Sunday, August 01, 2010

BP Branding Problem

With the spill in the gulf, BP has taken a PR hit. Most consumers don't do business with BP, but they do purchase products from BP branded dealers. Anecdotal evidence indicates that consumers are starting to shy away from BP branded dealers which is hurting the dealers volumes.

One solution is a PR campaign to repair the brand. Another is to shift to another brand name. BP gained a presence in the US by buying up US oil companies including Sohio, Amoco and ARCO. Since they own other brand names with long histories in the US, they could switch over.

Rebranding takes time and costs a fair bit. So does repairing a brand. The question for BP and it's dealers is which strategy has a lower cost and higher return.

(Yes ARCO is owned by BP. Here in the western US, ARCO is still the brand that they market under. The ARCO brand has come to mean low prices, cash prices, no credit cards and a fee for using a debit card.)

Usually a branded dealer pays a bit of a premium for the branded gasoline relative to the unbranded dealers in the market. In the short run, BP could compensate their dealers by lowering the price they charge them for gasoline to take into account the damage to the brand. I suspect that two cents a gallon relative to the competition will bring their volume back up.

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