Marketing Campaign Evaluation

UW OshkoshCorner Convenience Store

Marketing Analytics – Fall 2014Jennifer Eickert, Lauryn Jashinsky, Logan Moore, Madeline Rynkiewicz

10/8/2014

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.

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

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

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

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.

Evaluation of 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

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

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.

Appendix 1

Appendix 2

Appendix 3

ROMI Corner Convenience Store Sept Oct Nov Dec Jan Feb Mar Apr May JuneBase Case Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10

Total Revenues 63,500.00$ 69,000.00$ 65,000.00$ 55,000.00$ 50,000.00$ 85,500.00$ 72,500.00$ 70,000.00$ 60,000.00$ 51,000.00$ COGS (54,896.41)$ (59,651.21)$ (56,193.17)$ (47,548.07)$ (43,225.52)$ (73,915.63)$ (62,677.00)$ (60,515.72)$ (51,870.62)$ (44,090.03)$

EBIT 8,603.59$ 9,348.79$ 8,806.83$ 7,451.93$ 6,774.48$ 11,584.37$ 9,823.00$ 9,484.28$ 8,129.38$ 6,909.97$ Taxes -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

Base Case Cash Flow 8,603.59$ 9,348.79$ 8,806.83$ 7,451.93$ 6,774.48$ 11,584.37$ 9,823.00$ 9,484.28$ 8,129.38$ 6,909.97$

Upside Groth Rate Coeff.Marginal Upside Growth rate 5% 7% 9% 11% 13% 14% 14% 14% 14% 14% 100%

Projected Growth Rate 5.00% 7.00% 9.00% 11.00% 13.00% 14.00% 14.00% 14.00% 14.00% 14.00%Total Revenues 66,675.00$ 73,830.00$ 70,850.00$ 61,050.00$ 56,500.00$ 97,470.00$ 82,650.00$ 79,800.00$ 68,400.00$ 58,140.00$

COGS (57,641.23)$ (63,826.80)$ (61,250.56)$ (52,778.36)$ (48,844.83)$ (84,263.82)$ (71,451.78)$ (68,987.92)$ (59,132.51)$ (50,262.63)$ Marketing Costs (2,922.52)$ -$ -$ -$ -$ -$ -$ -$ -$ -$

EBIT 6,111.25$ 10,003.20$ 9,599.44$ 8,271.64$ 7,655.17$ 13,206.18$ 11,198.22$ 10,812.08$ 9,267.49$ 7,877.37$ Taxes -$ -$ -$ -$ -$ -$ -$ -$ -$ -$

Upside Cash Flow 6,111.25$ 10,003.20$ 9,599.44$ 8,271.64$ 7,655.17$ 13,206.18$ 11,198.22$ 10,812.08$ 9,267.49$ 7,877.37$

Incremental Cash Flow (2,492.34)$ 654.42$ 792.61$ 819.71$ 880.68$ 1,621.81$ 1,375.22$ 1,327.80$ 1,138.11$ 967.40$

(2,492.34)$ (1,837.93)$ (1,045.31)$ (225.60)$ 655.08$ 2,276.90$ 3,652.12$ 4,979.91$ 6,118.03$ 7,085.42$ Payback

NPV $3,073.53IRR 34%

Discount Rate 10% Sensitivity AnalysisTax Rate 0% Growth Rate

COGS 86% $3,073.53Marketing Costs 100% 3,073.53$

Printing Costs (24,000 coupons) (360.00)$ 90% 2,500.50$ Cutting Cost (100.00)$ 80% 1,927.46$

Coupon Redemption Rate 10% 70% 1,354.42$ Coupon Redemption Expense (2,400)$ 60% 781.39$

Flyers (200) (18.00)$ 50% 208.35$ Labor (6hrs. at $7.42/hr) (44.52)$ 40% (364.69)$

TOTAL (2,922.52)$ 30% (937.72)$ 20% (1,510.76)$ 10% (2,083.80)$

0% (2,656.84)$

Payback in the middle of the 4th

month