Success Through Differentiation, Thesis Paper Example

Acknowledgments

After the successful completion of my Masters of Science degree in November 2014, I first thought that I will not continue my higher education anymore. With my degree, I was able to make a job-move within my Company, Shell. And this was probably the best outcome and benefit for me. As District Manager Switzerland, I am now responsible for the operative retail business with around 240 gas stations all over Switzerland. But shortly after this move, there it was again: Ever since I stared up with my higher education, I wanted to do an MBA, but I have to turn up 39 years old, to realize my dream.

In May 2015, I could participate the final graduation ceremony at Ashridge. This moment was very impressive and I was highly emotionally touched by the atmosphere on the campus. When I left, I said to myself: In 2016, I will be back!

In his graduation speech, Kai Peters mentioned that there is no guarantee for success with such a diploma, but it is a door opener. And like a cook has to cook, in order to learn his metier, a manager needs to manage. So it is about trial and error, we need to make mistakes to be able to learn.

I knew, that it will be a lot of work to do it again, but my way was clear and so I went to subscribe myself for the EMBA course at Lorange and at the end it was another unforgettable experience in my life and I would never regret this decision.

Further I would like to thank Prof. Dr. William Holstein for his support and patience to be the supervisor of my thesis again. We did already a fantastic work for the Master’s Thesis, but the following piece of work is even sharper and I am very proud to have the chance to work together with you. Thank you!

This is also for my family and friends and their understanding. They are always there, when I need them. Thank you so much for everything.

And last but not least, I would like to express my best wishes to the Lorange Institute of Business and their staff. You did a great job in delivering the corresponding setup and insights for modern management and I know that the value of your Institution is unbeatable. Thank you and all the best.

Management Summary

In economics and marketing, product differentiation (or simply differentiation) is the process of distinguishing a product or service from others, to make it more attractive to a particular target market. This involves differentiating it from competitors’ products as well as a firm’s own products. The concept was proposed by Edward Chamberlin in his 1933 Theory of Monopolistic Competition.[1]

In the actual competitive market environment of Shell (Switzerland) AG, thereafter called Shell, Fuels Volumes and Margins are under pressure. The recent decision by the Swiss central bank to remove the cap against the euro came as a surprise to the markets

(It strengthened as much as 25% against the euro at one point during 15 January 2015).

Competition in the Fuels Market Switzerland is still increasing and there are around 3`000 Fuels stations overall in Switzerland. One might think that there is no easy way out of this dilemma of shrinking Volumes and Margins. While some companies are just following mainstream or try to copy the key elements of their competitors such as Shell, real innovation is generated through differentiation. But: What does that mean? Nowadays, only trough differentiation, a company can generate a higher price in the market and increase on the margin side.

To be unique and as the worldwide Leader, Shell needs to be ahead when it comes to the question on how to move forward.

This Thesis deals with the elements of differentiation at Shell. The author will point out that differentiation matters and Shell has several huge advantages, such as the differentiated fuels, called Shell V-Power or the Shell pump attendant.

Introduction

Shell (Switzerland) AG[2]

Shell Switzerland has a history that dates back over one hundred years.

In Geneva on April 20, 1906, Lumina S.A. was established as a joint stock company that traded light petroleum, gasoline and other petroleum products. In 1920, they took over the general agency for the marketing of Shell products in Switzerland and were renamed in 1949 as Shell (Switzerland). In 1966, Shell started refinery operations in Switzerland, with a 75% majority holding in the refinery de Cressier SA, which, in 1983, became the sole possession of Shell. In 1993, Shell moved its Swiss headquarters from Zurich to Baar in the canton of Zug.

In 2000, Shell sold the refinery in Cressier and their depots to the Dutch company Petroplus. In 2005, Shell introduced the first 100 octane gasoline “V-Power” and “V-Power Diesel” and launched the loyalty program “Club Smart” as a rewards program for gas station customers. In 2010, Shell inaugurated a strategic cooperation with Migrolino, a Migros brand for convenience retail stores to enable a common approach in their 131 company-owned filling stations.

