Where Do Fr*ee Gas and Grocery Incentives Come from?

Where Do Fr*ee Gas and Grocery Incentives Come from?

Believe it or not, free gas and grocery certificates are one of the most successful incentives in the marketing world. Such incentives can increase sales up to 30%, making it one of the highest rates of return on investment. For some, however, this may seem completely illogical. If a customer buys $500 worth of my merchandise, and in exchange I give them a certificate for $500 worth of free gas, how could I possibly make a profit?

The simple answer is that a $500 free gas certificate does not cost you, the retailer, $500. Instead, you buy the certificates in bulk at a greatly discounted rate, just pennies to the dollar (and the more you buy at once, the lower the cost per certificate). Therefore, the comparatively small cost of the certificate justifies itself by encouraging a customer to make a large purchase they might not otherwise have made.

Okay, that makes sense, you might say. But doesn't that mean that someone, somewhere, is losing money. The answer to that question is yes… and no. It's complicated. The goal of this article is to explain that complicated system to you, so that you understand how everyone involved benefits from free gas and grocery incentives.

Free gas and grocery incentives are underwritten by fuel and food companies as part of a strategy to generate guaranteed repeat sales, regular customers, and brand loyalty. They see the free gas or groceries not as a giveaway, but as an investment in creating a loyal customer from whom they will make much more that $500 over the course of their lifetime.

You see, in order to use the certificate for free gas or groceries, the customer has to select one grocery store or gas station where they can redeem their free goods. And they don't get, for example, $500 worth of free gas all at once—they get it gradually over several months. Rather, they purchase gas and groceries as usual, and at the end of each month they mail their receipts for the gas or groceries along with a redemption coupon to the redemption company. If they spent at least $100 dollars on gas or groceries that month at the store they previously selected, then the redemption company send them a gift certificate for $25 at the store they selected. This continued every month until the customer has redeemed the full value of their free gas or grocery certificate value.

So, although a gas company may be giving away, for example, $500 worth of free gas, they are guaranteed at least $2000 worth of sales from that customer, for a net return of $1500. Furthermore, they have this customer's loyalty for a period of months or even years. For example, for a customer to redeem the full value of a $500 free gas card, they'd have to fill up at the same gas station for 20 months ($500 divided by $25 per month = 20 months). Besides, once the free gas certificate runs out, the customer will probably still shop at the same gas station or grocery store anyway—stuff like that becomes habit forming after several months.

So the grocery and gas companies get guaranteed sales, the redemption companies that sell the certificates get paid for their services, retailers like you make more sales, and the customer gets free stuff. It's a win-win situation all around. Or, more specifically, a win-win-win-win situation.

Michael Goulet
Free Fuel Nationwide Team Leader
http://incentivesgroceryandgas.com
w-612-235-6372
Fax-480-304-9095
michaelg@freegrocerycenters.com