Oil Company Credit Cards: A Review of Rates and Redemption

Publication Date	September 2005
Publisher	Datamonitor
Product Type	Report
Pages	72
ISBN Number	not applicable
Product Code	DAT00534

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Summary

Introduction

Co-branded credit cards typically encourage a higher rate of transactions and generate three times as much turnover than bank-only cards. More versatile than the fuel card, co-branded oil company credit cards offer forecourt retailers the opportunity to enhance consumer loyalty, increase brand recognition and compete successfully with the co-branded credit cards offered by grocery multiples.

Scope

An assessment of the potential profitability of co-branded oil company credit cards when compared with fuel cards and bank-only credit cards
A quantitative comparison of pricing strategies of existing oil company credit cards and leading non-oil credit cards to acquire and retain customers
An evaluation of the non-price strategies employed to increase customer acquisition, retention, loyalty and card activity
An investigation into loyalty programmes, the relationship between issuer and retailer and some of the more innovative non-price incentives

Highlights

Consumers prefer co-branded credit cards. A typical co-branded credit card generates EUR37 more profit yearly than a bank-only card. In terms of fuel retailing, credit cards, due to their versatility, are becoming more popular than fuel card or cash payment. In the commercial market, credit cards accounted for 23% of fuel sold in 2004 across Europe.

In 2004, 68% of motorists considered price the most important factor when choosing a petrol station. Only 4% of consumers would select a fuel retailer on the basis of its brand. Given that most motorists are not loyal to fuel retailers, linking a loyalty scheme to an oil credit card has the potential to transform this.

Points-based loyalty schemes have proven popular but inevitably involve forging relationships with other retailers, such as Boots for health and beauty products in the UK or Gant for groceries in Poland. As well as providing a wider range of goods for redemption, such partnerships help to increase the appeal and frequency of customer rewards.

Reasons to Purchase

Understand which markets have an established playing field for co-branded oil company credit cards and the extent of the competition in those markets
Benchmark the rates and level of redemption offered by co-branded oil company credit cards and the leading non-oil card across various global markets
Evaluate the success of various acquisition and retention non-price strategies via detailed and extensive case profiles

