Abstract

The commercial fleet market has been experiencing rapid change since the mid-1990s, presenting new opportunities for fleet product and service providers. In 1995, Havill Consultants published the well-respected study entitled The DOE-EPA Regulated Commercial Fleet Market Fuels, Equipment, and Services Forecast, 1994 - 2000. Study findings indicated EPA UST regulations would impel many fleet operators to close their private refueling facilities and transfer as much as five billion gallons of fuel to retail stations. It is important for retail marketers and fleet card providers to position themselves to reap the benefits of the increased retail opportunity.

EPA UST regulations have not been the only factor in the fleet administrators’ growing commitment to off-site refueling. The increased availability and convenience offered by today’s fleet refueling programs provide the fleet administrator the level of security and control previously attained through on-site refueling. Fleet operators are able to shop for fleet card programs with features and benefits that fit their specific needs. Features, such as product lockouts, on-line billing, and exception reports, often improve the control that fleet operators have over vehicle refueling. The most successful marketers will match their product and service offering to the needs of the fleet administrator.

Unfortunately, marketing to commercial businesses is complicated because there are so many discrete sub-segments, such as government, utility, construction, service, and short/long haul carrier fleets. Not only do fleet marketers need to understand how product and service requirements vary across segments, but they must also understand how fleet administrators approach their decision-making process. Since each sub-segment has different fleet management criteria for choosing a refueling solution, broad strategies are not as effective as programs targeted for the discrete sub-segments.

Recognizing this fact, our clients again asked us to investigate the commercial fleet market. Havill & Company research is based on comprehensive end-user surveys. Unlike generalists who manufacture reports by soliciting the opinions of industry experts, our interviews are conducted with decision-makers for fleet product purchasing at the administrative level. In order to understand the information needs of today’s fleet product providers, issue ballots and questionnaires were distributed. Over eighty industry executives, including petroleum marketers, returned ballots illustrating the information that is most important to them. This overview, containing the research design and methodology, is the result of that effort.

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Introduction and Research Overview

Regulations have forced many fleet operators to refuel off-site at retail petroleum stations.

• Has off-site refueling created a trend of outsourcing other fleet services?
• How will outsourcing affect off-site fleet fuel consumption and fleet card use?
• What new fleet card features and reporting technologies will fleet managers demand?
• How will retail outlets evolve to attract commercial fleets?

   The Arab oil embargoes of the 1970s brought about major concerns for commercial fleet owners regarding the supply of fuel. These concerns prompted many fleets to install private tanks on their property to ensure continuous vehicle refueling and convenience. However, in late 1988, these same fleets were faced with major business decisions. Federal UST regulations were promulgated which required UST systems to be corrosion protected. During the ten-year period they were given to upgrade their facilities, fleets began to evaluate the pros and cons of on-site refueling. After evaluating the financial burden of upgrading on-site facilities and the increased convenience and control of retail refueling, commercial fleets began to close their on-site refueling facilities and search for alternative fueling sources.

   As this shift was occurring, fleet card and service providers were in need of market research concerning the newly created opportunities. Havill & Company conducted proprietary and syndicated studies researching the needs of the commercial fleet market. Each research project pointed toward the same conclusion. The 1989 EPA underground storage tank regulations have brought a structural change to the commercial fleet refueling market. In 1995, Havill Consultants published The DOE-EPA Regulated Commercial Fleet Market, Fuels, Equipment, and Services Forecast, 1994-2000. This study forecasted that the commercial UST population in 1998 would only be 44 percent of the population that existed in 1989. This shift to off-site refueling transferred as much as five billion additional gallons of fuel to retail marketers.

   The increase in the number of fleets refueling at retail stations coincided with the expansion of fleet management service providers, including fleet card providers. The number of marketers offering fleet cards has increased the amount of competition in the fleet card market. This competition has caused marketers to look for new ways to improve their programs. Therefore, petroleum marketers and fleet card providers offering fleet services have requested specific information on the commercial market.

   Havill & Company’s research will help subscribing companies identify and take advantage of the latest opportunities in the commercial market. This study quantifies the U.S. fleet population and its fuel consumption according to ten business segments: agriculture, construction, government, long haul carriers, manufacturing, retail, service, short haul carriers, utility, and wholesale. Fuel consumption is benchmarked by on-site methods (UST, AST, mobile/wet-hose), off-site methods (retail, truck stop, cardlock), and payment methods (cash, bank card, major oil card, universal card, paper account) enabling marketers to understand where and how commercial fleets refuel.

