By Andrew Patterson
Investors in recently listed Z Energy (ZEL) have more reason to smile right now compared to those who backed Mighty River Power (MRP).
[Full disclosure, your humble columnist is in the later rather than the former group!]
Issued at $3.50 a share the stock closed on Friday at a new high of $3.82 – a gain of almost 10% - and since listing last month hasn’t fallen below its issue price.
Compare that performance with Mighty River Power. Its shares only traded above their $2.50 issue price on the first nine trading days following its listing in April and have proceeded to spend the last four and half months effectively ‘underwater.’
It’s obvious which of the two ‘energy’ offerings is viewed more favourably by investors.
But the comparisons don’t end there.
While MRP effectively listed as the same power company that taxpayers owned outright previously, Z Energy undertook a full makeover prior to listing that involved ditching its former Shell brand in favour of a completely new product offering.
A whole new look
The new brand included a new name, a whole new look, an emphasis on service and a reworked customer engagement strategy.
And so far so good, according to CEO Mike Bennetts, who remains upbeat six weeks on from the company’s listing in mid-August.
“The former owners have said publicly they were happy with the price they got, we were able to aquire a new register of shareholders with the diversity we were wanting and since the float the share price hasn’t fallen below the issue price so on those three metrics alone we’re very satisfied with the outcome.”
It’s a dramatic turnaround for a company that three years ago most New Zealanders recognised as Shell but had little or no attachment to its brand or what it stood for. Drive into any Z service station these days and the change is obvious.
“For us the first year was really all about managing the downside risk of moving from being an international company to being a locally owned and operated NZ business. So that was really a transition year.”
“Then we went to the board with a strategy detailing what the future looked like for us for the next three years and that involved the decision to adopt the Z Brand in the first year of that programme.”
The decision to change the brand also involved having to re-engage customers and while Bennetts says he had no preconceived idea about how the makeover would look there were legacy issues to consider.
“I think every CEO brings their own ideas and judgement with them, but what we did was effectively pause the company and recognise the fact we had over 90 years of history in NZ so we felt it was important to start off by listening to our customers.”
“So we conducted the largest piece of market research ever undertaken in NZ for more than a decade and our approach was pretty straight forward. Firstly, we listened to what people wanted, we thought through carefully about what we could deliver and then we just went out and executed on our strategy.”
Value of research
So is there a lesson there about the more you invest in research the better the outcome is likely to be?
“Yes and no, I think it’s really important that you do invest in research because that’s part of the listening process, but I wouldn’t want anyone to think of us as a research driven company. I think you have to package research and put it next to intuition.”
“I feel good about my 30 years’ experience in the oil industry and we’ve got a lot of industry experience inside Z. So I believe you can really win when you put intuition alongside research. However, there are some parts of our offer that the research didn’t identify. In fact, some of the most popular parts of what we do didn’t actually come from the research specifically.”
“What the research did tell us was pretty simple. When it comes to the service station side of the business people said: look, I’ve got a really busy day so make it as easy as possible for me. When it came to the brand they told us they recognised it but had no emotional attachment to it. In fact, they said: how can you be a kiwi company if you’ve got that existing brand out front? So they were looking for a brand with a contemporary identity and something they could connect with.”
Coming up with the name
While Z is possibly the shortest brand name in the country, not surprisingly it featured early in the list of contenders. Some might say it’s about as quintessentially New Zealand as hokey pokey ice cream. What is it they say about kiwis living overseas that they can spot a Z in a newspaper faster than any other letter in the alphabet when scanning for news of events back home?
“We had the usual mix of long names and short names and we gradually whittled them down and tested a range of contenders. Z was actually one of the names that came up very early on in the process so there was perhaps some regret that we didn’t just agree on that brand name in the first week but you do have to make sure you go through the process thoroughly.”
“Ironically, it’s also created one of the world’s shortest email addresses, given that it’s just a single letter. [Z opted not to include the word energy in its address or the website URL www.z.co.nz]
Not all customers are the same
But do people actually seek out a service station based on its brand or do they in fact do what is perhaps more common – fill up at the nearest service station when they notice their petrol gauge is almost on E.
It seems that both types of customers exist.
“We tend to think all customers are the same and often we bring our own judgements and assumptions to the table. What we found from the research was that there are actually six different types of customer groupings in the market place and they each have different needs and wants so we had to determine the appropriate offerings for each of those segments.
“So for instance some customers are very loyal to Flybys. Around a third of our transactions involve a Flybys card and people are incredibly loyal to that offering. But equally at the other extreme there are other customers who only want to engage with us when their petrol tanks are nearly empty and they don’t even want to necessarily have to queue up to pay so it’s our job to deliver to all those different segments.
Old ideas can still be worthwhile
The introduction – or should that be the re-introduction - of the forecourt concierge is a good example of how Z is trying to deliver to those segments. While Bennetts says the idea didn’t come out of the research directly, it was obvious when reading between the lines that many customers valued having someone close at hand to assist them.
“There was obvious nostalgia coming through in the research about the days when services stations were all about service and while no one specifically asked for their return it was pretty clear to us they would be a popular part of our offering.”
Perhaps it goes to prove that sometimes going back in time can actually pay dividends after all.
Z BY NUMBERS (per annum)
18,794,560 Flyby transactions
678,023,136 litres of 91 Octane sold
12,872,473 drinks sold
(Source: Z website)