Industry and the company Shell

Shell faces increasingly fierce competition in the retail fuels business in Switzerland. Customer satisfaction is clearly a critical factor on its path to business success. This factor is especially important in the rapidly expanding convenience store business.

The fuels market in Switzerland is decreasing and there are more than 3,000 gas stations in the Swiss market. An increasing number of competitors, including national and international players, are trying to increase their market share and market presence. Shell refines and produces all types of crude oil products and this is the lifeblood of Shell. That`s why this thesis focuses on differentiation.

While Shell sticks to the traditional pump attendant, there seems to be a never ending trend to automate and self-serve[3].

• Retailers are introducing self-scanning solutions.
• Train stations are introducing 24hr ticket machines.
• Health care has introduced self-service diagnosis such as NHS Direct
• Amazon has introduced automated delivery drones (well, not quite yet…)

There is less and less human interaction and an ever increasing expectation of getting what we want, whenever we want it.  From the companies point of view, it reduces costs, increases availability, increases capacity – and for the customer, it may reduce prices (or suppress price rises) and increase availability. Making the customers happy and more loyal to the company might be one strategic approach of the introduction of the pump attendant. But taking a closer look the implementation of such a service element in practice must come to the conclusion that something must change. The following questions (examples) will be investigated on the way through the Thesis: 

What is the real benefit of the pump attendant for the customers and for Shell?

Whilst there is no doubt that Shell will be looking to maximise margins on every customer visit, it can’t be denied that the nostalgic value alone in these austere times adds significant differentiation and a richer customer experience.  Both of these are critical to increased customer loyalty and provide a warm fuzzy feeling that a plastic card and points alone cannot achieve at POS.

Are the customers more loyal to Shell through this element of differentiation?

In a crowded market, with increased competition from supermarkets, what can a brand like Shell do to stand-out? If your product/service is basically homogenised, as is the case with forecourt sales, you need to do something to stand out from the crowd.  Price is not an option as the brand leaders don’t have wider supermarket sales to fall back on.  Sales promotions have worked well, but they are hardly ground breaking or innovative and probably won’t reach the heights of the 1980s when people were encouraged to collect glasses or soup bowls.

What is the main task of a pump attendant and is this achievable in practice?

Coming from practice, it is known that most of the pump attendants are just filling up the tank instead trying to motivate the customer to try the differentiated fuels, such as Shell V-Power. The pump attendant is transporting the message to the customers but somehow this message gets lost along the way. So why should Shell pay for that? On the other hand, there is a lot of tradition related to the pump attendant.

How success is measures, when it comes to the decision continue: Yes or No? Is there room for improvement with the actual setup?

One interesting aspect of the attended service is that the customer can’t actually pay for the fuel with the attendant.  Given he can pay for a burger with a virtual currency like BitCoin, it wouldn’t be a stretch to give the forecourt attendants the relevant technology to allow them to take payments.  However, this would remove a golden opportunity for the author to wander about in the well-stocked forecourt shop whilst waiting for the car to be filled or washer fluid topped up.

If Shell should cancel the pump attendant: What are new/other models and ways to have the same or a better impact on the Swiss market?

Taking into account all the involved cost and the marketing activities attached to the pump attendant in Switzerland, we are probably talking about an amount of money in a range between 3 and 5 Million CHF. With this large amount of cash, Shell could establish brand new ideas and come up with a new and fancy marketing thing to attract new customers and position the company as highly innovative leader in Fuels technology. Are there better ways to do so?

Core Values & Sales philosophy of Shell

What are the reasons, that Shell has already a differentiation in place? How about the price perception and services in the market and via the customers? This chapter will highlight the related information with regard to the thesis topic.

Products, service and promotions

An overview about all services that Shell has to offer to their customers. Since there are so many activities, we need to slit them and point out what is relevant for the thesis.

Literature Review

Differentiation Strategy[4]

Porter wrote in 1980 that strategy target either cost leadership, differentiation, or focus. These are known as Porter’s three generic strategies and can be applied to any size or form of business. Porter claimed that a company must only choose one of the three or risk that the business would waste precious resources.

