Friday, April 03, 2009

Differentiation and Segmentation: A Case of Petro Cards

In order to reduce the usage of credit cards, I decided that I will start paying for my petrol bills from cash-in-hand or cash-in-bank. But on the other hand, gaining those reward points was also something that I did not want to give away. Thus, I decided to join one of the loyalty programs run by the petroleum companies.

I did little research, in the limited time I had. I considered the loyalty programs of Indian Oil and Bharat Petroleum. Incidentally, I had used BP’s PetroBonus™ in the past. This time, I thought I will check XTRAREWARDS™, too.

What interested me was how each of the two companies has differentiated their offerings in the areas of Entry Barrier and Usage.

To start enjoying PetroBonus™, one has to invest Rs. 250 of which Rs. 150 is for processing the account and the rest Rs. 100 can be used for purchases once membership is processed. Thereafter, one has to charge the card with certain value (usually multiples of 100s) which can be used against purchases made at a BP petrol bunk. There is a definite lock-in. there is no need to use your credit card or debit card. This card can also be used at the In&Out stores located in many bunks.

On the other hand, the entry barrier to XTRAREWARDS™ is almost nothing. The card is given to you for Rs. 10. For usage, one can make purchases at the Indian Oil bunk using either credit card or cash. There is no lock-in for users.

There are positives and negatives in both the models but I do not think one is better than others are. It is just a differentiated to suit the requirements of customers. It also allows the segmentation of a very homogenous market.

It is nice to see how these two companies have differentiated themselves while offering the same service.

HP also has a loyalty program but I could not analyze how their offering is differentiated.

Well, I went for XTRAREWARDS™ because I didn’t prefer lock-in and I do not seem myself shopping at In&Out stores.

Anyway, the credit card dues remain a problem for now but I do hope to do away with their usage by the end of this 2009.

CAVEAT EMPTOR: There do seem to be some problems with these cards. I had problem with PetroBonus as I thought the guys at the bunk cheat you by swiping more. Then I stumbled upon this blog on XTRAREWARD -

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