   In order to optimize the business from commercial market opportunities, fleet card providers need to understand the purchasing behaviors of fleet managers. As fleets vary according to size, segment, and travel characteristics, they also vary in the way they make decisions. What factors enter their decision-making criteria? Which marketing and sales channels are fleets most receptive to? Who makes the final decisions on which program to implement? In addition, fleet card providers need to understand the role of brand loyalty among commercial fleets, such as why fleet card customers carry multiple cards and what features or benefits one card has over another. Identifying the steps to building brand loyalty among commercial fleets will inevitably strengthen your fleet card program.

   Previous Havill research has shown that fleet managers are concerned about security and control issues involved with off-site refueling, specifically card abuses including unauthorized vehicle refueling and non-fuel purchases. Fleet card providers have since focused their efforts on providing the most extensive fueling programs for fleet administrators. However, no two fleet card programs are the same. The number of controls and exceptions offered by fleet card programs varies tremendously. Several fleet card features are available, such as product restrictions, identification numbers, and exception reports. Fleet card providers have asked us to verify the list of options that fleet administrators are requiring to manage the refueling of their fleet vehicles. Not only does this research illustrate the control and convenience features that are most important to fleet managers, it also provides subscribers with a complete summary of each available commercial fleet card program for comparison purposes.

   Besides the card program itself, marketers must keep abreast of the facility services and amenities fleets are shopping for and their competitors are offering. A fleet will not choose a card program if the card-honored facilities do not offer fleet refueling conveniences. Marketers are now offering cardlock islands, dedicated fleet islands, oversized vehicle accessibility, 24-hour access, and truck washes. This research will identify which of these services and amenities are a necessity to fleet operators.

   The movement of commercial fleets to off-site refueling has affected the outsourcing of other traditional fleet services, such as vehicle maintenance and procurement. This outsourcing has created a new form of competition for traditional fleet fuel program providers, including major oil, independent oil, and third-party fleet card companies. Maintenance and leasing providers have included fleet fueling programs with their commercial vehicle care or procurement programs. In some cases, the features included in these programs provide refueling options and controls that overlap the features offered by traditional fleet fueling program providers.
Havill’s upcoming commercial fleet marketing study will benchmark the popularity of full-service lease programs and maintenance management outsourcing.

   However, market research conducted on the commercial fleet market is only one small piece of the opportunity puzzle. Havill & Company maintains a SQL database of eight million businesses that have one or more commercial fleet vehicles. This database is enhanced with data gathered from this research, as well as your own business intelligence or proprietary research. For example, data such as vehicle consumption and maintenance expenditures can be attached to each record, allowing you to evaluate your market opportunity in a particular city, state, or region, and prioritize prospects. These databases can be integrated into relationship management software so that your direct mail or telemarketing campaigns are better targeted and more effective. These enhanced marketing programs, available through Havill & Company, will enable you to profile and acquire the best commercial customers for your fleet card program.

   Our reputation for developing accurate industry forecasts is a direct function of our proven methodology. Reliable planning information of this nature is only available through survey research with decision-makers responsible for deciding the fate of individual fleet programs. National Petroleum News (NPN) began publishing Havill’s forecast of 1998 compliance statistics in their November 1993 feature article. NPN called the research "the most detailed analysis and outlook to date on the impact of the EPA's UST regs on the petroleum marketplace." NPN continues to include Havill research data in its annual UST compliance articles.

   We are confident that this research study will become the primary source of planning data for our subscribers to develop their fleet marketing strategies through the year 2001. In addition to price discounts, charter subscribers will participate in the study design and receive feedback from the project team during the course of the research. This ensures that information important to your company is covered in the research. The study, published January 2000, provides clients with the tools they need to adapt their businesses to the post-regulatory, commercial fleet market.

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Research Objectives of the 1999 Fleet Study

   The primary purpose of this research is to provide an accurate analysis of the current commercial fleet market. Companies providing products and services to the commercial fleet market will now have an accurate benchmark of the industry for strategic planning purposes. In addition, the research will provide a forecast of changes in fleet market refueling methods and services through 2001. Overall, the primary objectives of the 1999 Commercial Fleet Market study are to:

