This document summarizes a proposed marketing campaign for the Corner Convenience Store on the University of Wisconsin - Oshkosh campus. The campaign would offer students a $1 coupon for every $10 they spend at the store during the month of September. Students would have a year to redeem the coupons. The goal is to increase awareness and sales by incentivizing students to shop on campus rather than leaving for other options. Financial metrics like ROI, payback period, NPV, and IRR are positive, suggesting the campaign would be profitable. However, the summary concludes the store's current growth makes the campaign's benefits uncertain and recommends exploring individual product or loyalty promotions instead.
2. Introduction
The Corner Convenience Store (C-Store) opened in Reeve Memorial Union at the
University of Wisconsin – Oshkosh in 2001. It was previously located in Blackhawk
and was relocated when Reeve was renovated. The Convenience Store itself is a
small, one-stop shop, similar to a gas station convenience store that offers a wide
variety of products. It functions as one operation along with the University Books
and More, but the two are run on separate accounts. Kathleen Kaltenbach is the
director of the entire operation and Thomas Wolf is an Assistant Director who is
also the C-StoreManager.
Some specific products offerings found at the C-Store are a variety of non-perishable
foods, such as; candy, chips, frozen meals, and granola bars. They also offer
beverages ranging from energy drinks to juice. While the selection of household
good and grooming products is much less, the C-Store also offers shampoo, plastic
cutlery, and other dorm room essentials. They have contracts with Pepsi and Cedar
Crest, so these brands are featured more heavily and may be promoted more often.
The current promotion activities are relatively small in scale, only encompassing a
low visibility Facebook page and signs throughout Reeve.
However, The C-Store is convenient for students, as it is open Monday through
Saturday from 7:30 AM to 10:00 PM and on Sundays from 12:00 PM to 10:00 PM.
They accept cash, debit, and Titan dollars for all transactions.
3. Being located on campus, the C-Store mainly targets students of UW – Oshkosh and
anyone working on campus. Since their customer base is extremely limited, their
market share is about 2%. They are directly competing with Blackhawk Commons,
Reeve Memorial Dining, and Mi Taza Cafés for business on campus. Students with
meal plans have already paid to receive meals at these locations. Other competitors
would be nearby gas stations, pharmacies, and grocery stores that are accessible for
students with means of transportation.
Description of the Marketing Campaign
We are proposing that the UWOSH Corner Convenience Store offer students coupons
for purchasing products at the store. Students will receive a $1.00 coupon of free store
cash for every $10.00 they spend in the store. The marketing campaign will take place
for the entire month of September. Students can purchase items anytime during
September and receive their coupons. The cash will be redeemable for an entire year,
expiring the following September. The Corner Convenience Store will market this
campaign through its Facebook page, the UWOSH Facebook and Twitter pages, and
through the use of fliers and signs posted throughout the various academic buildings
and residence halls. The goal of the promotion is to increase awareness of the store for
students and give students an incentive to shop this convenient on-campus store over
the alternative of leaving campus to get whatever they may need.
We believe that the Corner Convenience Store will benefit from this campaign, because
although students have heard of the store, they often forget that it is an option for them
to do some shopping. By promoting this campaign, students will become more aware of
4. the store and have the option of receiving free store cash if they decide to shop on-
campus, instead of off. Additionally, students will have an entire year to use their cash.
This will help increase student traffic to the store above and beyond the month the
campaign is running each year.
Nonfinancial Metrics
To better understand the current student awareness of the Corner Convenience Store
and predict the growth the marketing campaign will have on the store’s sales, we
distributed surveys to 66 UWOSH students. 33 students received survey 1, the control
group. 33 students received survey 2, the experimental group whose surveys included a
mock representation of our campaign (Please see Appendix 1 & 2 to view the surveys).
Our surveys evaluated the awareness of the convenience store and NPS as nonofficial
metrics and purchase intention as a financial metric. After analyzing our results, we
found that there is 88% awareness for the store. We determined that the NPS score
before the promotion was -36%, and the NPS score after the promotion was -27%. The
NPS score increased slightly with the promotion, but neither NPS score reflects that the
store has highly loyal customers since both values are negative.
Financial Metrics
Data and Assumptions
We were able to collect data from the UW Oshkosh Corner Convenience Store
through a meeting with the store manager, Thomas Wolf. He provided us with
financial statements to help us generate our ROMI for this marketing campaign. The
5. financial statements show that the Corner Convenience store generated about
$640,000 in total annual revenue for the school year. We were given the average
daily sales on a weekend and the average daily sales on a weekday for the Fall and
Spring semester. We then estimated the average monthly revenue for the first 5
months (Fall) to be $60,500 and the average monthly revenue for the last 5 months
(Spring) to be $67,800. We adjusted the monthly revenues to account for decreases
in revenue during breaks (when students are not on campus regularly).
