September 22, 2019
External Branding and Customer Acceptance
In a previous article, “Retail Brand Re-Alignment”, I suggested that proprietary innovation not copycat segmentation yielded the greatest return for each dollar invested. What I did not touch on was for this to occur it requires the company’s internal audience (their employees) be aligned with its external audience (its customers) and that their product be unique.
This builds upon the merchandise assortment strategy of “total store differentiation”. It is essential to recognize that if c-store companies borrow equity or create it, success is ultimately contingent upon “customer acceptance”. While this holds true to a more limited degree when borrowing equity it is especially important in creating equity.
Customers’ expectations have been pre-established when companies borrow equity. This is especially true when companies borrow equity from national fast food chains or what has become to be known as fast feeders. Consumers already have accepted the concept but have different expectations relative to cleanliness, fast and friendly service, fresh product and selection between chains.
The company borrowing the equity in this case needs to realize that these expectations have already been established and their mission is to meet or daily exceed the minimum acceptable standard for those customers so that they will view them as a viable location. When companies try to create equity by establishing a proprietary foodservice operation the customer experiences the development of each of the above variables i.e., cleanliness, execution etc., first hand. The key here is to realize that your offering is going to be held to minimum acceptable standards but judged on the highest in the industry.
As a result firms that borrow equity are limited in their upside potential to the ongoing strength of the brand they selected and the convenience of their location versus the additional locations of the parent companies in markets where they do business. Whereas those that create equity properly can develop their customer base on the power and the uniqueness of their brand.
Having said that, copycat segmentation, is when firms borrow equity in markets that are already saturated with similar concepts and/or when they copy the markets food offerings as opposed to taking the time to develop something unique. While there are no universal rules or performance or norms across markets when companies establish a proprietary program, they should go into it expecting to exceed the return they would receive when borrowing equity, or why do it?
Unfortunately, in all too many instances our experience indicates that this is not the case. It seems that many c-store companies are satisfied if their program simply exceeds what they were doing. In addition, even if it does not many leave it in and try to tweak it over time as opposed to stepping back and saying this just isn’t working and start all over.
At a minimum we suggest that a proprietary program should contribute 50 percent of sales and deliver a net margin of 52 percent. If your program is not meeting those minimum financial goals I suggest that you find out why.
There are several ways to do that but, the first step is to assess whether or not it is your positioning strategy or how all facets of the program has been executed. The quality of the food, fast friendly service, cleanliness of the facility etc…First step, conduct customer-centric research that is data driven to explore the “why” you are not hitting the goal. In many cases the result will be that you have not realized your original positioning strategy. You have under-delivered on the brand’s promise. As a result the sales goals have fallen short of your minimum expectations. In this case, the positioning is sound.
The second scenario that will surface is that you have achieved your original positioning strategy, but the customer just doesn’t care. In this case you have delivered on the brand’s promise but the customer does not see the value, so tweaking it will not matter. Start over! The foundation of Integrated Marketing Communications is to understand your customers’ expectations and exceed them in everything you do.