Troy D. George

The rebates in the industry I am most familiar with; Oil & Chemicals Refining and Marketing, are supposedly given on the corporate level and are something that I have never seen personally. As such, I wanted to meet in the middle and discuss Gasoline Rebate Cards, or Customer loyalty cards from your favorite gas station. Since recent estimates have up to two-thirds of all gas customers paying for a tank of petrol with plastic, the loyalty program or rebate offer seems like a natural fit (Johnston, 2012). And why wouldn’t the gas station want to offer these reward programs or rebates? The margin on gasoline is tightly regulated and small in most cases, but getting the customer in the door leads to further purchasing (“Seven Reasons”, 2013). Are these practices sound business decisions? Are they ethical? The scenario outlined above about the gas rebates represents a sound business decision for the gas station owner. It is a small price to pay to draw a somewhat captive audience into your store where the retail mark-ups extract their toll. The markup on fountain soda, health and beauty items, ice, alcohol, candy, general merchandise, and other items can be between 50% – 100%; if not more (“2012 Convenience”, 2013). The rewards or rebates generally build up until they are cashed in by the customer (Nikolakopulos, 2013). In other words, why wouldn’t the gas station want to offer two cents off every 100th gallon of gas when they are getting you to also purchase a pack of gum or cup of coffee every time you stop in that has been marked up over 100%? While some view this as questionable, the business owner is only offering a good at a price he thinks people will pay. If people don’t pay $15 for a ‘Git-R-Done’ car air freshener, then the owner wouldn’t sell it for that. I cannot fault the owner for trying to profit as much as he can. The flip side is that the markup prices some potential customers out of the store. This seems to be acceptable to most convenience store operators associated with gas stations. Shrewd marketing or taking advantage of an uneducated buyer? I vote for the former and thus; cannot call this unethical. What percentage of the rebates offered are actually paid? Some experts report that there is a mere 40% of rebates returned or paid out (“Seven Reasons”, 2013). Companies will thus count on a less than 50% return on a 4% rebate that has increased sales 150% on items that are already marked up 40% - 60%. Simple math will tell you that this is worth it. In the case of gas stations, rebates or rewards are often given as store credit which the consumer uses the rebate on items that are marked up at the percentages already mentioned (“Seven Reasons”, 2013). At less than a 40% return for pay, the gas station has nothing to lose in this case. Would you recommend that this business use cash rebates? In a word, absolutely. Building brand loyalty is a secondary benefit. Building a customer base of high-profit items in exchange for offering a miniscule percentage rebate that has an over 50% chance of not being used makes sense for the business. For the consumer, the recommendation is to be diligent about researching the fine print and participating in rebates, or to not participate in them at all. In the case of the gas station, a consumer could benefit from a frequently used gas station if they pay attention to the program details and ignore the $5 latte. Otherwise, the benefits are all the business’s. References: 2012 Convenience Store Markup Percentages. (2013). National Association of ConvenienceStores. Retrieved from http://www.nps.gov/commercialservices/docs/concessioner%20tools/2012_Convenience_Store_Markup_Percentages.pdf Nikolakopulos, Alia (2013). How do cash rebates work? Retrieved from http://budgeting.thenest.com/cash-rebates-work-24261.html Johnston, S. (2012). Trim Fuel Costs With Gas Rewards Cards. Retrieved from http://www.foxbusiness.com/personal-finance/2012/04/03/trim-fuel-costs-with-gas-rewards-cards/ Seven Reasons Why Companies Offer Rebates. (2013). Stupid Cents. Retrieved from http://stupidcents.com/seven-reasons-why-companies-offer-rebates/