Marketing Plan

Marketing Plan – 7-Eleven Inc.

MKT -500

Harshkumar Soni

"If convenience stores are open 24 hours, why the locks on their doors?" If anyone knows, it's 7-Eleven.”

I. Product Description:

7-Eleven is 21st century type of convenience stores over the globe. It got started in the year 1927 supplying milk, eggs and bread on weekends and evening when all the other grocery stores were usually closed. 7-Eleven was originated in Dallas, Texas but now operates in countries like Canada, United States, Japan, Taiwan, Thailand and other countries. They have varieties of products in their stores ranging from snack foods, beverages to confectionaries, perishables and other food products. 7-elven also offers private label soft drinks like Slurpee and Big Gulp. Not only that but 7-eleven convenient stores are known for their fresh-brew coffee, sandwiches and bakery items. Additionally it provides in-store services, such as mobile phone, online gaming, as well as ATM machine, fax, print, scan, and photocopying services. It was named 7-ELEVEN when the stores' hours were extended--from 7 a.m. to 11 p.m. The company vision and mission was short but very meaningful as they quoted the mission as ”At 7-Eleven, our purpose and Mission is to make life a little easier for our guests by being where they need us, whenever they need us.” and their vision "Our Vision Is to Be the Best Retailer of Convenience”.

The marketing plan is to introduce,” 7-Eleven” convenient store into Lexington (Massachusetts) market. It is a town located only 10miles away from Boston which is often referred as “birthplace of American Liberty” and well known for its Historic image. It’s a good place to invest for future. The idea for business is to provide 24 X 7 fresh food and beverages to the people in the local area.7-Eleven is the world’s largest operator, franchisor and licensor of convenience stores. As mentioned before private label of 7-elven “Slurpee” is loved by the people as the drink comes with the slushed ice in many different flavors.

In order to establish any product or service, the market must be studied for the demand and supply it delivers. Town of Lexington is famous for its tourism activities as it is a historical place.  It is highly lucrative place for establishing businesses.  It consists of many high-tech industries including Biotechnology, Defense Research, Hospitality Management firms, and software fields.  Additionally, it has High-Quality public schools which are very famous for attracting residents. All of these factors create enormous demand for the service 7-eleven is planning to provide.  7-Eleven is recognized  for its services such as 24 hours store open policy, provide wide range food products, drinks,  accessories such as charging cables, printing and fax services, and they have own brand products. The services and products have created many loyal customers of this chain.  For example, it offers breakfast sandwiches, breakfast bites, coffee with various flavors for early birds. Many customers likes to get quick bites for lunch or late afternoon, so in order to satisfy their demand, it provides Salads, Spicy Wing Zings, Pizzas, Mini Tacos, Burritos and various kinds of drinks.  The 24hour open store strategy provides best of the both worlds for its loyal and potential customers because it fulfills both their vehicle for fuels and late night hungriness.   Additionally, 7-Eleven would gain business from tourists and business associates who travel from out of state because they are aware that these stores open 24 hours.   Indeed, if they need printing or fax services while they are on the road or in middle of the night, they know where to stop. The location which I have selected plays vital role because there is no other gas station in the area which satisfy demands of customers.  If customers need a gas or food in the middle of the night, they have to make a trip to Woburn, MA. Consequently, these services will be in great demand and will solve the problem of missing the wide range of services provided at one location and in dark hours. There are many competitors in the same industry like Exxon Mobil, Shell etc. While talking about convenient stores the market is share by many different companies.

