A Fortune 500 fuel supplier is rapidly gaining popularity across the United States with 1,500 convenience stores in 180 markets and an expanding list of propane retailers, innovative lubricants, and alternative fuels. A bold digital transformation project began with a simple question: “How do we better predict our competitors’ actions so that we can price with greater precision?”
Given that fuel prices change hourly, the fuel supplier also needed pricing agility and market insights to maximize revenue and margin attainment. Highly manual processes using myriad spreadsheet data and guesswork were hinderances to the company realizing its true pricing potential.
Partnering with PROS, the company underwent a pricing transformation that is driving big digital efficiencies and fast revenue improvements.
Navigating a High-Stakes Environment
Every morning, the fuel supplier’s pricing team must analyze 20,000 data points to set prices for its gas and diesel products. “Our team has about four to five hours to digest all that information and set strategic prices that are effective at six o’clock that evening,” says the company’s director of pricing and economics.
That’s just for the company’s branded fuels. On the unbranded side of the business, the price might change two or three times a day. “They have a window of a few hours to make their decisions and post prices, so it's very high speed,” the pricing director adds.
Given that the company moves 3 billion gallons of fuel a year in a highly competitive and volatile commodities market, the stakes are high. Adjusting prices even a couple cents per gallon can have a big impact on business performance.
“We would bring in massive piles of data into spreadsheets, which pulled in data supplied electronically by vendors, run all our analytics on our prices, and send out price notifications,” the pricing director says. “We were doing the best we could with the technology at the time.” However, spreadsheets are not built for mission-critical pricing.
“We literally found the data limits to [Microsoft] Excel,” the pricing director says. “We ended up having multiple Excel sheets because it couldn't physically hold any more rows and columns of information. And that process itself was taking about a third of each my analysts’ day.”
The fuel supplier wanted to modernize its forecasting capabilities to be able to price with finer precision. “We wanted to put speed and efficiency into how we price and also harness the power of machine learning so that our team could be a lot more predictive,” the pricing director says.
The goal was to replace its purpose-built Excel spreadsheets with a cutting-edge solution that could digitize and further automate the pricing process while providing the statistical modeling the pricing team needed to gain greater analytical insights to understand volume/margin impact, performance, and market leadership.
Dynamically Optimizing Prices with the Help of Machine learning
The fuel supplier chose the PROS Platform for several reasons. First, the pricing and forecasting capabilities: “With PROS proven, world-class software, we felt confident they could help us manage the sheer volume and breadth of our business without sacrificing margin,” the pricing director says.
Another reason was PROS integration expertise with SAP. The fuel supplier was in the process of migrating its enterprise resource planning software to SAP, so it was important that PROS could integrate smoothly in tandem. PROS calculated that the fuel supplier would forgo approximately $5 million in revenue every quarter that the project was delayed. “We wanted to start leveraging the benefits of the PROS pricing solution as soon as possible,” the pricing director says.
Relying on the dynamic pricing capabilities of the PROS Platform, the fuel supplier can:
- Predict elasticity-aware price points based on volume and competitor data using PROS rack science algorithms for fuels
- Complete pricing cycles within hours rather than days
- Gain deeper insight into supply and demand in the various markets it serves
- Develop metrics to gauge the effectiveness of its pricing strategies according to rack products
- Standardize and automate pricing processes to realize time savings while reducing errors
“It’s Totally Transforming Everything.”
Once the PROS Platform for Pricing with AI capabilities was in place, the fuel supplier began realizing benefits immediately.
Speed and efficiency. “My team would spend nine to 10 hours a day going through and making price adjustments to make sure that we are hitting our targets,” says the fuel supplier’s pricing manager. “With the automation in PROS, with the way the science works and how the system flows from start to end, we can do that whole process now in 10 minutes.” This efficiency has enabled the pricing team to shift from execution to value-add activities, focusing on opportunities to improve margin. “Now that we've moved into the cloud, everything is updated in the morning before my analysts come in,” the pricing director adds. “These functions are now fully automated, so our pricing is continually being adjusted to keep us at the targeted range of our competitors.”
Pricing accuracy and refined strategies. “The PROS technology enables us to program a digital strategy around what we want to achieve using AI and machine learning to hit that strategy,” the pricing director says. “And it’s working. We were operating at an accuracy within two cents per gallon. With PROS, we have shaved that down to one-cent-per-gallon accuracy.”
Margin improvements. Margin improvements were even better than expected, exceeding what PROS projected for the year within the first quarter. “We began using automated pricing in December 2019 and, between then and early March 2020, the improved accuracy in pricing alone has increased margin significantly,” the pricing director says.
Revenue improvements. Automating many pricing tasks with PROS enabled the fuel supplier’s pricing team to focus on more tactical functions that drive revenue improvement. “The team is thriving with software to help them find new opportunities and new ways of looking at things,” the pricing director says. Within the first month of deploying PROS, the fuel supplier realized revenue uplift exceeding $300,000. PROS technology and science provided immediate ROI, and the pricing solution is expected to pay for itself many times over in the first year after delivering more than $1.8 million of incremental revenue within the first six months.
Resilience and mobility. The automation that the PROS solution provides not only delivered true revenue and margin improvement but also enabled the fuel supplier to carry out business as usual despite challenges related to the COVID-19 pandemic. “Our PROS pricing solution made it possible for us to continue doing business during the mandated stay-at-home orders to keep our team safe and maintain price activities without interruption,” the pricing director says.
Maximizing Revenues While Delighting Customers
The fuel supplier is revolutionizing its pricing practices with the PROS Platform for Pricing with AI, dynamically responding to volatility and winning in the fuels market.
With its best-in-class pricing capabilities, PROS is helping the fuel supplier identify new market opportunities and establish the future-forward pricing technology needed to propel the company for years to come.
“It’s wonderful that now we’re spending all this time on margin strategy, our customer complaints have gone down dramatically, our revenues have gone up, and it’s easier to communicate pricing with the account management team, sales, and marketing around what’s really going on with pricing,” the pricing director says. “That’s a big breakthrough for us.”