Kum & Go's Formula for Change
Midwest giant attempts to break the mold with new format, foodservice and local focus.
While Kum & Go is fostering employee loyalty, it also continues to make efforts at grabbing a greater share of customers’ time and money. This is evident in one of its key metrics: inside sales customer count, which the retailer tracks on a daily basis and breaks out in different ways— such as gas or inside only.
“The inside-sales customer count,” says Krause, “tells me: Are you still staying relevant with that shopper stopping in the store?”
For the past three years, Kum & Go has been collecting and tracking another metric to gauge its relevance: the Net Promoter Score, a system created by Satmetrix Systems Inc., Bain & Co. and loyalty expert Fred Reichheld. It asks the “ultimate question”: On a scale of one to 10, how likely are you to recommend a company (or brand) to a colleague or friend?
Based on their responses, customers are then divided up by level of enthusiasm. “Promoters” score the company a 9 or 10, “passives” score at 7 or 8, and “detractors” will score a company between zero and 6. To calculate the NPS, the percentage of customers who are “detractors” are subtracted from those who are “promoters.” (For more, see sidebar, left.)
Each month, Kum & Go surveys 10,000 to 30,000 customers about their shopping preferences and to ask the NPS question. The company is proud that its most recent score—78%—is close to that of Harley-Davidson and Apple Computer. But Folden points out that they are still early in the process.
“We’ve been looking at that information, and just trying to figure out what it means,” he says.
Two additional areas where Kum & Go is trying to nail down good metrics: Understanding the c-store consumer and their purchases, and how to best parse the data by transaction type: cash, debit or credit, for example. It’s part of a greater effort to explore what the customer wants, and tailoring the retail approach down to the local level.
“It used to be 10 years ago, you did one store set and hope you got 80% [of consumers],” says Folden. “I think all retailers today understand one size doesn’t fit all. If a neighborhood around a store has a Latino base, we’re accommodating the Latino customer that comes in. If it’s more affluent, maybe in a business section downtown, we are accommodating the type of lunch that customer may want. The first step is always to make sure you have the definition right, so we know what we’re doing.”
Kum & Go has taken this focus on locality seriously, crafting 360 coldvault sets and more than 100 floor plan-o-grams. The high number is partly because of legacy sites, but also because the chain factors in fuel offering. For example, if a site offers diesel, its automotive set will be different than a nondiesel location.
“Early on in the business, it was easier; there wasn’t as much competition, as many alternatives for people to go to,” says Folden. “Today you have Walgreens as a c-store, Starbucks is offering more convenient types of products, so we need to offer what the customer truly wants when they walk in the door. If we can do that, it differentiates our chain.”
Making of a Model
The development of Kum & Go’s latest format began with the employees. The company polled store associates, general managers and category managers about what features they would like to see in the store design.
Based on that feedback, the company built three mock-ups in a Des Moines warehouse, complete with cooler doors, equipment and plywood counters. Next, store associates, supervisors and SSC personnel toured the mock-ups.
“It was a great learning for us to be able to see how everything flows,” says Niki DePhillips, senior vice president of store development. “What is the spacing between the cash wrap and the shelving, and how big does the coffee island really need to be? You can measure the equipment, but to really get the feel from a customers’ and associates’ standpoint, it really helps to build it.” Based on additional feedback, DePhillips’ team tweaked the design and had everyone return for a final say. The end product is a store just under 5,000 square feet—compared to the former Kum & Go average of 3,400— with an expanded foodservice section, complete with an in-house kitchen. This is serving up offerings from Kum & Go’s new Go Fresh Market foodservice program: freshly made pizza, cold and hot sandwiches, subs, wraps and baked goods. The Go Fresh Market program will be included with all new and remodeled Kum & Go sites that have full-service kitchens.
The site also features a larger and separated coffee and fountain area for better traffic flow, more cooler doors and a checkout moved from the side to the center of the store. “The associate can see everything that’s going on,” says DePhillips. Perhaps most important, “The first thing you see when you walk in the store is the store associate, that friendly face, so we’re able to greet them right away.”
Then there is the “big C” portion of the design: building the customer’s needs into the format. Kum & Go added open-air coolers for milk to make graband- go easy. It made room for more cups and lids at the coffee bar and fountain so they ran out less often, and so associates could refill them more easily. In addition, thanks to customer input, the restrooms are entirely touch-free. Entry doors have been replaced by long, twisting hallways, and sensor-driven sinks, toilets and hand dryers are standard.
This will be the format Kum & Go expands with in 2012 and beyond, with central Arkansas in the queue for many new stores. The chain will announce a new market for expansion in January. It is focused mainly on midsize urban cities; development in rural areas is limited, although Kum & Go is rebuilding some sites in these markets, and, in the case of the Casey’s transaction, selling.
“The Casey’s transaction made sense for us because the stores we sold were not on our target growth list,” says DePhillips. “They were stores they wanted to buy and seemed to work for them. Most of the stores were older stores—I think the average age was 30 to 35 years old— so they weren’t necessarily on a list to sell. It was just a transaction that made sense for both parties.”
Krause says that any plans for growth must be tied closely to the likelihood of development. “Where is growth, where is the demographics we want, where’s the opportunity, where can we get development done?” he asks. “You can choose a city and not get development done in that city. Boulder is a good example.” There, local politics and restrictions have so far quashed Kum & Go’s efforts and building its footprint in the market.
But this does not deter Kum & Go; if anything, it refocuses the chain on finding an even greater opportunity.
“Every change you undertake may not create improvement,” says Krause, “but to improve, you must change.”
Kum & Go L.C.
West Des Moines, Iowa No. of stores: More than 400 States of operation: 11 2011 revenue (estimated): $2.6 billion Revenue increase vs. 2010: 26%