In terms of the differentiation strategy, there are several issues to be stressed out in relation to the Shell pump attendant:

A differentiation strategy is appropriate where the target customer segment is not price-sensitive, the market is competitive or saturated, customers have very specific needs which are possibly under-served, and the firm has unique resources and capabilities which enable it to satisfy these needs in ways that are difficult to copy. 

Matching Shell`s market position in Switzerland, the author considers the pump attendant in the field of “customer service differentiation”. But what is needed to maintain such a market perception via the customers? Is it enough to have 60 pump attendants in the field while Shell has a network of around 240 fuels stations?

With regard to this proposal, there are a lot of sources available to foster the findings or underlie and support the thesis.

• http://smallbusiness.chron.com/examples-differentiation-marketing-strategy-3222.html (and related articles)
• Book: Lovemarks, The future beyond brands, Kevin Roberts, CEO Worldwide, Saatchi & Saatchi
• Book: Armin Seiler, Marketing BWL in der Praxis IV, Orell Füssli
• Book:Marketing Management, Jolibert, Mühlbacher, Flores, Dubois, 2^nd Edition
• http://www.dailymail.co.uk/news/article-2150469/Shell-introduces-petrol-pump-attendants-recruits-staff-300-forecourts–check-tyres.html

The relevant material must be chose carefully in order to fit the topic and answer questions around the differentiation strategy and provide more theoretical insights.

https://hbr.org/2002/09/three-questions-you-need-to-ask-about-your-brand

Joseph[5] mentions a few relevant methods of differentiating as a marketing strategy: differentiating the product or service, differentiation based on expertise or convenience. Based on the review of the industry and the company, it is evident that Shell could build its differentiation strategy on the latter two, as the main product: fuel is a homogenous commodity. Staff that is trained to provide motorists advice could create value, as well as the convenience of being served instead of having to fill up the car.

Robinson et al.[6] state that every industry is a service industry, with the service adding value to the product. In the case of Shell, this can also be true. The main product of the company is fuel and car care products, however, by employing pump attendants, the company is attempting to add value for customers.

The authors also state that companies’ “servitisation? means that „considers the total offer to the customer as an integrated bundle consisting of both the goods and the services“[7]. This means that service can be a differentiating factor, that can ultimately provide the company with competitive advantages. Some authors[8] found that the greater the interdependency between suppliers and customers is the higher the effectiveness of the operation will be. However, it is important to note that based on Porter’s differentiation strategy, price is not an important influencer of customer decisions: differentiation and added value is. Added value, however, is again a problematic issue. There is a difference between what the company considers as a value, and the perceived value based on customers’ views. The higher the perceived value of the added service is the more customers are likely to pay for the services[9].

Katta and Sethuraman[10] created a comprehensive study regarding the impact of customer service where queues are present on satisfaction with the added value. Based on the study, the authors defined what the optimum waiting time from arrival is, and how individual customers should be segmented in order to maximize the results of adding service to the products. Service differentiation was also found to be an effective way of dealing with customers in a more effective way; those who would like to simply complete a purchase would need to be seen first, while customers needing advice and help would potentially have to see a senior member of staff, or be directed to a salesperson. Determining service classes is an interesting approach, and it is likely that it could be applied in the petrol station business.

Roberts[11] states that service industries should focus on creating relationships between customers and brands, therefore, personnel should be the link between the message of the core product and the consumer. Based on this idea of marketing, emotional links are more important than price and product features, therefore, customer service staff will have a high perceived value.

An interesting study was completed by Romaniuk et al[12]. regarding brand differentiation and perceived differentiation. Differentiation is described by the authors as „meaningful perceived difference that provides buyers with their reason to purchase and be loyal to the brand“[13]. Therefore, differentiation is a way of motivating customers to buy from the brand. At the same time, established brands (in this case, Shell) should make efforts to maintain their points of difference, which could be challenging in a homogeneous  market. Differentiation can be based on product features, or additional services. However, there is one part of the question that is not often examined by authors: the question of customers. The product or service differentiation needs to be perceived as different by customers. This means that the below study will need to focus on customers’ perception of the pump attendant service: how the majority of car owners perceive the values associated with being served by personnel.

