Recently a marketer commented that after going to meetings about category management, he started with his beer offering, buddying up with his major beer vendor. The vendor, with their vast resources and consumer research data, helped him optimize his beer offering. About a year later, he noticed his stores looked more like beer distributorships than c-stores, and his inside profits were down.
Common sense prevailed. He dumped the category management project, cut way back on beer shelf space, got rid of a bunch of displays and signs, then redesigned his marketing to match what his instincts were telling him his customers wanted. Guess what? All of a sudden, his inside profits increased!
The lesson was a hard but valuable one. Many owners have been brainwashed to think their vendors are smarter about customers than they are. They even tell us that at NACS and other store seminars. Who can argue with those enormous marketing research budgets? You can and you should.
If you are to survive hypermarket competition and thrive through the next decade, you must get out of the herd mentality, intimately know your customer, then design for and cater to that customer.
The hard truth is that your vendor has a profit agenda. Let’s face it – vendors make different margins on different products, just like you do. There is nothing wrong with that, except when vendors start making your product decisions. When category management becomes more about vendor profits than yours, it’s time to pull the plug. Let’s get back to your profits!
Store operators have also been brainwashed with a second myth – to think they must market to the entire world. For most chains, this is an incredibly stupid premise to hold. A small chain’s success lies in target marketing to a specific market segment and doing that better than anyone else. That’s what Wal-Mart and the big chains cannot do effectively. They go after the price-conscious bottom-feeders.
If you want to make big profits, you don’t want to compete for their price-driven customers. That high volume, high efficiency driven profitability depends on very cheap sources of grocery and fuel supply. The typical 5 to 50-store chain simply can’t buy at the same hypermarket supplier prices.
Unfortunately, many smaller chains decided to get busy growing so they could go head-to-head with the big boys. In the midst of that feeding frenzy, though, a few savvy storeowners looked at their own markets, saw what buying segments don’t like the typical big-chain lines and marginal service, and realized there are other facets of the population to successfully serve. These marketers realized that site-specific and region demographics were hugely more important than any national research. Then, they designed their stores and offerings to match their target customer.
Take for example a Texas marketer whose financial success is directly tied to his own in-house fresh taco operation. He didn’t buy into the franchise or vendor advice so readily available at the trade shows. Instead, he took a long, hard look at his own market and realized what the research firms were telling him was bunk – what he needed was tacos!
But he didn’t need the standard franchise taco. He needed the freshest, best, breakfast tacos, lunch tacos and dinner tacos money could buy. He needed the biggest taco his town had ever seen, a taco his construction worker customer could brag about. Then this marketer took it one step further – he put those big, fresh tacos out on the island, so his best customers didn’t even have to walk in the store – just gas and grab that big ol’ high margin taco.
This is just one example of a savvy marketer who took the time to analyze his marketing area, segment a population group, and then target that group, not because they were the largest segment of the population, but because within his area, they were the group not being effectively served by other competitors. He designed an entire strategy to profit from that segment, including bi-lingual employees and bi-lingual signage as well as the unique menu offering.
To truly succeed in the convenience store business through the next decade, you must identify a unique, target customer. Then, you’ll have to be better than anyone else in your market area at serving that customer. You will need unique offerings to serve that unique customer that will stand out in that customer’s mind – that will make them want to stop and shop with you time and time again.
Mass marketers and large chains operate with the premise that you can’t differentiate, that the only way to survive is through supplier price advantage and operational efficiency. Successful Meridian clients throughout the nation are proving that premise to be false. Yes, you will be even more profitable with efficiency. But it’s not just about low price. It’s about having what the customer wants and what that customer is willing to pay a premium for – yes, we said premium!
The key to above-average profits will be knowing your customer intimately enough to have and merchandise properly at least one thing your customers will pay extra for, and will love you for allowing them to do just that! Today, get started on intimately knowing your best customer, not your vendor’s best customer.