Creating a Magic Profit Carpet
NEW YORK -- Growing tired of watching a customer pull up to the pump, pay for their gas and drive away? The addition of credit card machines on gas pumps has created an additional obstacle for convenience stores when it comes to driving customers into the store to make additional purchases.
So let's talk about how to get them to step away from the pump and up to your cash register, with a coffee in hand for purchase. The latest research shows 79 percent of c-stores in the United States sell motor fuel. The customer is there to fill their tank, but how do you lure them into the store for other purchases? The key to driving profitability is to measure your conversion factor, or the percentage of customers who visit your location and make a purchase inside the store.
The conversion factor is more important than ever since traffic is flat or declining in most dayparts. According to The NPD Group, breakfast visits declined two percent in the fourth quarter of 2009, and traffic did not grow in any foodservice daypart last year. In today's environment, the growth plan likely to be most successful is the one that strives for more effective conversion. Let's take a look at how c-stores can achieve this through their beverage program, among other things.
Cast a Wide Net
The best way to drive sales is by focusing on products with the broadest consumer appeal. Coffee and carbonated sodas are two obvious choices. Consider coffee's appeal: NACS' annual report shows that monthly hot dispensed beverage sales average $6,908 per store. At an average transaction price of $1.15, that's 200 cups per day. Operators clearly agree with coffee's importance to the conversion factor since the 2009 NACS Consumer Fuels Report indicated that hot coffee programs are the leading product category to attract customers into the store.
Additionally, iced coffee has fast become a growing category with consumption increasing more than 20 percent in 2009 over the previous year, and it is now a part of nearly 9 percent of foodservice orders. Not to mention, more than 95 percent of those iced coffee drinks are purchased outside the home, providing a very compelling growth opportunity for c-stores.
With those numbers in mind, it is critical that convenience store operators stock quality products that will entice customers to purchase their daily iced coffee from them instead of pumping their gas and then heading to the nearest coffeehouse.
Remove Obvious Conversion Hurdles
One thing seems very clear -- women make up nearly half of all gas purchasers, yet they are a much smaller percentage of the in-store purchasers. Why is that? Look around for cues that are preventing gas customers -- women in particular -- from venturing in for a snack or beverage.
Promoting products, such as iced coffee or iced tea -- both big sellers among women -- at the pump is a great way to target females. You also must remove hurdles that will prevent shoppers from coming into the store. Women, in particular, are concerned about crossing and entering a dark or untidy store lot, so be sure to have a clean and well-lit parking lot.
Sell Them Some Time
The Achilles heel of c-stores' main competitor, coffee shops, is preparation time. Your coffee-shop competitor believes their customer is there for the "experience." However, the part of the experience they don't enjoy is standing in line for six minutes waiting for a skinny, two-pump mocha latte to be finished while they wait on a cup of black coffee.
Most of the time coffee shops' latte-sippin' consumer is the same time-pressed customer you serve. They want their coffee right now -- and that's your sweet spot. A shopper's limited time also can prevent an iced coffee or tea purchase, or any additional conversion purchase for that matter. This is where marketing and product positioning come in to play. As mentioned above, advertising at the pump is very effective, as is signage within the store -- at the register and over the beverage area -- clearly communicating the coffee is fresh and ready now.
As you can see, products with broad reach, such as premium iced coffees and iced teas can absolutely be a leader in conversion sales. After all, there is no doubt the appeal of coffee is widespread, and with high-quality offerings, c-store operators will notice an increase in "product selection" customers, which according to The NPD Group make up more than 20 percent of the c-store buyer population.
When evaluating ways to increase your profitability, I encourage you to determine what your conversion rate is today and identify ways to drive that rate higher. Premium coffee and tea products can jump-start your conversion rate and store profitability in the right direction, although in the end it's about connecting with the customer inside your store.
Gary Lillian is president of Javo Beverage Co., where he is responsible for the company's commercial strategy and development of key industry alliances. Before Javo, Lillian held executive-level sales and marketing positions at PepsiCo, Ford Motor Co., Pennzoil-Quaker State and The Clorox Co. He also founded start-up companies, including a beverage company and a packaged food company, later sold to Nestle. Lillian earned a bachelor's and master's degree in business administration from Northwestern University.