• Understand the distinguishing characteristics of each fleet business segment including agriculture, construction, government, long haul carriers, manufacturing, retail, service, short haul carriers, utility, and wholesale.
• Define unique segments of the U.S. commercial fleet population in terms of current vehicle demographics, including number and type of vehicles, ownership, travel characteristics, location, and fuel consumption, to determine the product and service needs of fleet segments and potential new customers.
• Identify the fleet card program features and reporting/billing options of greatest importance to fleet managers including security features, customer service, merchandise lockouts, and tracking features.
• Define the future fleet card opportunity due to changing market structures such as various station formats and payment methods.
• Determine the most effective sales channels to solicit fleets. Provide information to fleet program suppliers to help differentiate themselves and build loyalty among customers.
• Identify the importance of retail refueling facility attributes to fleet managers, including physical features, method of payment, equipment, merchandise offerings, and vehicle service.
• Identify which non-traditional services (maintenance, car rental, meal, etc.) card providers can add to their programs to encourage additional customers to use their card.
• Determine if alternative payment methods, such as RFID, enhanced bank cards, and full-service leasing fleet cards, have impacted the fleet card market.
• Gauge the impact, growth and throughput of traditional refueling facilities (retail, on-site) and non-traditional facilities (mobile/wet hose, cardlock).
• Identify why customers choose to leave card programs. Understand how fleet card providers can prevent attrition.
• Characterize the buying behavior and purchase decision process of commercial fleet managers.

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Methodology and Procedures

   Havill & Company has a proven track record of developing accurate industry forecasts for both syndicated and proprietary research. From our experience, the most reliable information source for predicting future technology trends and purchasing patterns comes from the end-users themselves. For this study, in-depth interviews will be conducted with over 1,000 fleet administrators. They will be asked detailed questions about their vehicle, maintenance, fleet card, leasing, and refueling plans.

   In preparation for this study, Havill Consultants has conducted the necessary background research for achieving the study objectives. Primary information sources include government agencies and reports, as well as fleet and petroleum industry trade journals. This information was compiled into an issue ballot containing a list of objectives for the study. The issue ballot was sent to industry executives at major oil companies, automobile and truck manufacturers, leasing and insurance providers, and auto parts suppliers. Over 80 decision-makers returned the ballot with their feedback. The results of the balloting process yielded the objectives and issues for this study and were used in the design of the questionnaire.

   Our research follows a reliable methodology. The questionnaire will be pre-tested by conducting over a dozen interviews, analyzing the results, making necessary revisions, and then continuing the cycle until all of the necessary refinements have been made. This study will employ a stratified random sample of at least 1,000 fleet owners. The sample list will be obtained from a Dun & Bradstreet database of over eight million fleet operators. The sample will be stratified to the population geographically, by size of fleet, and according to the following business segments.

   As surveys are completed, they will be entered into Survey System®, our full-featured market research software program. Market survey data from each questionnaire will be computer tabulated and projected to the fleet population. Statistical procedures will be applied to establish the significance of the research findings.

   Havill & Company will personally manage all aspects of the project. Each of the professionals assigned to this project has extensive fleet marketing research experience. They will share responsibility for the total project including secondary research, questionnaire design, telephoning, analysis, and writing the final report. All study findings will be fully documented in a report of approximately 500 pages. Where appropriate, graphs will be used to visually support the analysis.

   Approximately one month after the delivery of the final report, Havill Consultants will be available to meet with individual subscribers to discuss issues arising from the completed research. Pending sufficient interest, a multi-client study conference may be held at which Havill Consultants will formally present the findings of the research and field questions during the presentation.

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Deliverables

The final report will be based on the outline shown below. An executive summary will also be included within each report. Approximately one chapter will be devoted to each major topic. Each chapter will discuss the particular objective and related data. Each subscriber will receive three hard copies of the final report. In addition, each subscriber will have access to the document via the Havill Consultants internet site. This ability is particularly helpful for companies that would like to share the research information with managers and offices in multiple sites.

Overview and Report Layout Executive Summary Introduction and Overview Major Issues Methodology and Data Sources Summary of Fleet Market Forecast Fleet Market Characteristics Number of Fleets Number of Vehicles by Class Automobiles Light Duty Trucks Medium Duty Trucks Heavy Duty Trucks Tractors Buses Off-road Vehicles Trailers Travel Characteristics Local Regional National Vehicle Ownership Leased Owned Vehicle Base Location Home Based Dispersed Segmentation Agriculture Construction Government & Public Owned Long Haul Carriers Manufacturing Retail Service Short Haul Carriers Utility Wholesale Interest In Outsourcing Fleet Operations Use of On-line Services for Fleet Management Fuel Consumption in the Fleet Market Motor Gasoline Total Market Size Total Gallonage Facility Type Octane Level Consumption by Vehicle Type Consumption by Fleet Market Segments No. 2 Diesel Total Market Size Total Gallonage Facility Type Consumption by Vehicle Type Consumption by Fleet Market Segments Commercial Fleet Refueling Options Consumption by On-site Methods UST Refueling AST Refueling Mobile/Wet-hose Refueling Consumption by Off-site Methods Retail Cardlock Truck Stop/Travel Plaza Identification of Needs and Features of Fleet Refueling Facilities Refueling Facility Needs Merchandise Offerings Methods of Payment Accepted Petroleum Equipment Offerings Physical Facility Attributes Vehicle Services Distance Expected to Travel to Off-site Refueling Facilities Quantification of Fleet Fuel Gallons by Payment Method Cash Credit Card (Fleet, Bank, Oil) Paper Account Voucher Reason for Choosing Primary Method