II. SWOT ANALYSIS

Strength

· Convenient location

· Localized assortment

· High returns with limited investments

· High chances of Franchise Expansion

Weakness

· High product prices compared to giant stores like Wal-Mart

· Limited assortment offering

· People mindset as convenient stores rather than a place for meal

· Many alternative don’t allow attracting loyal customer

· Staff turnover

Opportunities

· Increment in fresh food products

· Increase share of meals

· Create own brand products

Threats

· Competitors - Convenient store , small-box retailers , super markets

· Higher shrinkage on fresh food could potentially impact margins

III. Target Market

 Business often finds difficulty in attaining needs and wants of customers over the broad market. Company has to identify and divide the market into smaller group which have distinct needs and wants. By market segmentation company can focus more on individual customers and can serve them effectively. When the market is divided into smaller segments, it becomes easy for a company to analyze market based on characteristics like geographic, demographic and psychographic. The success of the company highly relies on how better you understand your customer’s needs. While identifying what customers seek in your product can help the company to tailor their plan and appeal it to target market more successfully. 7-Eleven understands its target market which is divided into particular categories. These categories include age, gender, economic status, literacy or household size. After creating plans to address every category of target market, a business can expand and become successful. 7-Eleven is aware about their customers need, and their lifestyle, through which they can help people and become better at their expectations. People from different ethnic groups have different lifestyle which has to be understood by the 7-Eleven for providing them with better services. Furthermore, the expectations of the customers will be fulfilled that will have a huge impact on the customers who have different preference for each section. Demographic variables are so popular with marketers that they’re often associated with consumer needs and wants. In Lexington, Massachusetts where almost 50% of total population is in between 25 to 55 years people are more adapted to fast food and beverages. The market of Lexington town was attractive in selecting the demographic segments like age, sex, and lifestyle which could targeted for boosting up the revenue. Making children as a potential target, their services include are freebies, chocolate milkshakes, candies, Slurpee and so forth. Young people have a convenience of withdrawing money or prepaid reload at the ATM booths, energy drinks, various cold drinks, alcoholic beverages, cigarettes. For the teenagers, 7-Elevern provides games, movies, music cards, electronic accessories, and cold beverages. This is the reason 7-eleven is opened for 24 hours at many locations Overall, this convenience store is convenient and easy for people who have a busy lifestyle and need things in an emergency or something that can’t find apparently. The company has a very diverse and broad target market which gives better services than any other convenience stores in the world. To better help and improves the service, it is a key to understand the needs of customers for each section. According to Convenience stores news list 7-Eleven Inc. stands 1st with store count 8170 as on 2013. With 258 more stores in US compared to previous year 7-eleven has withstand amongst its competitors. While Sunoco Inc. as a competitor showed only 0.6 % growth. 7-Eleven holding a strong grip on convenience store market has favorable opportunities in the industry. The survey conducted by Wells Fargo discovered that sales of non-alcoholic beverage surged by 6.2 percent. Products such as Slurpee and other energy drink include major part of 7-eleven’s revenue. Thus, changing trend in consumption of beverages and fast food shows the revenue opportunities. 7-Eleven approximately generates 35$ billion annually from lottery business. By providing the lottery tickets on the fingertips of customers 7- Eleven enhances its customer services and thereby earn large amount of revenue. As we know that 7-eleven possess the growth opportunities by having reliable product the next step is to its measure it effective market segmentation. Kotler and Keller has established five key criteria i.e. Measurable, Substantial, accessible, differentiable and actionable. Products sold by 7-eleven are of average cost and can be purchased by common buyers. Thus, people can afford buying it and the purchasing power can be measured by company. As we discussed people of all age group are connected to 7-eleven stores cover wide market area. As 7-eleven stores are open 24 hours and 7 day a week it can be easily assessable by the target market. It specially distinguishes its marketing by attracting teenagers who are fond of fast meals and drinks.

IV. Competitive analysis

As other industry 7- Eleven has an intense competition in market. It faces competition from giant franchise stores along with locally owned convenient stores. In Lexington, 7-eleven faces competition from various convenient stores like Exxon Mobil, Sunoco, North side convenience stores etc. Exxon Mobil and Sunoco are considered as its two main competitors. Exxon Mobil is US based oil and gas company. The strong market position across the value chain enables ExxonMobil to take advantage of emerging growth opportunities around the globe. While Sunoco is also large Petroleum Company, that holds interests in logistics business. It has already established retail operations which provide a competitive edge as its growth prospect.