Editor's Note: The opinions expressed in this column are the author's, and do not necessarily reflect the views of Convenience Store News.
So let's talk about how to get them to step away from the pump and up to your cash register, with a coffee in hand for purchase. The latest research shows 79 percent of c-stores in the United States sell motor fuel. The customer is there to fill their tank, but how do you lure them into the store for other purchases? The key to driving profitability is to measure your conversion factor, or the percentage of customers who visit your location and make a purchase inside the store.
The conversion factor is more important than ever since traffic is flat or declining in most dayparts. According to The NPD Group, breakfast visits declined two percent in the fourth quarter of 2009, and traffic did not grow in any foodservice daypart last year. In today's environment, the growth plan likely to be most successful is the one that strives for more effective conversion. Let's take a look at how c-stores can achieve this through their beverage program, among other things.
Cast a Wide Net
The best way to drive sales is by focusing on products with the broadest consumer appeal. Coffee and carbonated sodas are two obvious choices. Consider coffee's appeal: NACS' annual report shows that monthly hot dispensed beverage sales average $6,908 per store. At an average transaction price of $1.15, that's 200 cups per day. Operators clearly agree with coffee's importance to the conversion factor since the 2009 NACS Consumer Fuels Report indicated that hot coffee programs are the leading product category to attract customers into the store.
Additionally, iced coffee has fast become a growing category with consumption increasing more than 20 percent in 2009 over the previous year, and it is now a part of nearly 9 percent of foodservice orders. Not to mention, more than 95 percent of those iced coffee drinks are purchased outside the home, providing a very compelling growth opportunity for c-stores.
With those numbers in mind, it is critical that convenience store operators stock quality products that will entice customers to purchase their daily iced coffee from them instead of pumping their gas and then heading to the nearest coffeehouse.
Remove Obvious Conversion Hurdles
One thing seems very clear -- women make up nearly half of all gas purchasers, yet they are a much smaller percentage of the in-store purchasers. Why is that? Look around for cues that are preventing gas customers -- women in particular -- from venturing in for a snack or beverage.
Promoting products, such as iced coffee or iced tea -- both big sellers among women -- at the pump is a great way to target females. You also must remove hurdles that will prevent shoppers from coming into the store. Women, in particular, are concerned about crossing and entering a dark or untidy store lot, so be sure to have a clean and well-lit parking lot.
Sell Them Some Time
The Achilles heel of c-stores' main competitor, coffee shops, is preparation time. Your coffee-shop competitor believes their customer is there for the "experience." However, the part of the experience they don't enjoy is standing in line for six minutes waiting for a skinny, two-pump mocha latte to be finished while they wait on a cup of black coffee.
Most of the time coffee shops' latte-sippin' consumer is the same time-pressed customer you serve. They want their coffee right now -- and that's your sweet spot. A shopper's limited time also can prevent an iced coffee or tea purchase, or any additional conversion purchase for that matter. This is where marketing and product positioning come in to play. As mentioned above, advertising at the pump is very effective, as is signage within the store -- at the register and over the beverage area -- clearly communicating the coffee is fresh and ready now.
As you can see, products with broad reach, such as premium iced coffees and iced teas can absolutely be a leader in conversion sales. After all, there is no doubt the appeal of coffee is widespread, and with high-quality offerings, c-store operators will notice an increase in "product selection" customers, which according to The NPD Group make up more than 20 percent of the c-store buyer population.
When evaluating ways to increase your profitability, I encourage you to determine what your conversion rate is today and identify ways to drive that rate higher. Premium coffee and tea products can jump-start your conversion rate and store profitability in the right direction, although in the end it's about connecting with the customer inside your store.
Gary Lillian is president of Javo Beverage Co., where he is responsible for the company's commercial strategy and development of key industry alliances. Before Javo, Lillian held executive-level sales and marketing positions at PepsiCo, Ford Motor Co., Pennzoil-Quaker State and The Clorox Co. He also founded start-up companies, including a beverage company and a packaged food company, later sold to Nestle. Lillian earned a bachelor's and master's degree in business administration from Northwestern University.
Editor's Note: The opinions expressed in this column are the author's, and do not necessarily reflect the views of Convenience Store News.