In the past several years, convenience has been the motivating force behind selection of a vendor once the need for the product or service is established.
We live in a society that is driven by convenience. Just think about these examples:
- Banking – most of us have direct deposit, pay our bills online and drive through the ATM to get cash
- Pay-at-the-Pump – we scan our credit card to buy gas…if the credit card portion is out of order, we drive to another pump or gas station
- Drive-through Food – pick up food on the way home…if the lines are long, we may go elsewhere
- Internet on your Cell Phone – we “surf the web” and find out anything about anything, talk to friends and business associates, answer emails, from a tiny phone…or watch!
Today, we take for granted these conveniences that may not have been popular a decade or so ago.
What is convenience? Definition: “the state of being able to proceed with something with little effort or difficulty.”
Many successful companies have even taken convenience to a new level: 24/7!
While convenience has been the number one factor in determining the vendor once a need has been established, a certain level of convenience now seems to be the price of entry. Efficacy seems to be roaring toward the most important reason that consumers use a business. The word efficacy is defined as: “the ability to produce a desired or intended result.” In other words, efficacy is the ability to produce a consistent quality experience.
Let’s look at a couple of examples:
1. Wal-Mart versus Target
- Convenience – Wal-Mart will clearly win this battle when you consider the following:
- One Stop Shopping – Probably a tie
- Wal-Mart has over 4500 stores
- Target has 1800
- Many Wal-Mart stores are open 24/7; most others are open 6 am until midnight
- Most Target stores are “only” open from 8 or 9 am until 10 or 11 pm
- Efficacy – Target has better quality products; neater, cleaner stores; more checkouts open and generally nicer, better trained personnel
Results – While Wal-Mart continues to be the giant of big box stores, most people agree that the Target experience is much superior to the Wal-Mart experience. As a result, Target stores receive a 5% higher gross profit margin and a .4% higher net profit margin. While Wal-Mart’s net is shrinking by .1% year-over-year (a lot of money considering the size), Target profits are growing at a rate of .4% year-over-year. Wal-Mart has started closing many of their former 24-hour stores in favor of having cleaner, more organized stores during the day.
2. McDonald’s versus Chick-fil-A
- Convenience – McDonald’s wins hands down
- 14,350 stores versus 1887 Chick-fil-A stores
- Many McDonald’s open 24/7 versus no Chick-fil-A
- Chick-fil-A stores are all closed on Sunday
- McDonald’s has wider selection of foods
- Efficacy – Chick-fil-A has established extremely high standards for quality, processes, hiring, and training and requires hands-on owners.
Results – A couple of years ago, Chick-fil-A passed McDonald’s in same-store-sales. In 2014, average Chick-fil-A sales were over $3.1 million while second place McDonald’s were at $2.5 million. Industry experts expect same-store-sales for Chick-fil-A to exceed $3.5 million by 2018. According to the American Consumer Satisfaction survey, Chick-fil-A customers ranked 86% as completely satisfied while McDonald’s customers ranked 67%.
Conclusion – I believe that these two examples paint a clear picture that while having hours that accommodate your customer’s needs, it’s not all about being open longer than your competition. Rather, it’s about providing your customer a consistent experience that exceeds the experience that they will receive elsewhere. Consumers are becoming more and more quality conscious and are willing to reward those businesses with sound processes in place. As we study dealerships we find that the most profitable dealerships are those that have solid, written processes with checks and balances to assure compliance.