid card program, according to Linda Casey, company spokesperson. “Our customers really like them.”

The company says its Speedy Cash PrePaid cards give customers the convenience of a credit card without monthly bills and finance charges. The PrePaid Gift Card can be used on all Speedway SuperAmerica purchases, while the PrePaid Fuel Card is good on fuel purchases only and can be used at the pump or inside the store. Both cards are accepted at any of the company’s locations; cards can also be purchased online (discounts are available only on in-store card purchases). Speedy Cash Cards can be reloaded at any company location.

Discounts are available on cards, with deeper discounts appearing during the holidays, according to Casey. One current special also involves the Speedway SuperAmerica credit card. New credit-card customers receive an 8-percent rebate on any gasoline or merchandise purchase for the first 60 days after opening an account. Existing customers receive a 4-percent rebate when they use the credit card to buy gasoline or merchandise after the first 60 days with no limit on rebate amounts. If customers purchase prepaid gasoline cards with this credit card during a discount prepaid card period, the price they pay for gasoline will be even lower, according to Casey.

“Prepaid cards are ideal for college students in the Midwest where we have over 1,600 locations. They can buy gas plus food, a hot sandwich or personal care items, things everyone needs,” Casey said. “They’re great gifts. Just put them in a card and put 39 cents postage on the envelope. You don’t have to worry about packaging, shipping, insurance, etc. And they’re always well-received on the other end.”

Stored Value for Customers
Stored Value Systems Inc. offers private-label, electronic cash cards to companies that sell products or services, including c-stores and fuel marketers. The Louisville, Ky.-based company has a complete end-to-end program that is transparent to customers. The company prides itself on its back-office expertise. Services include card design assistance and production; card carrier design and production; database management, card activation, value assignments, tracking and redemption; back office reporting and customer service for employees and customers.

“There has been a tremendous increase in prepaid gas cards,” said Bob Skiba, SVS’ general manager and executive vice president.

There are several drivers for the increase in prepaid gas cards, according to Skiba. First, there are more points of distribution for these cards, including gift card “malls” at grocery and drug stores. Second, there is the ability to offer discounted gasoline to consumers without actually lowering prices on signs.

“Kroger, Safeway and Costco offer customers reduced rates at the pump of, say, two to three cents off per gallon to those using these cards, which causes customers to buy more gas and visit more often. This is really a big deal for your average consumer,” explained Skiba.

Third, using prepaid cards as incentives for employees is another driver of growth, Skiba said. Adding prepaid gasoline cards are tops in employee polls used by some companies to determine the most desired gift card. Fourth, sending a prepaid gasoline card back to college with a son or daughter to make sure they have gas money, plus, in many cases, a discount on fuel is a big driver in growth of sales, he said

“Parents know where they’re going to spend the money. Also, some cards are reloadable so when it hits a certain purchase threshold the giver can have the card reloaded.” Christmas of 2005 brought “high double-digit increases” in prepaid gasoline cards as stocking stuffers, both for oil companies and supermarkets that sell gasoline, according to Skiba.

Displays for prepaid gasoline cards are mostly at point of purchase, according to Skiba, with signage or display readers at the pump also popular. Marketers who do not have a card program and don’t know how to begin can contact SVS, according to Skiba, for a turnkey solution appropriate to their locations and needs.

For Sale By Dealer Demand
“Our Chevron dealers had wanted to be able to sell prepaid gas cards for a long time, but we needed to upgrade some software and hardware first,” said Katie Burge, a sales representative for Elkins, W.V.-headquartered Woodford Oil. “When they received the cards, our dealers were ecstatic.”

Woodford Oil, a petroleum distributor/marketer, leases stations to dealers or chains and includes Marietta, Ohio-based Par Mart convenience stores in its fold. Chevron Corp. is a client of SVM. “We started the program in September 2005 first by changing software in the cash registers. Then we ordered the cards for the 2005 holidays; over half the dealers were equipped and sold cards at Christmas,” Burge said. “Cashiers at these stations did suggestive selling of the cards. Also, one customer, whose station is close to a car dealership, bought $5,000 of cards which the car dealer used as a promotion for car buyers and as employee Christmas gift cards.”

The prepaid cards for these Chevron stations are not preloaded, which helps prevent theft from displays, Burge said. Stores can load the card for the amount the customer wants at time of purchase. While all major Chevron facilities can accept these prepaid cards as payment, some of Woodford Oil’s smaller dealers, such as mom-and-pop stores, aren’t able to activate the cards yet, something which Burge said will happen later this year. Chevron supplies a display rack to dealers that goes right next to the register, according to Burge. They also can receive signage for windows and doors, pump-toppers and/or a 3 foot by 3 foot island display cabinet. Dealers can mix and match these displays as they wish and receive a 1-percent break when they sell the card. Profit is also made at the gasoline pump, according to current prices, and on items inside the store, she said.

Prepaid gasoline cards are good for travelers, Burge said. “Instead of taking extra cash or travelers’ checks for gas, customers can take a prepaid card. Customers can take the card to any Chevron station when they’re on the road and it will be accepted. It’s like a credit card, but paid in advance. At the dispenser, the customer puts the card in and receives a receipt that shows the remaining dollars on the card. If they reach the prepaid amount while getting gasoline, the pump will shut off when it reaches the amount on the card.”

Burge said if the card is stolen, all may not be lost. “There is a toll-free number on the card to call. If they have a receipt showing the balance remaining, the card can be shut off.” The cards can also be used by small-to-medium businesses who can give the cards to drivers when they’re on the road, she added.

Burge agrees the cards are ideal for college-bound students. “Mom and Dad can take their kid to college and buy a $100 to $200 prepaid gas card towards purchasing gas or convenience-store items. It helps parents keep control of the money they give to kids and know that they have gas money or food. They can reload the cards as needed,” Burge said.

“The cards are a good merchandising tool. You can advertise them and maybe bring in customers who might not have visited your station or store before. It’s a good add-on for a very small investment,” Burge said. “It would be a mistake to not have them available.”

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