At the same time, by simply creating a different feature, but not communicating its benefits with customers through effective marketing methods, emphasizing the „unique selling proposition“, customers are not likely to realize the difference. Companies need to build distinctive qualities and communicate them with customers in order to maintain their competitiveness.

Ok et al.[14] examined  a new theory related to differentiation of products and services in consumer-driven markets: attraction effect. Based on the topic of the current research, it is important to review this idea to examine its applicability in the road fuel industry. Also known as „asymmetric dominance effect“, the attraction effect is supposed to influence customers’ choices, making them irrational in making decisions. This effect is likely to impact consumer choices in a homogeneous industry, like road fuels.

Silva[15] also highlights the importance of market structure when examining competition and differentiation. Referring to Chamberlain’s 1933 work: „The Theory of Monopolistic Competition“, the author reviews the theories presented in the light of recent market developments. Based on the above theory, market conditions are defined by two forces: the number of firms competing for the same customers, and the level of differentiation. Although the above model might seem simplified, it can certainly be applied to today’s mostly homogeneous markets, with plenty of players trying to attract the same customer through differentiating products and services, increasing the perceived value of their brand. There is one interesting thought that needs to be examined is that „if the product is differentiated, with bigger prices in relation to his competitors, the individual producer will not loose all his sales“[16]. Further, advertising helps brands increase product differentiation.

As the current research is focusing on the effectiveness of Shell’s competitive strategy, it is also important to review some theories related to strategy and competitive advantage.

Porter[17] defined five forces of competitive strategy, and his model is still a foundation of many business researchers’ theories. Based on the model, the main forces that shape competition within industries, markets, and sub-markets are: the threat of new entrants, bargaining power of suppliers, the bargaining power of buyers, rivalry among competitors, and the threat of substitute products. In order to understand the correlation between product differentiation and performance, it is also important to check the factors of industry structure. One of the factors highlighted by Porter is industry growth rate. It has been revealed that growth rate is low in Switzerland, and while the number of new car registrations is growing, consumption is more or less unchanged. This means that new entrants are less likely to appear, however, competition and rivalry among firms is increasing. Technology and innovation is another market strategy driver, and in the case of Shell, it has an important role, as the company focuses on providing fuel with better performance than other companies. The next force is the government, defining the industry’s environment. The existence of complimentary products or services should also not be neglected. With the number of hybrid  cars on the market, electricity and alternative fuel are considered to be complimentary products.

Kunc[18]revisited Porter’s generic strategies in 2010, and evalutated its applicability in today’s  competitive business environments. The author found that there are two types of industry leaders based on the management’s strategic approach to competition: cost leaders and differentiation leaders. Cost leaders focus on price advantages, while differentiation leaders are trying to serve customers better than other firms. Reviewing the key issues faced by both leaders, the author  – based on Porter’s strategies – table 6.1[19] shows the list of challenges and questions that today’s companies need to face. These are: the expected market size, customer requirements, necessary resources to satisfy customers, and reaction to competitors’ actions.

As it has previously been revealed in the industry review chapter of the current thesis, Shell Switzerland is not a cost leader, therefore, it is likely to be a differentiation leader. The  answers of differentiation leaders to the above highlighted questions are listed below. The market size is defined by the number of customers needing the product or service. Customers are demanding, and less price sensitive, with strong brand and quality (product feature) preferences. Competitive advantage is based on innovation focusing on serving customers better, instead of reducing prices. Finally, when competition increases, leaders are likely to increase the level of differentiation, instead of reducing consumer prices. Based on the review of the theory created by Kunc, it is evident that there are two main factors – based on Porter’s model – that influence market demand growth: product attractiveness and market structure. Product attractiveness is one particular aspect where differentiation can have a great role. While the market of road fuel has been identified as homogenous, in order to gain a competitive advantage and increase market share, companies should make their product more attractive. As fuels are designed for the same purpose, differentiation can occur in the packaging, features, and service.