The SWOT analysis of Sunoco:

Strength	Established retail operations
Weaknesses	Dependence on third-party suppliers
Opportunities	Expansion of the retail marketing business
Threats	Intense competition

Sunoco is United States based company with around 10,500 employees. The annual revenue of Sunoco Inc. as reported on 2012 was around US$M 46824. The company operates into four different segment namely refining and supply, retail marketing, logistics. Sunoco as leading Gas stations has over 4900 outlets. It has a market share of 20.88% in Retail and marketing segments.

The SWOT analysis of Exxon:

Strength	Diversified geographic revenue stream
Weaknesses	Litigation and contingencies, declining financial performance
Opportunities	Rising global energy demand, addition of new oil and gas project
Threats	Economic conditions, challenging downstream industry environment.

Exxon Mobil has a market share of 19.76%, with oil and gas as its main product. Exxon Mobil recorded revenues of $420,836 million during 2013. It shows a dipped of 6.8% compared to last year.

ExxonMobil store has a merger with on the run convenience stores brand. While looking at their website we couldn’t find many details about the product it serves to the market. ExxonMobil are more focused with the gas and oil as the market segment then earing market share from convenience stores. While 7-elven owns the convenience business of the own brand has a much more variety of products then ExxonMobil. Target market is loyal to 7- Eleven as they are widely spread with more number of stores all over United States. Secondly, along with energy drink, foods they provide product such as cables, headphones, gaming, electronics etc.

Sunoco has a rich heritage and has been successful with its quality and excellence in convenience store business. The company serves market since last 125 years. In Lexington, the main competitor of 7-eleven is Sunoco Inc. It has always been confusion for customer between Sunoco and 7-Eleven as both located in the heart of the town. 7-Eleven differentiate its market when people find are driving by at mid-night and want to have some food as they have only one choice. Furthermore, the different meal menu provided by 7-eleven attracts more customer as Sunoco’s APLUS convenience stores provided only one or two meal deals.

Prior to launching full service convenience store 7-eleven would have a strong strategy for survival in competitive market. In perfect competition market where all the companies have homogenous product price strategy becomes an important issue. To estimate competitor’s likely response it is important to understand their objectives. To improve its market share and attract customers Sunoco’s APlus convenience store will expand its product line by adding more of soft-drink, coffee, meals etc. Unlike 7-elven none of the competitors provide 24hours service thus to strive in competitors market they would increase the operational hours. In their response 7 – eleven would provide home delivery in nearby radius with no cost making the customers more loyal towards them.

V. Financial Analysis

Owing to the huge capital that will be invested in setting up of 7-Eleven business in Massachusetts, a financial analysis has been undertaken to assess the viability of the business in future. The financial analysis has been undertaken through three approaches to derive an optimal review of the business viability. Consequently, break-even analysis, net present value analysis and sensitivity analysis have been used in undertaking the financial analysis

5.1 Break-Even Analysis

A break-even analysis is used to determine the sales level point that will derive zero profit for a given operation period. This is an essential financial analysis since it enables the management to determine the production level that should be maintained to avoid incurring losses. Thus, the breakeven analysis undertaken below reflects the sales level in units and in revenue that will need to be maintained by management to protect the venture from losses. In deriving the break-even point, fixed cost, variable cost, and price per unit have been estimated. The formula that has been employed in deriving the break-even points is reflected below.

Break-Even sales in units = (Fixed Cost)/ (Price – Variable cost) (Lunt, 2009)

Forecasted Fixed cost = $200,000

Average price = $150

Variable cost per unit = $50

Break-even sales in units = $200,000/ ($150 - $50) = $200,000/ $100 = 2,000 units

If break-even sales units are two thousand units, the break-even sales revenue that should be maintained is as computed below.

