Marriage of Convenience

The marketing team at 7-Eleven just couldn’t wait until July 11 to get the chain’s 75th birthday party started. And with good reason. The world’s largest convenience-store operator had already let too much time go by — a whole decade, in fact. In that decade, grocers got most of the attention from packaged goods manufacturers, retailers in several channels expanded their on-the-go offerings for shoppers, and everybody grew eyes in the backs of their heads to keep tabs on Bentonville. So the team at 7-Eleven made a unanimous decision last spring that not only would completely revamp the chain’s marketing blueprint, but would facilitate change in its corporate structure as well.

Enough was finally enough. Enough of fragmented marketing plans. Enough of vendors exerting too much control. Enough of store-size limitations on merchandising. And enough of non-traditional retailers stealing market share.

“It was definitely time for a change, both offensively and defensively,” says Bob Merz, who was tapped as director of marketing in mid-2001 after a 20-year career that included top marketing positions at Anheuser-Busch, Pennzoil, and BBDO Worldwide. “We’re bolstering our entire marketing mix, bridging it with merchandising, and inviting partners along for the ride.”

Those three things would hardly be easy to accomplish separately, let alone simultaneously. But Merz and Frank Kern, the chain’s new director of brand marketing (and a former executive at J.C. Penney and Sears, Roebuck and Co.) are so far getting the job done with an aggressive reinvention strategy. Revamped store formats, merchandising pilot programs, and all-new marketing practices are just the beginning.

Wait until July.

Take a Number

At the heart of Merz’s plan is the goal of attracting (and retaining) manufacturing partners, then using the strength of co-marketing to fuel branding activities.

A nice test run for the concept came last summer, when Pepsi-Cola Co. demonstrated the power of c-stores by practically letting 7-Eleven debut Code Red at retail. The chain got a 30-day exclusive on single-serve bottles of the Mountain Dew spin-off, and kicked in its own 15-second TV spot as a show of support. The Richards Group, Dallas, handled the ads. Once the new brand fully launched, 7-Eleven introduced a Code Red Slurpee (with customized cups) to maintain the aura of exclusivity.

“We had the product, they helped execute,” says Harry Walsh, vp-team leader for the 7-Eleven soda and snacks account at Pepsi-Cola. “With that campaign, 7-Eleven sent a message to all manufacturers: ‘Look what we can do.’”

Other vendors heard loud and clear. Soon after, nine of them — the most partners the chain has ever recruited for a single promotion — got on board for a holiday 2001 campaign. The Holidays Made Easy effort gave one of three 12-page coupon booklets containing $9 in discounts from the likes of Tropicana, M&M/Mars, AT&T, and Eastman Kodak Co. to customers who purchased 10 gallons of gas outside the store or $5 worth of merchandise inside. The booklets also contained “peel and reveal” instant-win gamepieces delivering such prizes as cell phones, mini-TVs, and gas cards. The Promotion Network, Dallas, handled. (Results weren’t available at press time.)

On that momentum, 7-Eleven restructured its 2002 marketing calendar in an effort to “help partners help themselves,” says Ken Harris, a partner with Wilton, CT-based retail consultancy Cannondale Associates. One-month promotion windows have been expanded to 60-day “themed periods.” The idea is to get the word out early that, say, stores will be dressed for football in January and outfitted for the NASCAR season in February and March, so manufacturers can add account-specific overlays to programs they’re already planning.

And that’s exactly what’s happening. Purchase, NY-based Pepsi-Cola already had its national Party Bucks Super Bowl promo (starring NFL commentator John Madden) ready to roll, so creating some extra activity for 7-Eleven’s January football theme was easy: Special discounts on Frito-Lay snacks and a buy two-get one offer for Pepsi sodas were touted with signage featuring Madden.

Beginning this month, Coca-Cola Co., Atlanta, drives into the NASCAR theme with an effort featuring collectable fountain cups, P-O-P displays, and a sweeps. Spot radio supports in major markets. “These new windows allow us to work proactively with vendors farther out,” says Kern. “And they allow us to leverage sponsorships and tie-ins manufacturers already have in place.”

“The relationship goes beyond the typical sales aspect,” says Joe Vonder Haar, a sales director at St. Louis-based Anheuser-Busch, which tweaked its national holiday campaign by supplying P-O-P materials of wreaths and Clydesdales to the chain.

Here’s a fact that might surprise you: In terms of volume, 7-Eleven is the world’s No. 1 seller of Budweiser. But then again, maybe it shouldn’t, since the company formerly known as Southland Corp. is a $29 billion retailer operating 22,000 stores worldwide and 5,500 in the U.S.

Although 95 percent of the 120,000 U.S. c-stores (total industry revenues in 2000 were $270 billion) are not 7-Eleven’s, “the terms 7-Eleven and c-store are interchangeable,” says Jeff Lenard, director of communications with the National Association of Convenience Stores, Alexandria, VA. “There’s a large dependence on how one retailer leads this category, which is rather unique.”

