Steal this Idea: Buying Futures of Gasoline

Buying gasoline has always struck me as a great example of irrational behaviour masquerading as bargain hunting. People drive around until they have nothing but fumes left in search of cheap gasoline. People put $5 in and wait for the price to drop. When prices are high, a common brag is how cheap someone was able to buy some gas. People are crazy for a few cents off the price of gas.

And for what? An average-sized fuel tank is around 60 litres. Let’s say that I fill my tank when it’s almost empty. I add 50 litres at each fill. If I drive around, peering up at the gas signs until I find a station selling gas for $1.10/L then I pay $55 for my tank of gas. The following week, I drive around peering up at the gas signs and Bingo! find a station selling gas for $1.00/L. I pay $50 for my tank of gas. I laugh and ask people to guess how much I paid for my gas. Hoo-hah! I beat the system. I saved $5. Not such a big deal.

A few neighbourhoods away, someone else has just paid $1.05/L of gas. In another neighbourhood, someone paid $1.15/L. The price goes up and down, sometimes you pay a little more, sometimes you pay a little less. But you have to drive so you have to buy gas. The game of finding lower-priced gas is just a diversion from the pain of having to buy it in the first place. Maybe we kid ourselves that we make out ahead of the game. Maybe we do make out ahead by playing the game. I don’t think that matters, I haven’t seen a lot of gas companies go out of business.

At the same time all the gas companies are trying to find ways to keep customers loyal. They offer a commodity product and try to differentiate it with fancy tech-sounding additives. They have a schizophrenia. They want customers to pay at the pump for convenience, yet they also want customers to come into the store to stock up on chips and pop. But it’s a gas station. People pull in for gas or to use the bathroom. That’s about it. There doesn’t seem to be a lot of opportunity for building the business based on the site.

Now I have an idea for how gas stations can make their customers loyal: selling gas futures. What are gas futures? They’re essentially price speculation in the present on the future price of gas. It’s what commodity traders do all the time. Buy at one price and exercise at another. Here’s how it would work.

I’d partner with a major gas company to roll out a new brand. Let’s call it PriceMakers. Customers sign up with PriceMakers and get a PriceMakers Petro card. They use that just like a gas debit card, except that the card trades in gas instead of debt. When the price is low customers can buy lots of litres worth of gas and add them to their PriceMakers Petro card. When the price is high they can cash in those stockpiled PriceMakers litres at the price they originally paid for them. It’s simple hedging. Every month the PriceMakers members can see on their statement how much they saved on their gas bill by using their PriceMakers Petro card.

So what’s in it for the major gas company? A few things:

• Cash up front for future goods
• A loyal customer locked in to your product
• A trackable customer and their behaviours
• A customer you can market other products to
• Residual, purchased inventory that remains unused

Once the PriceMakers Petro card takes off, you can extend the PriceMakers idea to other commodity purchases with price fluctuations, such as air miles, long distance minutes and electricity. Purchases can also be extended to where there is price discrimination based on geography, such as in airports, where a cup of coffee or a sandwich costs double the same thing on the street.

Now, where the idea gets really crazy is when you open up the PriceMakers website and start to let people trade their credits to each other. Then you tap into a network effect and the growth of the program can be exponential. Geographic barriers are destroyed and people can trade gas from low-priced locations to high-priced locations. PriceMakers takes a small piece of these customer-to-customer transactions. Maybe there’s a membership, or maybe not.

So what do you think? Would you sign up? Would you tell someone about it? Would you use it?

If you have any ideas to contribute or questions, please add to the comments.

Do You Lie for a Living?

Andrew Goodman of Traffick writes in a post called Do you lie for a living?:

I’m just flipping through Joseph Jaffe’s excellent Life After the 30-Second Spot (the PDF version—I hate to wait). When he still worked at an ad agency, Jaffe’s 10-year-old cousin asked him about the long disclaimers and small print at the end of print ads and TV ads. The kid then asked Jaffe why he’d work in an industry that requires him to lie for a living.

Which reminded me of a recent trip.

Big splashy promo by EasyJet in a UK airport, where they’d set up a booth across from the departure area. Pretty aggressive marketing—taking out promo space in the same airport you fly out of. Nice work. But the message itself got a chuckle from me.

UNLIMITED CARRY-ON BAGGAGE (Huge Asterisk)

* - Within reason. Subject to available space.

If the size of the asterisk in your marketing “communications” is literally comical, you’ve accomplished nothing but show people that ads are lies, no?

