We quite often get questions about the times when we raise the board price of fuel around the same time as we run Super Pumped discount days. We know why it looks bad, so we want to put some more info the table.
There’s no hiding from the fact that pump prices do sometimes move on Super Pumped discount days, but it’s not motivated by a desire to recoup the costs. In fact, we try to keep our pricing team, who set board prices, and our marketing team, who run our Pumped program as separate as possible. Put most simply: Pump prices fluctuate often – daily! - and we’re not keen on cancelling a planned discount day because the pricing team has moved the price based on the huge number of factors they use to make a decision, which would be the alternative.
So, why does the price at the pump sometimes go up on the same day, or the day before or after, there is an increased discount through our loyalty programme, Pumped?
The discounts for Super Pumped Days are decided separately to the pump price, by a separate team. Over the past six months we’ve had a Super Pumped day every week at Z, so they are nothing new. The everyday discount that any customers can get through Pumped is 6 cents per litre off. On Super Pumped days the discount is usually 10 cents per litre off.
The decision on what discount to offer on any given day is never influenced by the pump price, as the discount days are decided well in advance. This is so that we can book our marketing in to be poised to notify our customers in time for them to know it is happening.
Z’s pump price on the other hand is far more reactive. The pump price moves are usually based on the international factors- the international barrel price, refined fuel price & strength of the NZ dollar- as well as new local taxes, that are out of our control and move significantly even within a single day. When the barrel moves, we react.And we do this independent of whatever discounting might be happening on the day. Customers have told us they don’t like prices moving up and down every day, or by as little as one cent per litre, so we look for a few days of trend and for the amount to be in the 2-4 cents per litre range in a bid to annoy people less. (Some work to do here clearly!).
Prices will also vary from suburb to suburb and town to town due to local price board competition, which means that on Super Pumped days, while everyone using Pumped will get 10cpl off, the end price will be different for different customers. Regional pricing variations is another topic for another blog!
To make sure customers using discounts know the end price we’ve just started displaying the Pumped price on the price boards at some sites, so people can more easily compare prices and make an informed decision on where to buy fuel. It’s just a start but it’s one way we are trying to make discount prices easy to see and be transparent. We’ve also just submitted to the Commerce Commission on other transparency tweaks that could improve customer experience and we hope the whole industry will take notice.
In the future, we want to work with customers to find out how we might help make Pumped discounts easier to use and understand, so please send feedback!
Extra for experts on how we determine the pump price
How we determine the pump price:
It's based on a lot of different factors - the cost of the raw product, the cost to transport it and the cost to refine it into fuel. We’re a business too, so the pricing needs to cover our operating costs and provide a return to our investors for the money that they've invested in us as well. We also use the money we make to invest in things like service at forecourts, more environmentally sustainable fuels, our community funding programme Good in the Hood and innovation to be able to offer technology like pre-order coffee apps and the latest payment technology so paying at site’s as painless as can be.
The other significant aspect of the price is taxation - which accounts for about 66c per litre. There's more about this, and all the factors in how we calculate fuel price at http://z.co.nz/motorists/fuel-pricing/.