The “C” Stands For “Co”

Six million people bought coffee at 7-Eleven this morning. And your brand could have been on the cups.

As co-marketing spending tops $11 billion, packaged goods marketers are tuning into opportunities in convenience stores. There are nearly four times as many c-stores as there are supermarkets: 114,300 vs. 30,200, according to Wilton, CT-based Trade Dimensions (see chart). C-stores have prime locations and very loyal (as in “habitual”) shoppers – an astounding 500 million per week.

Opportunities grow, ironically, as spending declines. Only seven percent of marketing budgets is earmarked for account-specific work this year, down from nine percent in ’98, according to Cannondale Associates’ 1999 Trade Promotion study (see story on page 38). Still, that’s $11.2 billion, on top of $27.3 billion for consumer promotions.

At the same time, supermarket consolidation is changing the dynamics of co-marketing in grocery stores. The top 10 retailers have the same sales volume this year as the top 17 had last year, according to Trade Dimensions. In that tightened playing field, grocers need to play up their own brands. What’s more, they need to balance a full plate of different brands. Kroger Co., for instance, operates stores under 47 different names. So headquarters has to balance Kroger’s brand positioning with that of Fred Meyer’s, Loaf ‘N Jug, and all the rest.

“Saying you do account-specific marketing begs lots of questions. How specific? Store-level? Chain-wide? Corporate level?” says Trade Dimensions vp Scott Taylor.

As if that weren’t complicated enough, marketers who use both supermarkets and c-stores need separate strategies for each.

“Channel differences and consumer shopping behavior suggest marketers may need to communicate brand equities differently by class of trade,” says Jon Kramer, president of Stamford, CT-based J. Brown/ LMC Group. Shoppers act differently in each store. Unlike grocery shopping, c-store buying “isn’t a true shopping experience. It only lasts 90 seconds,” says Michael Powers, account director at Wunderman Cato Johnson, Chicago.

“It’s a misnomer that c-store purchases are an impulse buy,” adds Powers, who worked on promos for Amoco while at Frankel & Co., Chicago. “It’s planned, ritualized behavior. You go to the same place for coffee or smokes. People call a store, `My store.’ There’s very little brand switching. Heavy users come four or five times a week. The game is to get as many of those trips as possible to your store.”

C-stores historically have created their own promos with manufacturer funds. 7-Eleven – the promotion gold standard among c-stores – sets an umbrella theme for all items it features in one month across several product categories, then turns to suppliers for support. Less often, the chain joins a manufacturer’s national campaign, like Pepsi’s c-stores-only Star Wars blitz. “This was good for us because it crossed a number of categories: bottle and can, fountain, snacks, candy,” says 7-Eleven marketing communications manager Dana Manley. “That was a big deal for Pepsi to bring that to us. It was the biggest total store feature we’ve done in some time. The value of the property, the strength of the partner, and the number of selling opportunities it presented us were key decision points.”

Packaged goods marketers blanch at handing money to grocers, but among c-stores, “the real co-marketer should be the retailer,” contends Tim O’Krongly, vp-channel marketing and business development at Inmark Services, Greenvale, NY. “They can say to manufacturers, “My brand stands for convenience and price. You can add value to the equation by tying in with my events.'”

A chain that sponsors NASCAR, for example, could approach other NASCAR sponsors for an exclusive promo. Retailers do the legwork, manufacturers fund it.

Inmark plans to set up a “national tapestry” of non-competing regional stores and national chains like 7-Eleven and Circle K, then offer manufacturers turn-key promos pegged to their own sponsorships. “How many manufacturers say no to a retailer?” O’Krongly asks. Inmark will source exclusive premiums through its Optimum Group subsidiary and execute via U.S. Concepts, its in-store services arm.

“C” STANDS FOR “COMPUTER,” TOO

Four or five categories dominate c-store marketing. That limits opportunity for others, says Steve Cleere, director of client services at TradeMarketing Inc., San Francisco. “C-stores are inundated with tobacco, soft drink, b eer, and snacks promotions, and most have their own promos running, too. There’s a lot of noise in c-stores, so it’s hard to measure the bang for your buck.” Despite heavy reliance on promotions, c-stores haven’t discussed co-marketing strategies with manufacturers, Cleere adds.

Others say it’s the manufacturers who are slow to catch on, because they aren’t used to tracking c-store sales.

“Brand managers tend to ignore c-stores because they don’t have scanner data,” Powers says. “It’s stupid for [snack and tobacco] vendors not to take c-stores seriously.”

Scanners are becoming de rigueur in convenience land. Last year, 42 percent of c-stores had scanners, up from 28 percent in ’97 and less than 10 percent in ’94, per the National Association of Convenience Stores. 7-Eleven began scanning after NACS’s last survey, so now nearly 50,000 c-stores have scanners. Compare that to 88 percent of supermarkets, a mere 26,641 stores, Trade Dimensions reports.

ACNielsen began selling syndicated c-store data from 30 markets in May ’98, covering beer, beverages, candy/gum, frozen novelties, and tobacco. Information Resources, Inc. collects data from 5,000 c-stores for custom analysis, and does bi-monthly syndicated audits.

Technology also will drive co-marketing with grocers as programs evolve beyond menus. “You can’t just go in with a turn-key program,” says Kramer. “You have to build it with the retailer, and you can’t build it on the spot.” Marketers need to track results and build “success models” as blueprints for quick development. That means investing in data and training, Kramer advises.

7-Eleven uses its own scan data to predict trends and consumer preferences, but doesn’t track competitors. Marketers could use data to develop programs, but a stroll through the store works, too. “They should know as much about our business as possible before coming up with a concept and presentation,” Manley says. “They can get that info by just spending some time in our stores and seeing what people do and buy. I am amazed at the people who pitch things and haven’t been in a 7-Eleven in years.”

Marketers also must synchronize the field operations that they’ve decentralized over the last few years. The mid-’90s rise of co-marketing shifted a lot of marketing responsibility to field reps, who went off in all directions. Now, marketers need to coordinate those campaigns.

“Sales forces play a larger role in locally planned and executed promotions,” says Tim Hawkes, president of in-store marketing firm Trade Zone, Westport, CT. “Two trends are converging: Downsized clients are outsourcing more business, while campaigns are getting more sophisticated and complicated. There are fewer people to do harder work.”

Burgeoning Internet and intranet sites make execution easier for sales reps, who can download promo details from headquarters and share sales data. But packaged goods marketers have yet to maximize frequent-shopper programs to track and plan campaigns.

There is reach: Two-thirds of grocers have programs, and 66 percent of consumers use cards. Data can quantify how well promotions build equity, not just sales. Plus, more retailers (57%) think it will be loyalty programs driving long-term growth instead of strategic alliances with suppliers (30%), per an IRI online survey.

Of course, loyalty cards aren’t much use for c-stores, where 70 percent of transactions are in cash. But with 500 million customers per week, c-stores are worth an extra trip.