RUNNING HEAD: A SHIFT IN MARKETING

A shift in marketing: 7-Eleven case study Brandman University MKTU 605 - Marketing Management

7 Eleven 2 March 12, 20137-Eleven case study Introduction 7-Eleven Japan and 7-Eleven Inc. are two very different operations; from the demand of the customers to the service provided, 7-Evelen Inc. must learn a new way of marketing or cease to exist. The store in Japan met the demands of the consumer by catering to the dietary needs of the Japanese people while 7-Eleven Inc. was stuck in a conventional thinking convenience store rut. Jim Keyes, CEO of 7-Eleven, Inc. began working to adopt the operations of 7-Eleven Japan because of how well the chain was doing overseas. Keyes understood the differences between the Japanese chain and the operations in the United States; he knew it would be a great challenge to introduce fresh foods into the 7-Eleven Inc. chains. Marketing and advertisement played a big role in persuading new customers to come into the stores and kept the faithful customers happy. Introducing fresh foods, fruits and hot foods would increase competition amongst fast food restaurants and markets. Advertisement and marketing of 7-Elevens new vision would have to be done through various means in order to inform customers of the change. With the economy slowing down and more adults in the household working, the consumer will gravitate towards companies that offer more bang for their buck. Convenience, value and price will all play a roll in the customers decision to purchase products on the run. 7 Eleven Japan versus 7 Eleven United States 7-Eleven Japan has worked hard to be the largest convenience store chain in Japan (Bell et al., 2004). They focus on the dietary needs of their customer by providing fresh-made takeout meals. Most of the locations are in busy areas of the city where they rely heavily on foot traffic. 7-Eleven Japan introduced a system in the 1970s called point of sale system. After numerous upgrades to the system, the store clerks had the ability to enter into the register the age and

7 Eleven 3 gender of the buyer to help 7-Eleven Japan understand which products appealed to the different customer base (Bell et al., 2004). Additionally, the company also valued feedback from the customer. They would use this feedback to develop with suppliers new, more popular products (Bell et al., 2004). Toshifumi Suzuki, the chairman and CEO of 7-Eleven Japan involved all of his employees into the decision making process. The stores did not only rely on the point of sale system to reorder merchandise, they also had the responsibility of managing and ordering merchandise (Bell et al., 2004). Suzuki said, It is very important to keep our employees sensitivities sharp enough to see where customers are headed and not let 7-Eleven Japan get behind changes in taste (Bell et al., 2004). Additionally, Suzuki believed that providing his employees with the tools they need to succeed was the best option for the chain to grow. Suzuki estimates that the average consumer spends about 500-1,000 for lunch (Bell et al., 2004). Eating out has become a common occurrence. Customers relied on places like 7Eleven to offer ready-made meals at a reasonable price. Aside from having food already at the establishment, 7-Eleven also offered food for customers that could be pre-ordered a day prior as a take home meal. In addition to providing fresh foods, 7-Eleven also provided a series of other services including photo finishing, self-service color print copiers, and payment of utility and other bills. 7-Eleven Inc. in the United States were extremely different than those in Japan. 7Eleven stores throughout the United States were just convenience stores. The products that people defined as convenience included beer, soft drinks, Slurpees, and cigarettes (Bell et al., 2004). As times passed so did the needs and demands of the customer; however, 7-Eleven Inc. did not keep up with the changes and stopped creating value to the customer (Bell et al., 2004).

7 Eleven 4 Keyes said Southland Corp. had never paid much attention to its Japanese licensee and therefore never realized that Ito and Suzuki had reinvented 7-Eleven with the fresh food concept (Bell et al., 2004). Eating habits differ greatly from Japan to the United States. Fresh food accounts for about 40 to 45 percent of 7-Eleven Japan's sales compared to just 10 percent of the sales in the United States and Canada, according to estimates from industry analyst Kit Case at Southwest Securities (Bhatnagar, 2004). 7-Eleven in the United States is famous for the Slurpee and the Big Gulp (7-Eleven, 2009); consumers are used to seeing that as the norm in convenience stores. To change this paradigm, Keyes hired a number of senior executives from companies like PepsiCo with experience in food and marketing to meet its goal of change (Bell et al., 2004). Keyes tried to emulate the Japanese concept in the U.S. Keyes is taking initiative and making a change. To some organizations change is something that is avoided because it is too much work. Keyes is looking at what works in other countries and applying it to the United States. Testing fresh-made foods in a selected few stores is a good idea because he does not know how the population will react to it. He took the initiative and created the combined distribution center which consisted of 13 commissaries, 11 bakeries, and 22 distribution centers to help with the distribution of the fresh-made foods (Bell et al., 2004). Keyes has established a sense of corporate recognition for their vendors. Additionally, independent franchisees hesitated to be part of the new vision of 7-Eleven by continuing to use old vendors that did not meet the quality and standards that 7-Eleven Inc. found as acceptable (Bell et al., 2004). Keyes understood the resistance from the franchisees so

