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    Changing Faces

    Big Oil seeks a better image amid heated competition and increased criticism.

    By Mitch Morrison

    Here's a deal for BP marketers: Sell 80,000 gallons or more a month and get a free makeover to the sophisticated BP Connect image for free.

    Sell less and the typical arrangement applies — distributors and dealers pay up front and receive per-gallon credits to cover the lion's share of the costs. Either way, the UK oil giant will foot most of the bill.

    Likewise, other petroleum giants such as Royal Dutch/Shell and Exxon Mobil Corp. offer retailers generous incentives as they parade new, sportier images that exude vibrancy and confidence in place of dull storefronts and aged signage.

    Yet, despite the spiffier rollouts, experts say Big Oil has lost its shine. By many accounts, the respect that major oil companies once commanded has withered, not only among price-conscious customers, but with branded distributors and retailers.

    Marketer-supplier relations have taken a sharp downward spiral, CSNews has learned through numerous interviews and a study conducted last year by a national petroleum group.

    The souring relationship comes as a small pool of oil giants confront a retail landscape shifting radically toward deep-pocketed big-box retailers and independent convenience store chains. These new competitors are successfully mimicking Big Oil's longtime advantages of slick looks, multiple payment options, spotless islands and well-stocked retail outlets.

    Indeed, while flags of the six largest oil brands fly over more than half the nation's retail stations, independent studies conclude that private brands are rapidly cutting into this comfortable niche.

    "There is still brand value, but it's not what it used to be," said Bob Bassman, general counsel for the Petroleum Marketers Association of America (PMAA). "Big Oil is trying desperately to breathe life into their brands. They're trying to give more value.

    "In the old days, the dealer or jobber could get several cents more with a brand. Today, you're talking about a cent or two, and even that isn't a guarantee anymore," he noted. "It's not as if the brand image got lousier; it's that the private brands have gotten much better."

    In a survey conducted by PMAA last year, respondents generally gave low grades to the major oil and re-

    fining companies. Perhaps most disconcerting for these companies was that brand programs — traditionally a category of strength — fell from grace. The largest declines were found in advertising programs and financial assistance.

    Experts attribute this descent in large part to the medley of mergers that has blurred brand value, eliminated once-popular names and bureaucratized an industry founded on intimate bonds.

    "The people that worked for the majors and worked for the jobbers had an understanding that was built on personal relationships, a handshake," said PMAA president Dan Gilligan. "Today, everything is extremely legal, extremely litigious. The personal relationships have fallen quite a bit.

    Perhaps of even more concern to the petroleum marketer is the sense of doubt: "He's not even sure he's going to have his brand around anymore," Gilligan said. That observation is reinforced by the scheduled departures of the Texaco and Amoco flags from the marketplace. The two venerable American brands had enjoyed high approval ratings among marketers and retailers, but have been absorbed by larger predators in recent years.

    Welcome Changes

    And so the major brands are recasting themselves. Several leading petroleum concerns are spending millions of dollars on their images, unveiling new colors and more vibrant logos at thousands of stations across the nation.

    But while these oil giants sound a similar drumbeat, philosophical and operational differences have emerged, underscored by brand treatment, program offerings and marketer ties.

    Exxon Mobil Corp. touts diversity within a homogenous framework. It chose to preserve the two premium U.S. brands, offering wholesalers both wherever permitted by the federal government.

    "A lot of people take the fork in the road," said Tim Hinchman, company district business manager, alluding to the decision by corporate rivals to eliminate at least one featured brand absorbed via merger. "We disagree with that."

    Taking a two-is-better-than-one approach, ExxonMobil is courting both Exxon and Mobil jobbers with equal care, extending a uniform reimaging program, the same credit-card service and the popular Speedpass payment system.

    The company has undergone some scrutiny for its multi-tiered credit-card program. Reading somewhat like a jumbled puzzle, operators and marketers pay different transaction fees depending on the program of choice. Based on superior rates, the company has stacked the program in favor of Speedpass.

    Hinchman said, "The processing and order fulfillment was a bit of an irritant. But we feel confident that our credit-card fee structure is the best in the industry."

    What is paramount, company officials say, is that ExxonMobil is eyeing ways to strengthen its bond with its sizable distributor network of 730 jobbers, who handle 9,000 locations, roughly half the company's domestic retail presence.

    Chevron Way

    Another company, San Francisco-based Chevron Texaco Corp., whose flag waves at more than 8,000 locations in the United States, is considered by many the elite brand of the West Coast.

    Unlike ExxonMobil's broad marketing menu, ChevronTexaco takes a holistic approach to its downstream operations, defining brand in terms of personal relationships. "How can we be relevant to the customer? As a culture, the [majors] have to change," said Dave Reeves, president of ChevronTexaco's North American Products Co. "We will never abandon our product quality offering, but the true differential will be the ability to make these distinctions because all of us will have the similar identifications."

    Dealers and marketers harp on pricing disparities between themselves and the big-box competitors, whose street prices often are comparable to what the former pays wholesale. To narrow the gap, major oil companies offer temporary pricing allowances — cents off the gallon, with discounts varying by location.

    While jobbers' stomachs may churn over price, Reeves does not see street price as the bottom-line determinant for most customers. "The people particularly successful are not those who choose to compete on price alone," said Reeves, "but on how you service the customer and how you value price your product."

    One Up

    Contrasting ExxonMobil's dual-brand approach, BP plc and Royal Dutch/Shell proclaim the motto: "One for all. "

    BP is retiring the Amoco flag, designating it instead as a fuel brand. Shell, which recently acquired the Texaco stations as part of the Chevron-Texaco merger, plans to discontinue the historic Texaco star.

    In their places, BP and Shell are pouring big bucks into new images. For BP, it's a sleek sunburst tied into a high-tech look that features Internet kiosks, futuristic pumps and sharp reimaging.

    Such a move does not come without risk. By promoting BP as the marquee brand at existing BP locations and at longtime Amoco and some ARCO stations, some critics say, BP jeopardizes relationships with loyal Amoco jobbers, c-store operators and dealers.

    But Polly Flinn, BP's senior vice president of marketing, said the sophisticated BP Connect theme has strengthened the company's relationship with its jobbers. "BP Connect is our vision of what will make us distinctive with the consumer."

    Shell Game

    Like BP, Shell is brandishing a new concept. Retail Visual Identity (RVI), a sleek yellow and red design unveiled in Europe in the early 1990s, will replace the Silverado design at the chain's 9,000 branded locations. "It's a given we needed to modernize and improve the offering we have out there," said Mike Iribarren, general manager of marketing. "We're trying to develop a look that projects a warm, friendly, caring, modern look that at the same time gives us a more global look."

    Reimaging is only part of the Shell strategy aimed at reenergizing its downstream segment. The Houston company plans to beef up national promotions by emphasizing its line of quality gasoline products.

    "We have a lot more behind our product than just playing a price game. We have an image, we have a heritage," he said. "The customers we're appealing to are willing to pay a small premium. You've got to be competitive, but you've got to give a value."

    Like its counterparts, Shell subsidizes — and sometimes underwrites completely — per-site image enhancements through per-gallon discounts. A retailer or jobber rolling out a reimaged Shell station, for instance, may save several cents per gallon over a certain period of time. As for promotions, Shell reviews individual plans, whether they be radio spots or mail fliers by local retailers. If the plan is approved, the company subsidizes the effort.

    The company also touts three credit-card lines, including a Shell MasterCard that rewards customers with a 5-percent rebate on fuel purchases, a proprietary card and a Shell gift card.

    "We're trying and we are reinforcing the value of the brand and what it stands for," he said. "At the end of the day your channel partner is going to be pleased if you win over more customers for your channel forecourt."

    Building Relationships

    If suppliers and marketers are to enjoy better days, major oil companies must undergo a change of mindset, some say.

    A prime example of this is Citgo Corp. of Tulsa, Okla., the only major brand that is 100 percent marketer run.

    "The big point of difference for us is we have a broad array of programs that are modular, flexible and not mandated," said Julie Anderson, Citgo's manager of communications strategies. "We try to give the jobber the tools to compete. We don't tell them how to compete."

    While Citgo is unique in that it does not operate any stores itself, some major oil companies are scrutinizing how they do business with their distributors.

    "The core success is built around relationships, competitive value and how you communicate with your partners," he said.

    Reeves was not surprised by the prevailing sentiment that relationships between marketers and suppliers have frayed in recent years. "In general, it's true that business relationships have become less personal," he said. "Fundamentally, this is because we're going from being single-branded suppliers to multiple-branded, which means we have to balance different alliances and loyalties.

    "As oil companies have come together, the emotional attachment to the brand has come into question. The question for the oil company becomes, which brand are you loyal to?"

    By Mitch Morrison
    • About Mitch Morrison

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