October 1, 2015

Profit, Volume, Margin, Growth: Pursue Success on Your Own Terms

Insider, 7 Elements

How do you define success? More profits? A bigger network? More margin? More volume? Something else? Whatever that definition, it is the starting point that aims your strategy into the reality of volatile markets, increasing competition and evolving consumer spending patterns.

Today, technology tools and data science take some of the uncertainty out of decisions, from daily pricing at the pump and in the store to investments in sites. We say “some” of the uncertainty, because nothing is 100% certain in our fast moving industry. Every one of us has to make decisions that leverage all the expertise and intelligence available. We have to build structures that make the most of our collective wisdom. We have to invest in systems that enable us to stay ADAPTABLE, scaling and improving quickly and efficiently.

One of our clients is a cooperative in the Basque region. When they were still a prospect, we took a look at their pricing process. In all honesty, we saw what was a very effective system for their market and goals. They were getting incoming competitor information and sending out price changes within 15 minutes. Automating that system would bring the turnaround to five minutes, but in their market, that wasn’t going to impact their bottom line. They were justifiably proud of what they were accomplishing with one manager using four spreadsheets managing more than 600 million Euros of fuel.

We noticed that the man was wearing a cast on his foot. He had fallen down the stairs the day before and broken his ankle. He was resilient, but how robust is a pricing system with a single point of failure? The cooperative integrated a Kalibrate system not to improve on what the manager was already doing well but to add resiliency and scalability to the system.

Understanding what’s necessary to gain and sustain success doesn’t happen by accident. Kalibrate has been in the fuel and convenience retail industry for decades, and every day shows us some new angle. We wouldn’t have it any other way.


7 Elements Case Study

Kalibrate’s 7E Score gave the retailer a benchmark and starting point for new strategies and tactics. The Score revealed that the retailer was a typical Quartile 3 (low performance/low potential) operator. Their low scores in each area were combined with a Market Efficiency rating lower than average. This was cause for concern—and also an opportunity. Kalibrate identified three key areas for immediate focus: Market, Location and Pricing. Together, Kalibrate and the retailer were able to define near- and medium-term activities to address these capabilities.

First, we mapped the markets where the client was thriving and those where the company was simply surviving. We identified markets favorable for expansion and markets to avoid. This mapping also indicated potential for network rationalization and reinvestment. Before Kalibrate and the client began working together, the client had some sites that were too close together. While this created a sense of brand awareness with consumers in the market, it also brought about demand cannibalization. The client was essentially stealing customers from its own sites.

Second, within the markets where we expected the client to prosper, we pinpointed very precise locations of unfulfilled demand – locations where the client had the greatest opportunity to steal a march on the competition without re-introducing demand cannibalization. There is a fine line between improving brand awareness through market presence and becoming your own strongest competitor. Together, we were able to get this balance right.

Third, we agreed on a pricing strategy and site-level tactics to meet the retailer’s strategic imperatives. We aligned these tactics with the market and client’s overall brand messaging to provide compelling value to existing customers and build brand loyalty with new customers. The client had been working under the misconception that price had to remain low in order to compete with highly competitive new entrants into the marketplace. In reality, the improvements the client had made in the other 6 Elements earned the right to price at an appropriately premium level. The client successfully created enough difference between its own sites and other competing locations that its customers were willing to pay a little extra for fuel.

Download 7 Elements White Paper

Share this: