Customers are always looking for ways to save at the gas pump, and retailers often search for unique ways to provide them with the value they’re looking for. Though fuel is a competitive industry where any edge over the competition could turn out to be critical, many retailers offer a similar promotion to influence more visits: a static discount.

The discount is usually available to loyalty members, branded credit card holders, or users of a strategic partner service; in years past, 5 cents per gallon seemed to be the standard amount. But lately, brands have started upping the ante, getting more aggressive about winning customers over.   

Look across the industry: Walmart partners with stations like Exxon and Mobil to offer Walmart+ members 10 cents off per gallon at those stations. Many fuel brands offer discounts directly to their own loyalty members. The platinum tier of Shell’s Fuel Rewards program offers 10-cent discounts; Love’s has a 10-cent promo for its app users; Pilot offered the same this past summer. 

But it led us to question: Is there any proof that 10 cents off each gallon is actually necessary? It’s worth a closer look to see if these promotions are moving the needle, and there are a few angles to consider: 

• The actual value a 10-cent discount provides consumers
• Whether that value is enough to actually overcome consumer friction
• The impact for the retailer

Our verdict is that static offers never quite hit the mark, because they simultaneously end up being too much and too little for different groups of consumers. We’ll offer context and explain why below.

The cost-benefit analysis for static offers

When it comes to brick-and-mortar retail transactions, all consumers have friction — a thing, perception, or circumstance standing in the way of a purchase at a given store. The amount of friction in each one-to-one relationship between a consumer and a retailer is always unique. By offering the right value, retailers can overcome this friction and convince consumers to transact at their stores. 

The purpose of fuel discounts, then, is to help provide the incentive that shoppers need to visit for a fill-up. A static 10 cent-per-gallon discount on a refuel usually earns the consumer between $1.50 and $2.00, depending on their tank size, offering a tangible benefit.

However, there can be trade-offs to consider. Take, Walmart+ subscribers for example. They incur subscription costs for Walmart+, which charges $12.95 per month or $98 annually. Additionally, there’s also extra legwork required every time they want to redeem their benefits at the pump. Subscribers need to use the Walmart app to receive a discount ID code or present a QR code at the pump each time they fill up.

As a secondary perk of those subscription services, many customers might want to make the most of their benefit packages and use those discounts each time they fill up — but others might determine the juice isn’t worth the squeeze. 

Consumer criteria: What factors influence fill-ups?

Though static discounts offer consistent value, consumer value points often change. The amount that a given shopper needs to motivate a change in their usual behavior can vary, based on a few factors.

Their location

In a recent survey, we asked Upside users to identify the amount that they’d need to receive to view a particular offer favorably. Understandably, this amount varies based on how far away that customer is from the gas station. Intuitively, a customer that lives 10 minutes away from a particular station would need a higher offer to pass numerous stations and drive all the way there, compared to a customer that lives under a minute away from the station. 

For example, the value tipping point for customers only one-fifth of a mile away from a station was 5.3 cents per gallon. Below that, the offer was viewed as not worth their effort. For customers one mile away from the station, the amount they expected to receive increased — this group of customers said that 8.1 cents per gallon was the tipping point to view an offer favorably.

Now, remember that these amounts are just averages, and they do not apply perfectly to every customer. But they go to show the value of personalization, not just for the individual, but depending on an individual’s situation.

Sign price 

When sign prices are higher, consumers expect higher discounts. This association is well-known in behavioral economics, and it’s helpful to think about it another way — a coupon for $5 off the purchase of a refrigerator is not as meaningful as $5 off for a pizza. Consumers expect their potential discount to increase alongside the total price that they pay. 

On average, for every 10% increase in the national average sign price, the average Upside offer earned increases by 1.2%, an increase that aligns with customer expectations.

It’s important to note that sign price is very dependent on geography, and prices can look dramatically different across regions. These differences are due to regional demand, regulatory environments, taxes, and operating costs. In Pacific states, for example, sign prices are generally highest — in October 2024, we observed an average sign price of $4.44 per gallon. That’s in large part because California has the highest gas taxes in the country and its strict emissions standards require a special blend of fuel unique to the state. 

On the other hand, states with lower taxes and more lenient regulations like Arkansas, Texas, Oklahoma, and Louisiana averaged a sign price of $2.77 per gallon over the same period.

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In the Pacific, where prices are significantly higher than other regions of America, a 10-cent discount might not have cut it with shoppers expecting more relief at the pump. 

The feasibility of the 10-cent offer for retailers

Let’s now consider the other side of the equation — the retailer that offers the promotion. The feasibility of a static, 10-cent discount depends on a few external factors. 

Margins

Retailers profit when the revenue they generate exceeds the costs they pay. Profit margins fluctuate throughout the year, and high sign prices are not always indicative of high profit, because retailers are paying higher rack prices, as well. Offering discounts can cut into that profit, but during high-margin periods, retailers can account for a promotion without sacrificing too much.

We’re currently in one such high-margin period — in Q3 2024, retail fuel margins inched up year-over-year to remain at historically healthy levels. But in a cyclical business like fuel, operators know not to get too comfortable. In fact, NACS recently presented research at its annual convention warning retailers not to count on fuel margins staying high forever. During low points in the cycle, fuel stations occasionally allow for zero or negative profit margins to cover a sudden jump in rack prices.

And just as sign prices differ by region, retailer margins do, as well. We looked at the average station’s margin per day for a gallon of regular grade fuel, and predictably, it varied based on regional factors like transportation costs, operating costs, taxes, and regulations.

In the Pacific, where sign prices were highest, the average station was earning 54 cents of profit per gallon of regular gasoline in October 2024. In Texas’ region, meanwhile, the average station earned only 22 cents per gallon during the same period.

This shows the differences between regions — with margins over 54 cents per gallon, stations in California could offer more aggressive promotions that win new customers or more trips inside the convenience store. Meanwhile, stations in Texas are giving away nearly half of their profit with that same discount amount. 

In this instance, a static offer is simultaneously too high for some retailers and too low for others.    For offers to remain profitable, it is important to respond to fluctuating profits margins. 

Fuel grade

Whether you’re buying regular or premium fuel, static offers remain constant and don’t change based on the grade. This represents a missed opportunity for retailers, since some fuel grades are more profitable per gallon. If they could offer higher promotions on premium fuel grades, it could encourage consumers to upgrade and maximize value for the retailer. But as it stands currently, consumers with a static 10-cent discount are most incentivized to purchase regular fuel, their cheapest option.

Our verdict: Static offers never get it ‘just right’

When you consider the cost, benefits, and ultimate value to both consumers and fuel retailers, static offers never get it quite right for everyone. They’re simultaneously too high for some and too low for others.

Those 10 cent-per-gallon discounts usually either leave money on the table with customers who would’ve paid the full sign price, or they’re not high enough to move the needle for an uncommitted customer. As fuel retailers and third parties seemingly rush to form these partnerships based on static discounts, it’s fair to wonder what kind of benefit the consumers and operators will actually derive from those offers.

Upside’s personalized promotions motivate profitable changes in behavior.

Get in touch with our fuel experts today.