Gebauer et al.[20] – focusing on manufacturing companies’ competitive advantages – created a framework for service differentiation. The main focus of the authors’ research was to reveal „the interaction of service differentiation with customer-centricity and inattentiveness through a cross-sectional study of manufacturing companies“[21]. The research found that there are two different company models today: servitized and non-servitized. In servitized companies, the product and service are integrated, and the company considers the individual needs of customers. In the model outlined by the authors, one needs to take into consideration the complexity of customer needs, inattentiveness, and consumer-centricity. In the petrol service industry, it is hard to define what motivates individual consumers to choose one particular filling station over the other one, therefore, in order to reveal the above three conditions, it is likely that surveys and market research need to be utilized.

Service differentiation – in the case of Shell: manned pumping stations – is likely to have a moderator effect on competitive advantages. Without gathering information on competitors’ offering, it is not possible to create a differentiation strategy[22]. Therefore, when approaching the question of market differentiation and competitive advantage, market conditions need to be considered, according to the study.

Azar[23] states that „One of the most common decision problems that consumers face is choosing between differentiated goods or services that differ in their quality and price“[24]. However, based on the model and market analysis completed by the authors, price should not be a suitable method of differentiation, as many customers are happy to pay extra for a higher quality item. The study focuses on the question: „whether consumers consider relative or absolute price differences when choosing between differentiated products“[25]. Decision making bias were discovered by the authors when it came to grocery and car shopping, and many consumers believed that they had to spend extra for higher quality products or services. This finding is relevant to the current study, as consumers’ relative thinking attitude is likely to determine their purchase decisions.

Sartorius et al.[26] examined the different variables that influence the fuel retail industry. Completing the study in a South African environment, the authors found that the main reasons why customers choose one petrol station over another are: the proximity of the fuel station from different routes, the price, the size of the station, and the additional services offered, such as tyre pressure check, hand car wash, and an on site mini market.

In order to fully understand how the industry of petrol retail works in Switzerland, it is important to review some official statistics that focus on both worldwide trends and national phenomena. The OECD report[27] published in 2013 provides a comprehensive overview of the road fuel industry. The report states that the main force of competition – considering that road fuel industry is a homogeneous market –  is price. It is also important to mention that the density of petrol stations in the country makes the competition even fiercer, however, there are some regional differences to consider, as well. One of the most reasons that the authors mention for the decrease in petrol consumption in Switzerland despite the 3 percent increase of new vehicle registrations between 2011 and 2012[28] is the reduction of the fuel tourism levels from Germany and France. The higher exchange rate of Swiss Franc negatively impacted the motivation of foreign drivers to fill up in Switzerland.

The above study also found that the number of service stations in Switzerland is declining, and this might be a part of a larger trend of market consolidation. Operating service stations should be done in a cost-effective manner, and this is why it is important to examine the role of pump attendants, and compare manned  and unmanned petrol stations in detail. Castro et al.[29] studied the self-service economy, and found that “Although full-service gas stations provide additional services — the attendant wipes windshields, checks tire pressure, and checks the oil level—they have largely been replaced by more cost-effective self-service stations“[30]. The authors state that in some states of America, unmanned stations are banned, due to safety issues, and concern over job losses. At the same time, it has also been found that customers who use manned petrol stations are forced to pay a higher cost for fuel. Concerns over the health of pump attendants due to the long term exposure of chemicals is also a factor to consider when comparing the two business models.

From the above review of market forces and competitive strategies, it is evident that a relationship between customer experience and market share through differentiation and personal contact is likely to exist. Therefore, in order to determine the exact impact of pump attendants’ presence on market share and customer loyalty, it is necessary to examine some existing research that focuses on customer preferences and attitudes.

Klaus and Maklan[31] created a study that focused on five different hypotheses in order to identify the correlation between customer experience, loyalty, satisfaction, and word of mouth behavior. Based on the results of the hypothesis testing, the authors found that “customer experience also had a significant impact on loyalty intentions… and “Customers’ perceptions of their experience are generally associated with the question of how service is delivered rather thanexploring what is delivered”[32]. This indicates that pump attendants are likely to have a role in delivering differentiated customer experiences, which – in turn – could result in higher level of loyalty, brand preference, and a strong position of Shell in the market. While the above hypothesis is likely to be proven by the current research, it needs to be tested later based on the results of interviews and market research.

