Mini Case: Store$24$

Store$24,$ a New England convenience store retailer, had $75$ stores located throughout the Northeast

region. The stores were similar with respect to many aspects of their operations, including

compensation, technology, management structure, product pricing, and product selection.

However, the stores varied widely in size, geographic location, market demographics,

competition, and employee skills.

Change of Strategy: Efficiency Only $$ Efficiency $+$ Differentiation

The traditional operating strategy in the convenience store industry consists of fast, efficient,

and friendly service, clean surroundings, high product quality, and broad product selection.

Before FY $1998$ and after FY $1999,$ Store$24$ followed this traditional strategy exclusively.

However, during FYs $1998$ and $1999,$ Store$24$ sought to further differentiate its stores by creating

entertaining in$-$store atmospheres. Thus, Store$24$ characterized its strategy during this time as

consisting of a traditional efficiency component, labeled as $$Cause You Just Can$$t Wait$$

$($BYJCW$)$ and a differentiation component, labeled as $$Ban Boredom$.$

Senior management believed that the differentiation component should create a stronger sense of

loyalty between Store$24$ and its target customer base of young, urban adults between the ages of

$14$ and $29$ years. As one senior manager explained,

$$I believe this would really play off of the urban, young adult market. Marketers

know that this demographic gets bored easily and needs to be stimulated. We

wanted this group to always see new and different things in the store.$$

Store$24$ actively promoted its new $$Ban Boredom$$ strategy on billboards, buses, and trolleys.

Stores placed a large display case at the head of the center aisle to feature the promotional items

for the current theme, such as life$-$sized cutouts of movie stars and $$3\mathrm{.}99$ videos for an $$old

movie$$ theme.

In contrast to the traditional efficiency component, the differentiation $$Ban Boredom" component

allowed the store managers autonomy in its implementation. Although corporate defined a theme

and provided the display cases, store managers possessed considerable flexibility in executing the

theme throughout the store. Thus, although the physical environment was important to the

differentiation strategy, the skills of the managers and crew were at least equally important to the

strategy$$s success. As Store$24$s controller explained,

$$Managers and crew that were already skilled in our core $$Cause You Just Can$$t Wait$$

strategy, and other basic store operations such as cash, labor, and inventory control, were

able to devote considerably more time to implementing the Ban Boredom strategy and to

tailor this strategy based on knowledge of their customers. These skills made it easier to

build the Ban Boredom strategy on top of the basic efficiency one.$$

The interaction between store employees and customers were key to the Ban Boredom strategy$$s

overall success. Store$24$s senior management intended for the innovative displays and

promotional items to serve as a point of interaction between employees and customers. The

belief was that this interaction would help Store$24$ build a relationship with customer and cross$-$

sell high margin products. The controller explained:

$$The displays under the Ban Boredom strategy had the dual intention of building a rapport

with customers and bumping up the average sales per customer. We expected store

management and crew to use the displays as $$ice$-$breakers$$ in talking with customers. In

addition, the margins on the promotional items featured under the Ban Boredom strategy

were typically two to four times the margins of our traditional products. When customers

were browsing or $$window shopping$,$ we encouraged store crew to direct the customer$$s

attention to these promotional items.$$

Balanced Scorecard: Communicating Strategy & Rewarding Performance

Store$24$ created a Balanced Scorecard to communicate the new strategy and reward

performance. On the Balanced Scorecard, the measures and the links between these measures

illustrated the qualitative impact that improving a given metric would have on overall company

performance. Store$24$ collected information on a variety of performance measures relating to the

four perspectives of Balanced Scorecard. Some key metrics are defined as follows:

$-$ Financial Perspective:

In addition to sales and margin, the key metric is store profit, which is profit of the store

before corporate overhead allocations, rent and depreciation.

$-$ Customer Perspective:

$$ Telephone surveys conducted by a third$-$party research firm on name recognition of

Store$24$ and customer ratings on various dimensions of service quality.

$$ Customer feedback on in$-$store comment cards about the product selection and other

factors that would persuade them to shop at Store$24.$

$-$ Internal Perspective:

Store$24$ translated its strategies into a set of store$-$level operating standards. Management

measured store$-$level conformance with these standards