These estimates of the total monthly revenue are used in our base case assumption.
From our meeting with the store manager, we were informed that because the store
is part of a state institution, most items (such as food and drinks) are tax exempt.
Non-food items have the same tax rate as the state which is 5%. Since the store itself
is tax exempt and the majority of their product selection is food and drink, we are
stating that there is no tax rate. Then we calculated our COGS by dividing the total
annual expenditures for the school year, which were about $555,000, by our total
annual revenue. Based on this, we estimated the cost of goods sold at 86%.
For our projected growth, we estimated it according to our survey results of
students that stated how likely they were to purchase anything from the store
before and after the promotion. We chose a projected average growth of 12% for the
ten month marketing campaign. We are projecting an increase in total revenue for
the first month to be 5%. As awareness of the promotion and store increases
throughout the school year, we except to see an increase in the growth rate reaching
6. a maximum of 14% by the 6 month and remaining constant for the rest of the
campaign.
Finally, we estimated the monthly marketing costs as the total of the printing costs
of 24,000 coupons from Copy This ($360), processing fees for cutting the coupons
($100), flyers to hang around campus ($18) and 6 hours of labor for hanging up the
flyers about the promotion and updating the store’s Facebook and Twitter pages at
an approximate rate of $7.42/hour. According to our survey, we are estimating a
coupon redemption rate of 10% because participants stated they would be more
likely to purchase items from the store with this promotion. Taking this redemption
rate multiplied by the total number of coupons handed out, we also added $2,400 to
the total marketing costs. This marketing cost will only affect the first month due to
the fact that we will only be handing out the coupons in the first month but they are
effective through the end of the school year.
Evaluationof the Marketing Campaign
The UW Oshkosh Corner Convenience store marketing campaign (a coupon offering
a $1 voucher for future purchases after spending $10) will run for a ten month
period that matches the school year. We used the incremental cash flows to
determine the Return on the Marketing Investment (ROMI) which was calculated by
subtracting the base case cash flows from the upside cash flows. The Payback for the
marketing campaign occurs in the 4th month, the Net Present Value (NPV) of the
marketing campaign is estimated to be $3,073.53, and the Internal Rate of Return
(IRR) is estimated to be 34% (Appendix 3). Based on these three financial metrics
7. used to evaluate this marketing campaign, the UW Oshkosh Corner Convenience
Store will receive a low, yet still positive, ROMI for this campaign.
We conducted a sensitivity analysis on the expected growth rate to further evaluate
this marketing campaign. By multiplying the monthly expected growth rate by the
growth rate coefficient we can calculate the expected growth rate. In order to
maintain a positive NPV, the campaign must have a growth rate of approximately
40% of the assumed growth rate or higher.
In addition to the financial metrics used to evaluate this marketing campaign,
different non-financial metrics could be used. We can measure take rate according
to how many of the 24,000 coupons distributed were redeemed each month. We
predicted the coupon redemption rate to be 10% according to our survey results,
resulting in 2,400 coupons being redeemed. In addition, by asking customers how
likely they would recommend the UW Oshkosh Corner Convenience store to a friend
or colleague on a scale of 1-10, they can calculate their Net Promoter Score (NPS).
We had an average NPS of -36% before the promotion and a NPS of -27% with the
promotion. According to these results, we will not have promoters of the store.
Conclusion
Although this marketing campaign has shown a slight degree of upside, our group
would not recommend it to the Corner Convenience Store. The primary reason
being that their recent sales within the past four semesters have been growing at a
much larger rate than earlier historical records. This suggests that they may be able
8. to continue their success by simply continuing their current operations and
promotions, while letting market forces and customer trends dictate their growth.
The effort to organize and promote the campaign will not be worth the Corner
Convenience Store’s allocation of resources if they can continue to remain profitable
anyways. If they are interested in offering a new campaign, they should research the
potential upside to individual product promotions, returning customer reward
programs, or new customer (freshman) incentives. The rationale behind this is that
their inventory frequently sees many new products, which consumers may need to
be incentivized to try. Also, since their customer base is cyclical (assuming
graduates will never purchase again), it’s important to target incoming students
who will have many opportunities to purchase from the Corner Convenience Store.
A rewards program may then make them a loyal customer throughout their years at
school. The limitations of our suggested campaign may be that it is too broad or
non-specific to engage to customers. With additional resources, these more complex
promotions should be evaluated as well.