$5 per gallon?! Learn how rising gas prices will affect consumer behavior moving forward.
Gas prices are on the rise nationwide. Rising by more than fifty cents per gallon since mid-December, the average gallon of gas hit $3.84 nationally on March 12th, 2012. Such a steep increase is rare in the winter months, forcing analysts to re-think their predictions for the summer, traditionally a time for the year’s highest prices at the pump. Consumers have reacted negatively to the uncharacteristic increase. An ABC News/Washington Post poll released on March 12th shows that “89 percent of adult respondents are concerned about the recent run-up in gas prices; 66 percent are ‘very’ concerned about it.” Further, IHS Global Insight economist Chris Christopher said that although people in the U.S. spend less than 4 percent of their disposable income on gasoline, the price has an oversized influence on consumers' confidence: "We buy gas in a very different manner than everything else. It is a very visible transaction. You go to the tank and squeeze, and (see) the cost go higher and higher."
In order to cater to their customers, small business owners must react to the uptick in gas prices, re-evaluating their business strategies in kind. How will you target shifting consumer behavior if the Chevron® marquee reads $5.00 per gallon? Points to remember: costs and pricing. If fuel prices increase your cost of doing business, you will likely pass along those costs to consumers by way of higher prices for your goods and services. Below, discover fuel-saving strategies that will keep your costs down, helping you retain your customer base in a time of high gas prices.
1) Vehicle efficiency
- Clean your air filter: The Car Care Council of America says replacing a dirty air filter with a clean one can increase gas mileage by 2 miles per gallon. A dirty, clogged air filter makes a car's engine work harder, decreasing fuel efficiency.
- Ditch the roof rack: According to Consumer Reports, carrying anything on top of your car, including an empty roof rack, decreases gas mileage. When Consumer Reports put a large car-top carrier on a Camry, its gas mileage dropped from 35mpg to 29mpg at 65 miles per hour.
- Slow down: Edmunds showed an average savings of 12 percent for drivers who dropped from 75 mph to 65 mph. The savings are even more significant for longer trips.
- Avoid idling: If you're going to be stopped for more than a minute, turn off the car. According to Edmunds, not idling can save as much as 19 percent of fuel.
- Empty your trunk: If your trunk is full of junk, clear it out. Extra weight in the trunk makes a car less fuel-efficient, especially on inclines (think San Francisco).
- Check the gas cap: According to the Car Care Council, a loose gas cap allows gas to evaporate, which can lead to lost mileage for every gallon of gas.
2) Energy, technical efficiency
- If you run a fleet of vehicles, plan to phase-in leases of more energy-efficient trucks and vans for service calls.
- Consider purchasing GPS software that routes trucks based on a driver's proximity to the next house call.
- Use the internet, cell phones, and otherwise mobile networking whenever possible. Gas prices haven’t increased the cost of web usage!
Whether you own a fleet of vehicles or only one, chances are that your small business uses a car for something. As mentioned above, consumer behavior relates to your price at the pump as follows: if your fuel costs are higher than expected, you will pass along those extra costs by way of increasing the prices of your goods and services, driving away consumers who are already pinching pennies at the pump. A vicious cycle indeed! By keeping fuel costs down, you won’t have to pass along extra costs to consumers, and you will score points (and implicitly improve relationships) with your customers.