7 Eleven 5 in order to enforce the change, renewed contracts required they purchase a significant amount of products from 7-Eleven Inc.s approved vendors. Although Keyes was doing a good job trying to mimic the Japanese way, one thing that he was not tuned into was the customer. Meeting the needs of the customer like the Japanese does is something that would help increase the revenue of the company. The Japanese have the Point of Sale system that uses the demographics of the customer to better serve them. That alone helps the company see what is being sold and to whom. Additionally, the Japanese also conduct surveys and had specific groups of people as their target market. Keyes has been working hard to make the changes in the United States, and it is a slow process but with the help of the customer it will be a bigger success. Marketing efforts for 7-Eleven in the United States Introducing original items in the stores is the first step in marketing. As changes take place, regular customers to the 7-Eleven stores will notice the changes immediately. Word of mouth will become another way the stores will get a customer base to try their new stores. As the stores in the united states continues to change and adapt to the healthier lifestyle of Americans, fresh food product development will take a critical role in marketing this new image of 7-Eleven. The selected stores that have been chosen to partake in introducing fresh foods and hot foods have said their sales have doubled since they began selling the new products. Targeting a specific demographic is another way for 7-Eleven to market their new concept. For example, 7-Eleven stores in New York City offer food for vegans (Goldwert, 2010). If the test products in the New York locations do well other stores throughout the country may soon be introduced to the products. Finally, television, radio or digital media advertisement is an option

7 Eleven 6 that 7-Eleven Inc. can benefit from; Winer (2007) states that advertising can reach a large number of customers efficiently (pg. 273). Implications for competitors in the Food & Beverage industry With the introduction of fresh-made foods into the convenience store business, creates competition to the markets and the fast food restaurants. Retail consultant Howard Davidowitz said regarding the 7-Eleven move, "This radical transformation could have a tremendous impact on American food stores because it becomes another alternative channel for consumers... Grocery stores already are suffering at the hands of discounters and dollar stores and here comes 7-Eleven, which is almost on every street corner around the country (Bhatnagar, 2004). With a down economy, consumers are looking for quality products at a low price. Kathy Hasty, 7Eleven senior director for hot foods said, People are watching their dollars and looking for value more than ever, but they still have busy lives and need convenience. 7-Elevens new served-hot foods are an attractive alternative to traditional hot-food retailers (7-Eleven, 2009). Future of food distribution to consumer While singles still spend the largest portion of food budgets eating out, the increase of busier and busier lives will cause a majority of people to buy food already prepared and eat it at home or on the run. Buying conveniently already fresh-made and heated food saves time and in some cases, money. Most parents that do not have time to cook after work will increasingly purchase food being distributed to locations like 7-Eleven. Additionally, as lives continue to get busier and busier, families will spend less time preparing foods at home or the foods they do prepare will be taken to eat on the run. For those still willing and able to prepare food at home to eat at home or take with them, the marketing changes made to 7-Eleven will not have any effect on them.

7 Eleven 7 Lessons learned for Market Management and key takeaways Market managers are not limited by boundaries when it comes to marketing a new idea. They can look outside the box and see what other countries are doing that works for them. Since each countries culture is different, the market manager will need to tailor the marketing plan to fit the culture they market in. 7-Eleven Inc. has learned a lot from 7-Eleven Japan. The Japanese move slowly, deliberately, collectively and politely when dealing in business affairs. These are some traits the United States might want to consider adopting in their business practices. Providing a customer with a quality product will keep the customer coming back. Having a good relationship with the vendors will facilitate transactions and together will allow the organization and the vendors to work together to meet the customers needs. Keeping the

customers needs a top priority will show the customer the organization cares. Loyalty to the customer will keep them coming back. Customer service is a must; good customer service will gain customer loyalty and maintaining high service standards will accomplish this (Bell et al., 2004). Conclusion 7-Elevens in Japan differ so much from the 7-Elevens in the United States. Although they are all 7-Elevens their priorities differ. The Japanese are all about taking care of the needs of the customer. In the United States, their priorities were elsewhere. The new CEO of 7-Eleven Inc., Jim Keyes, has been working to adapt the United States 7-Elevens to mimic operations from the Japanese chain. He introduced fresh foods, which was been a huge success, in the stores that were chosen to be the test platforms for the new products. 7-Eleven Inc. introduced the use of Combined Distribution Centers to be able to distribute their products to their different stores in a timely manner and while still fresh. Having a good working relationship between 7-Eleven Inc.,

7 Eleven 8 distributers and vendors has made doing business better for everybody, especially the vendors who no longer feel taken for granted. The introduction of fresh foods into the convenience store stream will create competition with the fast food restaurants and markets. With a down economy, consumers will look for businesses that will give them more for their dollar. More families with busy lives will look for places where they can stop and pick something up that has good quality and a low price. 7-Eleven Inc. is slowly climbing their way back as the number one convenience store like their counterparts in Japan. One thing that Keyes needs to keep in mind is the customers needs. After all, it is the customer who will either make or break a business

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References: 7-Eleven Newsrooms. (2009). 7 Eleven offers hot foods menu D-FW area stores heat it up with specially designed high speed oven. Retrieved from http://corp.7eleven.com/Newsroom/2009NewsReleases/7ElevenOffersHotFoodsMenu/tabid/339/Defa ult.aspx Bell, D. E. & Hogan, H. (2004). 7-Eleven, Inc. Harvard Business School: Boston, Massachusetts Bhatnagar, P. (2004). New flavor for 7-Eleven? King of Slurpee and big bite hot dogs may be on the verge of an extreme makeover. Retrieved from http://money.cnn.com/2004/09/29/news/midcaps/seveneleven/ Goldwert, L. (2010). 7-Eleven to offer vegan foods options at 8 NYC locations; Noodles, dumplings have no mean, dairy, egg. Retrieved from http://articles.nydailynews.com/2010-12-03/entertainment/27083252_1_noodles-vegandumplings Winer, R. S., & Dhar, R. (2011). Marketing Management (4th Edition ed.). Upper Saddle River: Pearson Hall.