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 Consumer Research: How Do Consumers React to Gas Prices?

There is probably no commodity in the country talked about more than gasoline — and for good reason. For one, gas is a commodity that is a big part of daily life — and a big part of expenses. Overall, gas sales are more than 3% of the country's overall gross domestic product. Gas prices are also very transparent. It's not uncommon to pass a dozen or more fuel retailers as part of a daily commute. During this time, drivers can comparison shop for prices at 45 mph or even search for prices on websites or apps. Add to the mix the regular drumbeat when prices rise €" or don't fall fast enough in consumers' minds — and you can see why gas prices are such a regular part of our daily conversations.

So how do gas prices affect purchasing behavior — not just for gas but for other products in the convenience store? And how do they color overall consumer sentiment related to the economy? Those are the fundamental questions that the National Association of Convenience Stores (NACS) sought to answer in our latest consumer survey.

This is the fifth time in the past seven years that NACS has surveyed consumers and released results with the NACS Consumer Fuels Report, providing insights on how consumers shop for gas, what changes their purchasing behavior, how they perceive the convenience store industry and what they are considering for the future. (Unless otherwise noted, all statistics are from the 2013 NACS Consumer Fuels Report. In some cases, findings from previous surveys are included.)

Gas prices color how consumers see the economy.
Consumer sentiment is clearly are affected by gas prices. Nearly 9 in 10 consumers say that gas prices impact their feelings on the economy.

How much do gas prices today impact your feelings on the economy? 2013
($3.30)
Great impact 38%
Some impact 50%
Little impact 10%
No impact 3%

Consumers care more about price than any other factor.
Price remains the dominant reason why consumers buy gas at a particular location. Nearly three in four consumers (71%) say that they consider price to be the most important factor in determining where they buy gas. Over the past seven years, "price" has consistently reigned as the single most important factor. (The gas price in parentheses reflects the prices at the start of the year as reported by the U.S. Energy Information Administration.)

When buying gas, which of the following factors is most important to you? 2013
($3.30)
2012
($3.30)
2009
($1.68)
2008
($3.11)
2007
($2.33)
Price 71% 63% 73% 73% 66%
Location 18% 20% 16% 16% 22%
Brand 8% 8% 10% 10% 9%
Ease of entrance/exit 2% 6% Not asked Not asked Not asked

The gas price sign remains the most important lure to consumers.
Among the consumers citing gas prices as their primary reason for shopping at a specific store, they overwhelmingly say that the reason they select a location is because of the posted price. Nearly two thirds of consumers (65%) say that a store's posted price is the main reason why they select that store for gas. These findings show what most retailers already know: Loyalty at the pump only lasts until the next fill-up, and retailers must compete furiously for an uncommitted customer. Also, consumer awareness of gas prices as part of their daily travels may fuel the frustration that they express when prices increase because they are constantly surveying the landscape and monitoring prices.

How do you shop for price?
(Asked of those who cited "price" as most important)
2013 2012
Price sign at store 65% 66%
Store tied to loyalty card/discount 16% 5%
Company/store reputation for low prices 10% 3%
Online gas price aggregator/website 7% 5%
Other 1% 15%

(The 2012 survey asked open-ended questions and similar responses were grouped together. For example, "I observe prices while driving" [41%] and "Price sign at store" [25%] were combined.)

Consumer preferences for price held across all demographics and regions. The only significant variations were related to the time of day. Customers purchasing gas in the morning (6:00 am to 10:00 am) were more inclined to select a fueling location because of a tie-in to a loyalty card: 21% of morning customers picked a store because of a loyalty card, as opposed to the overall average of 16%.

Meanwhile, the opposite is true at night (7:00 pm to 6:00 am), when only 9% of gas customers consider loyalty cards to be the most important factor in their purchase. This means that morning customers may consider time and routine more important, while night customers will take a little more time to seek the right price.

If you can get the gas customer, you can increase other sales.
Why do retailers fight for price-sensitive gas customers? Because they know that if they can get a consumer to the fueling island, they have a much better chance to get that consumer inside the store for additional purchases beyond the low-margin gas purchase. While motor fuels drive sales dollars for convenience stores, in-store sales drive profit dollars. On average, 71% of a store's total sales are motor fuels, but motor fuels only account for 36% of profit dollars. (Source: NACS State of the Industry data)

When buying gas, which of the following do you most often do inside the store?
(multiple responses permitted)
2013 2012
Buy a drink 36% 25%
Buy a snack 22% 7%
Buy lottery tickets 20% *
Buy cigarettes 16% *
Use the bathroom 13% 15%
Buy grocery items (bread, milk) 7% 16%
Buy a sandwich or meal 4% 2%
Use the ATM 4% 7%
Other 2% 7%
I never buy anything inside the store 37% 48%

*Not asked in 2012

There are also some demographic variations behind who buys what. For instance, night customers (those buying gas between 7:00 p.m. and 6:00 am) are far likelier to buy a drink (50% say they do) or buy a snack (30% say they do).

Age also plays a role in how people shop. Younger people who have always thought of fuels retailers as a place to get food are much more likely to buy food. For the 18-34 customer, drinks were big traffic drivers (47% say they purchase them), as were snacks (35% say they buy them). Meanwhile, 48% of those ages 50 and beyond say that they never go inside the store.

Interestingly, there were no significant variations by gender; men and women were generally equally likely to take the same actions.

Consumers will considerably change their behavior to save 5 cents per gallon.
Consumers will "inconvenience" themselves if they think they can save 5 cents per gallon. Given that the average fill-up is 9 gallons, this means that total savings for these actions are around 45 cents for the fill-up. (Fuel tanks typically hold around 16 gallons but some like the Honda Odyssey are as much as 21 gallons. Even so, savings for a nearly empty Odyssey would be about $1 for a fill-up.)

Cash discounts
Cash discounts proved the most popular option for consumers to save money at the pump. Nearly half of all consumers (46%) "strongly agree that they would seek out cash discounts, and fully 78% are open to the idea. A staggering 60% of consumers who buy fuel at night (7:00 pm to 6:00 am) strongly agree that they would seek out cash discounts. Meanwhile consumers in the West are least likely to seek out cash discounts, with only 37% who "strongly agree."

I would pay with cash to save 5 cents per gallon. 2013
Strongly agree 46%
Somewhat agree 32%
Somewhat disagree 13%
Strongly disagree 9%

Debit discounts
While cash discounts have been around for years, debit discounts are much more recent. While consumers are slightly less likely to seek out debit discounts compared to cash discounts, three out of four consumers (74%) say that they would change how they pay in order to save.

I would pay with a debit card to save 5 cents per gallon. 2013
Strongly agree 43%
Somewhat agree 31%
Somewhat disagree 12%
Strongly disagree 14%

Left-hand turn
In terms of changing their driving behavior, more than two-thirds of consumers (68%) would make a left-hand turn across a busy road to save 5 cents per gallon.

I would take a left-hand turn across a busy street to save 5 cents per gallon. 2013
Strongly agree 34%
Somewhat agree 34%
Somewhat disagree 18%
Strongly disagree 13%

Drive 5 minutes out of my way
Two-thirds of customers (68%) also would drive 5 minutes out of their way to save 5 cents, the same percentage that would take a left-hand turn. However, a slightly smaller percentage of consumers feel strongly about this option.

I would drive 5 minutes out of my way to save 5 cents per gallon. 2013
Strongly agree 28%
Somewhat agree 40%
Somewhat disagree 19%
Strongly disagree 12%

Drive 10 minutes out of my way
To save 5 cents per gallon, one out of eight consumers (12%) strongly agree that they would drive 10 minutes out of their way. Overall, 36% of consumers would take this approach. Would this inconvenience actually save them money? Assuming that the car gets 30 miles per gallon at 45 miles per hour, this 20-minute roundtrip to save approximately 45 cents (a typical fill-up is about 9 gallons) would consume a half-gallon of gasoline, or $1.65 when a gallon cost $3.30 (the average national price of gas when this survey was fielded).

I would drive 10 minutes out of my way to save 5 cents per gallon. 2013
Strongly agree 12%
Somewhat agree 24%
Somewhat disagree 37%
Strongly disagree 27%

Methodology for the 2013 NACS Consumer Fuels Report
The results from the 2013 NACS Consumer Fuels Report were released February 1, 2013. To understand consumer opinions on a variety of gas-related issues, NACS commissioned Penn, Schoen and Berland Associates LLC to conduct n=802 online interviews with adult Americans who purchase gasoline from January 5-7, 2013. (Telephone surveys were conducted in previous years.) The margin of error for the entire sample is +/- 3.46 at the 95% confidence interval and higher for subgroups.

For more detail or insights from the report, contact NACS Vice President of Industry Advocacy Jeff Lenard at (703) 518-4272 or jlenard@nacsonline.com.