The NACS[33] research group focused on main industry trends in the fuel market, and  customer behavior trends that might impact branded fuel retailers. The authors of the study found that the main reason why many franchise owners sign a deal with a branded retailer is that it instantly provides them with the recognition of a strong product and the merchandise that is already sought after by customers. Based on a study carried out in the United States, the research found that “about one in seven drivers consider fuel brand to be the top factor in their fuel purchasing decision“[34]. At the same time, based on the survey results, 71 percent of customers considered price as an important factor when buying fuel in 2013. The location was named as  a determining factor by 18 percent, while brand was only important for 8 percent of customers. The above findings indicate that price based competition in the western world is likely to be strong, therefore, in order to achieve a higher level of brand loyalty, petrol station operators need to focus more on differentiation. Only 13 percent of customers stated that price had little or no impact on their fuel choices[35].

Based on the above review of literature and the conclusion of the literature review that the petrol retail industry is of homogeneous nature, it is important that companies focus on increasing customers’ brand loyalty. In order to target the right type of customer, however, researchers need to fully understand the issues related to customer loyalty.

Bennett and Bove[36] created a comprehensive review of theories and models that help measuring and increasing customer loyalty. Defining loyalty as „the relationship between an individual’s attitudinal predisposition towards an object and the repeat patronage of that object“[37], the researchers found that there are several potential benefits of increasing brand loyalty among customers. First of all, it costs more for a company to acqire a new customer than to maintain a relationship with existing ones, resulting in multiple recurring sales. Next, customers who are loyal will be less vulnerable to price increases, and less likely to leave to obtain a deal from another retailer. Customers with a strong brand preference and loyalty – as Maklan mentioned – will also be more likely to provide the company with a free word-of-mouth advertisement, which is invaluable, and can potentially reduce marketing budgets. Finally, the average sales value of a loyal customer is higher than a newly acquired one’s. While the list of benefits for companies goes on, and should be later examined in the study, one particular statement has to be mentioned here in relation with the decision of employing pump attendants: “Increased knowledge of loyal customers can be used to improve the effectiveness of marketing activities and negotiations with customers“[38]. While analyzing transactions of individual buyers at a self-service station might reveal trends, its impact on understanding customers would not be comparable witih stations that employ on site staff who can engage in conversation with motorists.

The above literature review has revealed that the fuel retail industry in Switzerland is homogeneous, and highly competitive. There is a low threat of new entrants, but a high level of rivalry among firms, therefore, differentiation strategy is likely to be the most effective method to maintain or increase Shell’s market share. 

Product & Service Differentiation

With a theoretic approach on how to differentiate with a service in general, the author will guide the reader towards an image of the “perfect” differentiation. This will help even more to judge about Shell, later on.

The Role of Shell V-Power (Aus EMSC Thesis)

Shell Switzerland has always delivered impressive and profitable results in the past years. The overall fuel volume increased on a high level by roughly 6% between 2009 and 2012.

The income statement of Shell Switzerland is generated through the margin on fuels while in the convenience retail sector; Shell earns only royalties from the sales of its retail partners. Shell does not deal directly with convenience retail products, but maintains cooperation with suppliers in order to achieve competitive prices for their service stations and ensure competitive prices.

That’s why Shell has a high interest in increasing its fuel volume since this is where it receives most of its profit. The sales partners earn a commission, but the big part of the fuels margin is left for Shell to cover their costs and deliver profit to the group.

Since the overall margin on Shell’s V-Power products is much higher, there is a major interest to push forward the sell-out and lift up the average share of Shell V-Power products in Switzerland.

Shell believes in high quality fuels and positions itself as a premium brand in the market. Shell is thereby a strong innovator, as mentioned earlier. Switzerland is known as one of the most expensive countries in Europe[39], a good match for business.

