Unbundling At The Gas Station

The pricing at the pump has long been debated and much maligned. Without going into those details I would like to point out a form of unbundled pricing practiced by some gas stattions. Gas prices at the pump is a fixed charge that includes all federal and state taxes and credit card commission the owners pay to the card companies. As the oil prices soared their credit card charges per gallon increases as well. Some gas stations started listing two prices, one lower price for cash and the other  that is 10 cents higher for credit card purchase.

Before the oil crunch everyone paid the same price. The credit card commision is distributed across the entire customer base in the form of higher gas price. When gas was selling for $1-$2, no one minded. Now at $4 a gallon and extreme competition with other gas stations (this is a high operational leverage business with low contribution margin) the owners started separating out the credit card commision and list the lower price to attract customers.

This is unbundling. The main service offered is filling up your tank. For the convenient pay, which is now optional, you pay 10 cents more per gallon.

Is there a problem with it. In some cases, some of the gas station owners advertised only the lower price to attract people and implicitly tacked on the added fee. That is unacceptable unless the customers knew exactly what services they are getting for the per gallon price.

When done explicitly and deliberately, this falls under unbundling. Another point to note here is that, like airline travel, gas stations are commodity businesses. The consumer expectations and loyalty is low. Unbundling fits this business model well.