Sized to Fit

While partner-focused initiatives are helping drive both store traffic and sales, 7-Eleven is looking to double effectiveness through 60-day campaigns for its own private-label merchandise executed separately from the themes. In February and March, for instance, in-store materials and media ads will highlight breakfast specials, not NASCAR. Merz says there’s no reason why account-specific programs and dedicated private-label efforts can run their respective courses without bleeding into each other, even if the goals of each are very different.

Such a bevy of activity might be easy to implement in a big-box superstore. But in a 2,500-square-foot c-store? Sounds like it could get a little crowded.

Executives are well aware of that possibility, and have created a two-fold method of controlling space and keeping the store environment consistent.

Part one is a policy mandating the chain itself manufacture all P-O-P materials and in-store communications (with funding from the CPGs, naturally). Artwork is sent to partners for tweaking and approval, then produced by Denver-based print shop Adams McClure.

Logistically, that can become quite a lengthy process — especially when you’ve got a program like Holidays Made Easy with a raft of vendors on the approval list. “But this way, the creative starts with us and ends with us,” says Amy Erschen, vp-account services with The Promotion Network, which was hired as lead agency last July. “In the past, there just wasn’t any kind of a filter.”

Part two involves reducing the number of P-O-P materials sent monthly to stores from 85 to 50 “and saying much less [on them] than they used to,” says Roger Winter, president of The Promotion Network. “At some point, you overwhelm the consumer. 7-Eleven used to say everything, but now it’s learning the benefits of shorter messages.”

Such a heavy lean on marketing doesn’t hide the fact that a c-store is only as good as the products it offers. So 7-Eleven has more closely aligned the marketing department with product directors to make category-management easier and “make them work better together,” says Winter.

Special product groupings, affinity assortments, and store-within-a-store sections are rising in importance. Meal deals, which combine beverages and snacks from partners with 7-Eleven’s fresh-item menu, are becoming a big business. The communications center, which houses phonecards, prepaid cellular phone kits, and (new for 2002) prepaid Internet access, is generating solid revenues. “We will both expand and narrow the assortment in 2002,” says Merz. “You can appeal to the core customer and still reach out to others without disenfranchising that core.”

Although the core remains 18- to 44-year-old males, the retailer is more aggressively targeting females of all ages and teens of both sexes.

For women, the chain is investing heavily in fresh food such as deli sandwiches, fruit, and wellness items. New wine sections also cater to females. Meanwhile, the chain has bumped spending on college marketing efforts and increased the frequency of youth promotions: A campaign last fall brought Pepsi’s sponsorship of the Britney Spears concert tour in-store, for example, through an offer for a free poster with 12-pack purchase and customized fountain cups and signage. (“The numbers went through the roof,” praises Pepsi’s Walsh.)

And what about Slurpee? Fear not. 7-Eleven is planning big things for its flagship product in 2002, primarily in youth-focused campaigns. It’s a smart move, since a back-to-school effort in 2000 with Santa Clara, CA-based Yahoo helped increase Slurpee sales by seven percent. “It’s rare to find retailers so willing to try new things,” says Yahoo marketing director Luanne Calvert. “Slurpee is fun and friendly, and 7-Eleven served us a lot of eyeballs.”

New flavors from partners (like the “Fanta Banana” from Coke served up last month) will be enhanced by premium giveaways (like the free bag of Lifesavers Kickerz offered with a 40-ounce purchase in January) and even continuity programs (cups currently have points stickers from Pepsistuff.com on them). Dedicated advertising will break later this year.

“We’ve been expecting more Slurpee marketing,” says NACS’ Lenard. “The drink has turned into this industry’s calling card.”

The store itself will soon get the scrutiny marketing and merchandising have received. A few prototypes are quietly being tested in Texas and Florida that, if proved successful, could redefine the format with larger footprints, more-navigable aisles, sophisticated end-caps — even drive-through windows.

You Say it’s Your Birthday?

All the work comes together in July for the 75 Years of Convenience celebration (which was still under vigorous development at press time). The summer initiative will serve as an official coming-out party, with numerous partners and multiple promotions likely.

Not that the revelry will go to 7-Eleven’s head, though: Merz promises that, according to the new plan, the theme will be focused, the communications consistent, and the partners in sync.

The birthday bash will also be used to break a new national image campaign, the chain’s first in years. Exactly what agency will be handling it, however, is unclear, since 7-Eleven was wrapping up a review for a new ad agency in early January. (Incumbent Richards Group did not participate.)

One of the biggest debates during the review was the question of whether or not to retire the decades-old “Thank Heaven for 7-Eleven” tagline. “It’s so associated with the company,” notes Winter. The final decision? Stay tuned.

Once an agency is selected, Merz and Kern will work quickly to better blend advertising and promotion — and increase the use of promotional advertising — into the new marketing mix. “I’m not biased towards one or the other. Both are critical and have to work together,” Merz says. “But we won’t execute either unless it supports our brand objectives.”

Manufacturers are starting to believe (many for the first time). Merchandising is hitting its stride. And a new store model is waiting in the wings. Having said “enough” to the past, Merz and Kern certainly have plenty planned for the future.

No wonder the party couldn’t wait until July.