Which makes me think there exists an opportunity for an airline or travel agency. Two scenarios come to mind.

(1) People are exhausted by bait-and-switch pricing for travel products. The advertised rate is $289, with a dreaded asterix. If you read the fine print wedded to the asterix, you discover the rate is one-way and subject to a litany of fees, some charged by the airline, some charged by the airport, some tacked on by transportation regulation bodies. Price out the full trip and it looks like over $400 for that one-way ticket.

So is anyone brave enough to advertise the price someone is actually going to pay? Surely that’s a good opportunity for differentiation, even if the no-haggle, no-surcharge price only gets selectively advertised, doesn’t it seem worth the risk? In an industry with so little to differentiate between offerings, other than price, honesty seems to me a good virtue to cultivate.

(2) Use the asterix as the jumping off point for a key message, delivered in a new way. If your airline has more daily departures than anyone else, then try,

Daily Departures Now Boarding *
* Daily? Practically hourly! At least for the hours that count. We get you to where you need to be, faster. We fly more often to major destinations. We could be boarding a flight right now. Are you coming?

Consumers practice connected consumption now. They know the lies of advertising, and if they know, they tell people. Soon everyone knows. Then that knowledge becomes ingrained, and with it, a passive annoyance. Whole businesses can be built or expanded on this type of insight and breakthrough. The hypothetical campaign I describe could even be publicly announced as Putting Your Money Where Our Mouths Are. Visual: ticket counter employee with startled expression in their eyes, hundred dollar bill covering their mouth.

Can Brands Enable Social Engagement?

MediaPost has a great article given by J. Walker Smith, the president of Yankelovich Partners, entitled Productivity: Meet, Greet, Then Market.

These days, the best way to get people’s attention is not to engage consumers with a brand, but to host or facilitate a context for people to engage with one another. People don’t want to see ads; they want to see their friends. And while they’re doing so, they’ll do business as well….Instead of isolating people into private experiences shared with no one else or clustering people into closed communities of narrow interests, the Internet is bringing people together in new and unprecedented ways.

...

(What makes for) the killer app isn’t Fox’s online content; it’s social engagement at MySpace.com. Social engagement is the platform on which business can be done.

I love reading how the advertising industry talks to inself. Overall I see the industry having a very hard time dealing with the web and finding ways to engage with people and charge for that engagement. Mostly existing tactics have been ported from existing media.

The article does hit a couple of good grounders identifying the new value drivers online but it misses the home runs:

• social engagement is not the ‘latest killer app,’ it’s not an app. Social engagement is what we do as humans. The web just allows people to do what they want in new ways and at different scales.
• people are most locked into experiences not by the interface or subscription fees or the data that they have invested in a site and will have to reinvest in another site, which is painful, if they make a switch, but by other people. And not just by volume but by quality. What’s quality? It’s different for each of us, that’s what makes it interesting.
• ”...where people are engaged and interacting, they’ll do business, too.” Only if that same place meets their needs. I use Flickr to store and share my photos. But if I wanted to print them in an album and Flickr only offered a subpar option, I’d take my photos elsewhere to have them developed into an album. Portability is here and the people formerly known as audience know it.
• “There’s a new appreciation that people like talking to other people, not to brands. In fact, at Yankelovich we’ve documented how little people want to be marketed to these days.” People talk to brands? The reason advertising is in such deep decay is that people in the industry say and write these kinds of things. If no one hears a brand in a forest, does it exist?
• “Technological advances always increase control, but in the past this has mostly been an increase in collective rather than individual control.” Wrong. Almost all recent (the last 20 years) computer technology has been focused on serving the interests of organizations because they were the ones buying it and that’s what they wanted. The shift to enabling individuals to do things with computer technology (task enabling) from enabling organizations to control their employees (control enabling) is what I see as the biggest shift in what is collectively called Web 2.0. The best delineation I’ve encountered of task-enabling technology versus power-enabling technology is in Ursula Franklin’s The Real World of Technology. Read it and you’ll see.

As a personal anecdote, I recently stopped using Yahoo as my RSS reader. I had been thinking about it for awhile but waffled on moving because I’d invested my time in subscribing to over 100 feeds. I had no way to export them so I kept using Yahoo and I kept hating Yahoo for giving me no way to export them. Then I reached a tipping point and it became worth it to move all those feeds to Bloglines. Why? So that I could create a blogroll like the one you see to the left under Leading Readings.