Fleet Card Program & Billing Features Card Security Features Instantaneous Card Lockout PIN Access Required Customer Service Features 24 Hour Support Emergency Road Service Site/Station Directories General Merchandise Features Auto Rental Food General Merchandise Lodging Maintenance Product Lockout Features Fuel Allocation Limits by Driver/Vehicle Fuel Grade Purchase Location Time/Day Billing Features Tracking by Card Tracking by Driver ID Tracking by Vehicle Exception Reports Fuel Grade MPG Exceptions Manual Transactions Weekend Sales Other Billing Features Cost Tracking Mileage Based Information Tax Tracking Report & Billing Statement Options Billing Cycle Payment Methods Billing Methods including Internet Program Fees and Discounts Average Number of Card Programs Used Use of Integrated Cards Satisfaction with Card Provider Marketing Channels Used for Choosing a Fleet Program Comparison of Fleet Card Programs Fleet Leasing Programs Leasing Provider Used and Length of Lease Type of Lease Financial Full-Service Lease Administrative Certification Driver Programs Fuel Insurance Maintenance Reporting and Billing Comparison of Fleet Leasing Programs Renting of Supplemental Vehicles Fleet Maintenance Programs Preventive Maintenance Services Tracked Maintenance Tracking Methods Used Annual Cost of Preventive Maintenance Maintenance Methods Used by Managers Mobile/Wet-hose In-house Third Parties Preventive Maintenance Intervals by Vehicle Type In-house Vehicle Parts Inventoried Satisfaction with Maintenance Provider OEM and After-Market Fleet Industry Parts Characterize Replacement Frequency Batteries Belts Brakes Filters Hoses Spark Plugs Tires Characterize Replacement Habits Scheduled As-needed Purchase Location for Replacement Parts Automobile and Truck Characteristics Identify Typical Turnover of Leased and Owned Vehicles Characterize Vehicles Replacement Habits Location of Vehicle Purchasing and Leasing Financing of Vehicle Purchases Forecast of Fleet Market Size Order to Delivery Time Attitudes Procurement of Vehicle Add-ons Appendix

Note: The specific final report outline is subject to change based on survey results. This outline is the basis for the intended final deliverable.

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Who Benefits From The Study

This study grew out of requests by our clients for industry statistics and forecasts to drive their business planning and project development activities. During the design phase of this research, we discovered that companies had information needs specific to their businesses. Information on fleet market structure and demographics were of interest to fleet marketers and fleet product providers alike. Additionally, there was a demand for forecasted commercial fleet market opportunities through the year 2001.

Petroleum Marketers/Third-Party Card Providers

   As more fleets are opting to refuel vehicles off-site, great opportunities open up for petroleum marketers in the form of new business for their facilities and fleet cards. Third-party card providers also have the opportunity to create brand and facility loyalty through various card options and expanded acceptance. At the same time, petroleum marketers and third-party card providers must be aware of the demands of different fleet market segments, as they require different services, billing and payment options, and facility amenities.

• What are the demographic and consumption characteristics of the fleet market?
• How many fleets will be refueling off-site?
• What are fleet managers demanding when they decide to outsource fleet services?
• What are the card and billing features requested by fleet managers?
• How will evolving refueling and payment technologies affect the industry?
• What are the most effective sales channels to solicit fleets? How can I keep fleets using my card program?
• What types of non-traditional services can I add to my program in order to attract more customers?
• What refueling facility features are fleet administrators demanding for their drivers and vehicles?

   This research was designed with the above issues in mind. The research study will become a primary source for detailed information on the number of fleets, the number of vehicles, and the total U.S. fuel consumption in the commercial market. Data will also be collected on other topics, such as facility services and amenities, fleet card programs, and new refueling technology. This information will allow petroleum marketers, and third-party card providers to develop long-term strategies that match fleet managers needs and desires in order to differentiate themselves from the competition.

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