Reflection - Learning Launch

Challenge:

I was the team lead of marketing department for non-fuels products and services in gas stations, which included  convenience store, car care service and other auxiliary services. Traditionally this category is not the key focus for  margin-driving, yet its importance has been emphasized when there is increasing strain on operating cost, no  matter from land, labor or logistics.  On customer side, they have been habituated to the usual routine --- fuel and  go --- without the intention to look for additional services at station. The non-fuels product and service are not  highly visible in customer eyes, without any strong and consistent value proposition. Although more than  customers in market preferred our brand, customers still see our brand with no significant differentiation. Instead,  customers focus on deeper fuel discount or proximate location when they make a choice.

A project was assigned to me to overcome above challenges. First, how to create a novel and differentiating non- fuel product or service at the station level to boost brand image. Second, how to use this differentiating product/  service to increase customers spend, and hence repeated purchase and ultimately the loyalty.

Selection:

It’s a very challenging task which expect a move from ‘Zero’ to ‘One’. My team and I have to start from scratch and  examine the root cause, situation, insights, potential solutions bit by bit. During the project, I have applied  different design thinking techniques, which included “mind-mapping”, “visualization”, and “learning launch”.  Finally, we spent most of the time and found it most effective by using a few “learning launch” approach, which is  the experiments conducted in the marketplace quickly and inexpensively, before extending and scaling up for a  mass rollout. Although we spent a bit of time of test-and-run, but with the initial data, we were able to finetune  our direction and avoid critical mistake at later stage, and hence a potential cost down from error.

Application:

From the research data as well as the discussion with customers, we have identified coffee at gas stations is one of  the highest potential non-fuels product which can drive repeated purchase and differentiated from other stations  at the same time. Yet, how to ‘launch’ the right coffee offer with right way of working, brand, pricing, menu,  quality and presentation will have to be tested before roll-out.

We have two phases of “Learning Launch”. The first phase is trying to test whether customers welcome coffee  offer at stations. We understand an acute change of habit is not feasible, so a user-friendly approach and high- quality coffee are provided in which customers will not need to alter a lot from their existing habit. We partnered  with a famous local coffee chain which is popular among youngsters. We use their coffee product, machine,  packaging and recipe, with the experienced part-time barista to make a cup of high-quality coffee which is 99%  similar as what they can enjoy at coffee shop. The customers could choose a cup of free coffee (either Hot  Cappuccino or Hot Americano) if they refueled with certain amount. More importantly, customers were allowed to  stay at their own car without the need of going inside the store for waiting. Instead, they can get the free coffee by  the barista directly, who will not in touch with any gasoline due to hygiene concern. The idea is done in 1-month  time and tested in 5 stations with less traffic, more space, such that the customers will have a better mood for  understanding the new offer. Customers are encouraged to share their feedback as well after enjoying the coffee.

Once we have enough data that coffee is the right product to work on, we kicked start the second phase of the  testing on pricing, menu and presentation of the product. Besides giving it as a free offer to customers, customers  were given a choice to purchase the product, even they have not fueled with adequate amount. The menu was  extended to include two additional products – Latte and Mocha and the options for Ice coffee, i.e. a total of 8  different product options are offered. The order was once taken by the frontline who is refueling, and now, an iPad

unit with digital menu will be given to customers to browse around. They can use the iPad to send the order to  barista in the store directly, and after 3 mins, the barista will present the products they have ordered. The idea is  tested in the original 5 sites plus another 5 busy sites, to ensure that the coffee offer could be extended to sites  with different dynamics. After another 1 month for testing, eventually the coffee product offer is rollout to all sites  1 month later.

Insight:

In the first test, we have confidence that the coffee offer will be accepted by all customers. Similar to what we  expected, 75% of customers welcome the coffee and they are very satisfied with the offer we provided. They are  also surprised with the quality, which is very similar to what they drink at coffee chain retail. However, 25% of  customers didn’t feel very happy about the free offer, as they claimed they ‘never’ drink hot drinks even in coldest  season. The finding triggered the menu setting to include cold drinks in the selection. On subsequent launch, the  sales result showed 70% of customers will choose iced coffee. Without the initial test, we would likely to launch  hot coffee only and under-estimate the market size of this segment.

Another surprising finding is that, customers who accepted the free offer claimed that, the main purpose of the  coffee is for their bodily needs, e.g. immediate thirst and sleepiness, rather than an enjoyment of life moment.  Even we are using exactly the same material and procedure, the overall experience in gas station, no matter the  ambience, staff and uniform, it doesn’t really create a sense of comfort. With this insight, we assumed customer  will be readily to pay the coffee at a price 30% below the regular price in the coffee retail chain.  Also, the inclusion  of the digital menu with in-car shopping experience will help to improve the purchase experience.

In the second test, we assumed our customers will accept a price point at lower price point and we set the price of  hot drink and cold drink at same level. As mentioned before, 70% of them choose iced coffee which deviated from  our original prediction of 50-50. It was up until we surveyed a few customers about why they purchased cold  drinks even they liked hot drinks more. They mentioned cold drink is more expensive than hot drink in the market.  Having a same price for both products, they preferred cold drink as they gain the benefit like ‘saving a few dollars’.  With this in mind, we finetuned the menu in which hot drink is priced 30% below regular price while cold drink is  priced 20% below regular price.

Approach:

Even there is a chance of doing a similar project next time, our team will continue to use the same tool. As  previously mentioned, this project is a totally new project which required a lot of test-and-learn. It may be helping  with the use of other tools at the early phases, but without a series of assumption and trials during  implementation, the idea will not be fully examined with its advantage and drawback.

After rollout, the result is closed to what we predicted: 50-50. And it synchronized at what we want: customers  really viewed our brand as more lifestyle and forward looking after the product is introduced. We also spotted  some coffee-only transactions, which means customers may drive to station for coffee, rather than merely ‘fuel- and-go’. The tool was effectively reassured the use of right product – coffee as the first step and validated the  customization of coffee operation in gas station as second step.