Break-Even sales units = 2,000 units

Price per unit = $150

Break-even sales revenue = 2,000 units * $150 = $300,000

Consequently, the venture will need to generate $300,000 of revenue annually to avoid sinking to any loss. The break-even sales revenue depicted in the computation above implies the venture will be profitable in future operations. This is because 7-Eleven is expected to generate sales revenue of $480,000, $480,000, $490,000, $520,000, and $550,000 in the next five years. Thus, the forecasted sales revenue is higher than required sales revenue level to avoid loss making. The ability of 7-Eleven to generate profit implies the venture should be undertaken since it is financially viable.

5.2 Net Present Value (NPV) Analysis

Net present value analysis has been employed to test the ability of 7-Eleven to give positive returns. This has been undertaken by considering the time value of money in future forecasted sales revenue. In undertaking the NPV analysis, the forecasted profit from forecasted sales revenue above for the next five financial years has been employed. In addition, a discount rate of 7% that represents the cost of capital has been employed in discounting profit generated. Initial cost of setting up 7-Eleven is estimated to be $550,000. Consequently, the computation below depicts expected return of the investment.

Year	Discount rate (7%)	Cash flow	Present value
0	1	-$750,000	-$550,000
1	0.93458	$180,000	$168,224.4
2	0.87344	$180,000	$157,219.2
3	0.81630	$190,000	$155,097
4	0.76290	$220,000	$167,838
5	0.71299	$250,000	$178,247.5
NPV			$276,626.1

The NPV analysis undertaken in the table above depicts that 7-eleven will make a return of $$276,626.1in the next five years. This is an indication that the venture is viable that satisfies its implementation.

5.2 Sensitivity Analysis

Owing to uncertainty of 7-eleven achieving the forecasted sales revenue, a sensitivity analysis has been undertaken to assess different scenarios that are likely to be experienced and affect viability of the venture. The three scenarios that have been analyzed are good, normal, and worst scenarios that are likely to happen. A good scenario is expected to allow the business to have a sales increase of 5% while the worst scenario will is expected to cause a sales revenue decrease by 10%. Consequently, the table below depicts potential impact of the three scenarios on ability of 7-eleven to achieve break-even in sales revenue level of $300,000.

Worst -10%	Normal	Good +5%
$432,000	$480,000	$504,000
$432,000	$480,000	$504,000
$441,000	$490,000	$735,000
$468,000	$520,000	$780,000
$495,000	$550,000	$825,000

The sensitivity analysis above depict that 7-Eleven will be able to hit the break-even revenue of avoiding losses. Consequently, the business should be accepted since it has high potential of helping the management to maximize profit.

VI. Pricing Structure

The pricing strategy that will be applied in promoting 7-Eleven business is penetration-pricing strategy. This involves setting price that is considerably lower than that of competitors in the market to attract higher consumers that is essential in generating sustainable sales revenue. Thus, the average price will be $150 that is lower by $20 dollars compared to price of major competitors in the industry. A lower price compared to that of competitors in retail industry is essential in enabling 7-Eleven to penetrate the market easily due to price sensitivity nature of consumers. Price sensitive consumers have tendency to buy goods or services that have a lower price over similar products carrying a higher price in market. Thus, the penetration-pricing strategy is instrumental in 7-Elene to be successful in the competitive industry since it will attract high volume of consumers. Similarly, the price selected for 7-Eleven will ensure variable cost and fixed cost are met to make profit. Indeed, the break-even analysis undertaken above depicts that the price selected allows lower sales revenue to be achieved to cover fixed and variable costs. Consequently, the pricing structure applied in running 7-eleven at Massachusetts region is optimal since it depicts it will attract more consumers and enable profit to be generated in future operations.

Reference

Kotler, P., & Keller, K. L. (2012). Marketing management. Harlow: Pearson Education.

Lunt, H. (2009). 2: Fundamentals of financial accounting. Oxford: CIMA.

Pride, W. M. (2010). Marketing. New York: Cengage Learning.

Pride, W. M., & Ferrell, O. C. (2008). Foundations of Marketing. New York: Wiley.

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http://lexingtonchamberofcommerce.vpweb.com/Quality-of-Life.html

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