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Published: May 3, 2010
 / Summer 2010 / Issue 59

 
 

Why We Hate the Oil Companies

When the person wearing your logo sees your company as the problem, you know you are in trouble. All large companies — not just oil companies — need to think carefully about the way they are perceived by customers, suppliers, retailers, and other stakeholders. Corporate behaviors of all kinds are being scrutinized much more closely today than they were in the past, and the public face that a company presents has never been more crucial to its long-term fortunes. Perhaps the most important lesson that I learned during my years at Shell — and especially during my listening tour — is that companies need to take their own messages seriously, so that others will as well. Are the messages that are sent out what we really believe? Or are we merely saying things that we hope will give us a temporary advantage?

Overlooking the Customer

Every day, tens of millions of people around the world stop at a retail gasoline station. For many, it is the most negative experience of the day, unless they have to have a tooth pulled. A retail customer has to stop, get out of the car, figure out the pump, pay in advance (like a suspected criminal) or enter a zip code to confirm ownership of a credit card, pump the gas (trying not to acquire the smell of benzene on his or her hands), maybe clean the windows with the dingy water available, and decide whether to chance the restrooms (probably locked with a key attached to a giant tag, a double sign of distrust).

For this delightful experience, consumers pay a price that they don’t understand or feel is justified, to a huge company of which they have at best a faint knowledge. Need mechanical help or directions? Good luck. For seven years, in a Gallup poll on the favorability of 24 different industry and government sectors, the oil and gas industry has been rated 24th. (In the 2009 poll, the runners-up for most disliked were real estate and the federal government.) When the major oil companies run their retail businesses in such a consumer-unfriendly manner, why are they surprised to have a bad reputation?

Even the product is unappealing. From the time the substance is extracted from the ground — a dirty, backbreaking process — to the time it enters a vehicle’s tank, oil companies go to extreme lengths to make sure their product is not seen, smelled, or touched, much less tasted. “Loss of containment” of crude oil or refined gasoline is not only an unpleasant experience for those around it, but it is also dangerous. The products are flammable, and some elements within them are known carcinogens.

There are other products we use every day that we wouldn’t want to be exposed to in their raw form. Computer chips and circuit boards are made using a toxic mix of chemicals (hence they are disposed of as hazardous waste). But companies like Apple build a loyal following of customers who are passionate about their products. The basic difference: Apple sees itself as a consumer products company and works hard to build relationships with customers. In contrast, although their brand signs may be on every street corner, oil companies see themselves as commodity producers.

Retailing fuels is basically a secondary exercise from the oil company’s point of view, a way to get rid of the product it has spent so much time and money producing. Although the gross margin on a clothing store or similar retail store is typically 35 to 45 percent, gross margins on gas stations — even with convenience stores — have been as low as 12 to 13 percent in the last few years. This makes the retail side the least valuable part of the business, more often a nuisance than a value creator.

 
 
 
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Resources

  1. Stewart Brand, “City Planet,” s+b, Spring 2006: How the profound consequences of increasing urbanization are changing the way we think about demographics, cultural vital­ity, and economic development.
  2. Viren Doshi, Gary Schulman, and Daniel Gabaldon, “Lights! Water! Motion!s+b, Spring 2007: Rebuilding the world’s urban infrastructure can be done only by integrating energy, transportation, and water.Peter Senge, Bryan Smith, and Nina Kruschwitz, “The Next Industrial Imperative,” s+b, Summer 2008: Why facing up to climate change requires a revolution in business thinking.
  3. World Wide Fund for Nature and Booz & Company, “Reinventing the City: Three Prerequisites for Greening Urban Infrastructure,” (PDF) March 2010: More analysis and ideas on why we need to aggressively pursue urban sustainability.
  4. For more thought leadership on this topic, see the s+b website at: www.strategy-business.com/sustainability
 
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