The cars on the streets of Switzerland are, on average, 8.2 years old, because the Swiss take care of their cars and want to conserve their value as well. Therefore, it is no wonder that in Switzerland, the ratio of V-Power fuels, compared to the volumes of the main grades (e.g. Diesel, unleaded fuel 95) is one of the highest in Europe. The customer is willing to pay the price difference of around 0.19 CHF per liter because he will receive quality and performance in return.

More importantly, Swiss customers seem to be more loyal and quality-oriented. They know that the V-Power fuels will bring added value to their car. The V-Power range includes two products in Switzerland: V-Power Diesel, and V-Power 100.

These products contain special additives that keep engines clean, as described earlier.

On average, in 2013 the sales on V-Power 100 were between 6 and 11% of Shell`s total unleaded fuel 95 volume in Switzerland.

On average, V-Power Diesel sales were between 5 and 12% in 2013, compared to Shell`s total Diesel fuel volume.

In the Swiss market there are many national players (e.g. COOP) as we have seen already, and their fuel does not contain any additional additives. In terms of V-Power, Shell has a unique diesel designed particularly for winter for its customers which is already available in Germany and Austria. Shell is following their premium and quality path, while the competitors just want to maintain a cheaper price, hoping that this will attract more customers. The Shell V-Power fuels are one major differentiation between Shell and its competition.

Since Shell stands for innovation and quality, the company utilizes several elements at their stations to live up to its promise. These elements include the pump attendant and the loyalty program. We want to have loyal customers and provide them the best service in the market, together with innovative products and services.

The Role of the Shell Pump Attendant

The pump attendant is one of the most important customer differentiation elements of Shell. The pump attendant maintains a unique service level that the competition does not have yet. He or she is often the first person to make contact with customers and we at Shell make this a priority. Checking the level of air in the tires and refilling water in their radiators while the customer is pumping their fuel are only some of the services provided by the pump attendant.

All DACH countries have a similar setup and there is a wide range of services, such as refueling or switching the customer to the V-Power range. Another objective of the pump attendant is to look inside the engine to sell quality motor lubricants, such as the Shell HELIX-range[40]. For the pump attendant, there are separate marketing plans set up every year. In terms of cost, every Shell station in Switzerland selling more than 3 million liters of fuel per year is allowed to contract a pump attendant.

The pump attendant is one of Shell’s differentiators. There are rumors in the market that the competition, mainly SOCAR, is planning to include this personal relationship as well. This act is a pure “me-too” strategy[41]^,[42] and it will be interesting to track the success of the competition in this particular case, because low price and high quality service do not get along with one another for very long.

Pump Attendant

A first summary on why the Pump attendant should continue in this way. What are the potential consequences for Shell, is they don`t change something and what are the costs, going down the river.

Pump Attendant with adjustments

One part of the solution might go into the direction that Shell will keep the Pump Attendant as differentiation, but have to improve around it: New payment methods, mobile screens to transport the message of Shell V-Power, e.g.

New ways of differentiation

The final option would be to eliminate the Pump Attendant in Switzerland and invest the whole amount of money into something new: A road Show, a promotion, a activity etc. It must be clear that there would be a benefit for Shell to go such a radical way. Let`s wait and see, the final outcome. I am curious, how about you?

Methodology  

The methodology that will be applied to the overall research topic uses two different approaches:

• In-depth analysis of company data related to the topic, such as financials, historical data, Service Questionnaires (internal PMTDR-results). On top, there will be a review of the relevant theory around differentiation in marketing to build up the reader`s understanding for the later judgment of the proposed findings.
• Personal Interviews with Retailers and Shell internal people such as Focal Point for the Shell Pump Attendant. A survey could be installed and analysed (Survey Monkey)
• Coming to the solution part and potential proposals, new marketing ideas should be tested, based on the cost saving for the pump attendant. On the other hand, it could be that we should remain with the pump attendant model, but improve around with several other elements. These ideas must we worked out.