Content

Chapter 1 Executive Summary
- Co-branded cards are used more frequently, have a higher turnover and encourage customer fidelity to partner retailers
- Competitive price strategies should be the primary consideration to ensure customer acquisition and card activity
- Loyalty schemes vary widely; cash back on purchases, points based programmes and club models are the most common
- Co-branded credit card relationships vary; some offer issuer and retailer equal control, others see the issuer as decision-maker
- Non-price incentives at the application stage increase customer acquisition whilst others aim to encourage card usage
- Fuel retailers should aim for simple loyalty schemes based on equal partnerships and not underestimate the power of non-price incentives
- Trends
- Recommendations
Chapter 2 Introduction
- Card managers
- Marketing and advertising executives
- Market analysts
Chapter 3 Assessing The Opportunity
- Co-branded cards are more profitable than bank-only cards and encourage greater customer usage
- In 2003, the average co-branded credit card had a 3,340 higher turnover and made 37 more profit before tax than a bank-only credit card
- Customers are more inclined to use a co-branded card more regularly than they are a bank-only card
- Co-branded cards achieve higher rates of spending than bank-only cards
- In Europe's key markets, credit cards now account for 23% of commercial fuel volumes sold in 2004
Chapter 4 Price Strategies
- Competitive price strategies should be the primary consideration to ensure customer acquisition and card activity
- Price-based strategies are the most obvious way to differentiate a card product
- Competitive APRs are entrenched in market specifics but are, on a global level, often counter-balanced by the annual fee
- Interest free days are commonly offered on a global level with, on average, the most generous offers in Sweden
- Balance transfers are popular in the UK and some markets in Asia Pacific but scarce in Continental Europe
Chapter 5 Non-Price Strategies
- Some non-price strategies can help acquire customers, others can encourage customer loyalty and card activity
- Loyalty schemes vary widely; cash back on purchases, points based programmes and club models are the most common
- Cash back schemes are relatively cheap to implement, simple to understand and essentially encourage customer spending
- Visa Repsol offers customers a tiered set of discounts with more savings on fuel rather than non-fuel purchases
- Texaco's co-branded credit card in the UK offers customers up to 1.6% cash back on fuel alongside the opportunity to collect points
- In the US, ExxonMobil offers cardholders 3% cash back on Esso fuel and non-fuel purchases, and 1% cash back on all other purchases
- A reward of redeemable points often involves forging partnerships with other parties but increases customer loyalty and retention
- A reward of redeemable points often involves forging partnerships with other parties but increases customer loyalty and retention
- Shell Canada's credit card offers Airmiles - a popular points-based model
- Given that points are costlier to implement than cashback, Statoil has chosen to be a partner in a leading coalition loyalty schemes
- The Citibank and IndianOil card is strongly marketed to motorists looking to reduce fuel spend and car maintenance costs
- In Poland, points collected on PKN-Orlen's co-branded card are redeemed via Programme Vitay, the most successful in the market
- BP Partner Club offers both Point of Sale discounts and points which can be redeemed at a later date
- Typically, the bank provides the issuing expertise whilst the fuel retailer will deal with the sales, marketing and promotion of the card
- In Spain, Repsol's co-branded card with BBVA and La Caixa is managed by the bank but is branded and marketed by Repsol
- The design and branding of the card entirely depends on the type of partnership agreed between issuer and fuel retailer
- Repsol's only rival in Spain the Cepsa / Race MasterCard is a multi-venture card combining issuer, retailer and association
- MOL is part of the Multipoint coalition scheme which includes a major retailer, telecoms company and a leading bank
- International recognition and coverage is the main role of the scheme: Statoil Diner's Club card is replaced by MasterCard
- Non-price incentives at the application stage increase customer acquisition whilst others aim to encourage card usage
- ExxonMobil in the US offer customers the ability to link their credit card to a Speedpass
- In Canada, CIBC Select VISA offer successful applicants a free i-pod for a limited period
- In Malaysia, Citibank Silver credit card offers new customers a 3-year fee waiver PLUS a chance to win cash prizes worth over 200,000
Chapter 6 Recommendations
- Fuel retailers should aim for simple loyalty schemes based on equal partnerships and not underestimate the power of non-price incentives
- Trends
- Recommendations
Chapter 7 Appendix
- Definitions
- Related Research
- SPP writing team
- How to contact experts in your industry
List Of Figures
- Figure 1: The co-branded card is more profitable than both the affinity and bank-only card
- Figure 2: Competitive APRs are the key to customer acquisition but can be offset by annual fees
- Figure 3: There are three types of loyalty schemes: the club, cash-back and points-based
- Figure 4: Co-branded venture have a larger pool of resources and assets
- Figure 5: Oil credit cards are investigated in Demark, Finland, Norway, Sweden, Poland, Spain, Hungary and the UK
- Figure 6: Outside of Europe, oil company credit cards are investigated in the US, Canada, the Phillipines, Singapore and India
- Figure 7: The co-branded card is more profitable than both affinity and bank-only cards
- Figure 8: Across all consumer segments, co-branded cards encourage customers to use the card more regularly
- Figure 9: Co-branded cards generate more value per year and encourage more frequent spending on a monthly basis in-store
- Figure 10: Credit cards are a popular second choice for fuel purchases, particularly in Southern Europe
- Figure 11: APRs are entrenched in market economics and credit risk of the customer base but are generally balanced with the annual fee
- Figure 12: Customers in Sweden can obtain up to 60 days interest free credit whilst Spanish cards do not typically offer this type of promotion
- Figure 13: There are three types of loyalty schemes: the club, cash-back and points-based
- Figure 14: Visa Repsol's promotional discounts are vehicle or travel related
- Figure 15: The range of partners in the WE O U scheme is extremely varied
- Figure 16: A straight-forward cash back has worked well for ExxonMobil
- Figure 17: Airmiles are big ticket rewards but, like other points, can be redeemed for more than just money off flights
- Figure 18: Statoil's is one of the partners of the Premium Club loyalty scheme
- Figure 19: Features of the IndianOil card focus on reducing the cost of running a car
- Figure 20: Programme Vitay is the most successful loyalty programme to date in Poland
- Figure 21: BP Partner Club offers a wide variety of discounts and promotions in conjunction with a points-based scheme
- Figure 22: Co-branded venture have a larger pool of resources and assets
- Figure 23: BBVA and La Caixa, the issuing banks, are not featured on the Repsol Visa card
- Figure 24: The proprietary fuel card features Esso's iconic tiger (top) whilst this is forgone on the co-branded card
- Figure 25: The type of agreement between partners determines the brand image of the card
- Figure 26: Cepsa's card is multiple branded
- Figure 27: The multipoint brand incorporates 4 equal partners
- Figure 28: Coverage is a key issue when choosing a scheme
- Figure 29: The Speedpass is a secure and easy way to pay for fuel and non-fuel goods on the forecourt
- Figure 30: 1 iPod is given away to a new Visa Select customer every day for 3 months
- Figure 31: Free prize draws based on POS transactions encourage card usage