[1] http://en.wikipedia.org/wiki/Product_differentiation

[2] Michael Sommer, EMSC Thesis, Customer Segmentation in Fuels Marketing (2014)

[3] http://www.marksage.net/2013/12/will-shell-re-introduction-of-service.html

[4] http://en.wikipedia.org/wiki/Porter’s_generic_strategies

[5] Joseph, C. „What are examples of differentiation marketing strategy?“Chron Small Business. 2012.

[6] Robinson, Terry, Colin M. Clarke-Hill, and Richard Clarkson. “Differentiation through service: A perspective from the commodity chemicals sector.”Service Industries Journal 22.3 (2002): 149-166.

[7] Ibid, p. 151.

[8] Mitsch, R.A., 1996, The Emerging Customer-supplier Continuum. Chemistry & Industry, December 2nd

[9] Robinson, Terry, Colin M. Clarke-Hill, and Richard Clarkson. “Differentiation through service: A perspective from the commodity chemicals sector.”Service Industries Journal 22.3 (2002): p. 153

[10] Katta, A. and Sethuraman, J. „Pricing strategies and service di
erentiation in queues | A protmaximization perspective“ 2005.

[11] Roberts, K. „Lovemarks:Future Beyond Brands

[12] Romaniuk, Jenni, Byron Sharp, and Andrew Ehrenberg. “Evidence concerning the importance of perceived brand differentiation.” Australasian Marketing Journal (AMJ) 15, no. 2 (2007): 42-54.

[13] Ibid, 43.

[14] Ok, Efe A., Pietro Ortoleva, and Gil Riella. Theory of product differentiation in the presence of the attraction effect. Mimeo, 2011.

[15] Silva, Abraão Luís. “Chamberlain on product differentiation, market structure and Competition: An essay.” Porto: Faculdade de Economia do Porto, Universidade do Porto (2001).

[16] Ibid, 6

[17] Porter, Michael E. “The five competitive forces that shape strategy.” Harvard business review 86, no. 1 (2008): 25-40.

[18] Kunc, Martin. “Revisiting Porter’s generic strategies for competitive environments using system dynamics.” (2010): 152-170.

[19] Ibid, 155

[20] Heiko Gebauer, Anders Gustafsson and Lars Witell, Competitive advantage through service differentiation by manufacturing companies, 2011, Journal of Business Research, (64), 12, 1270-1280. http://dx.doi.org/10.1016/j.jbusres.2011.01.015

[21] Ibid, p. 7

[22] Ibid, p. 12.

[23] Azar, Ofer H. “Relative thinking in consumer choice between differentiated goods and services and its implications for business strategy.” Judgment and Decision Making 6, no. 2 (2011): 176-185.

[24] Ibid, p. 176.

[25] Ibid, 178.

[26] Sartorius, K., C. Eitzen, and J. Hart. “An examination of the variables influencing the fuel retail industry.” Acta Commercii 7 (2007): 218-235.

[27] OECD. Competition in Road Fuel 2013 Policy Roundtables. DAF/COMP(2013)18

[28] Ibid, 299

[29] Castro, Daniel, Robert D. Atkinson, and Stephen J. Ezell. “Embracing the self-service economy.”Available at SSRN 1590982 (2010).

[30] Ibid,

[31] Klaus, Philipp, and Stan Maklan. “Towards a better measure of customer experience.” (2013).

[32] Ibid, 6

[33] NACS „2013 Retail Fuels Report“ (2013)

[34] NACS „2013 Retail Fuels Report“ (2013), 59

[35] Ibid, 16

[36] Bennett, Rebekah, and Liliana Bove. “Identifying the key issues for measuring loyalty.” Australasian Journal of Market Research 9, no. 2 (2002): 27-44.

[37] Ibid, 3

[38] Ibid, 6

[39] http://www.swissworld.org/en/economy/wages_and_prosperity/cost_of_living/ (visited date: 28.05.2014)

[40] http://www.shell.com/global/products-services/on-the-road/oils-lubricants/cars/find-right-car-oils.html
(visited date: 28.05.2014)

[41] http://www.marketinglexikon.ch/terms/528 (visited date: 28.05.2014)

[42] Book: Kühn Richard & Patric Vifian: Marketing Analyse und Strategie