Adjusts Strategy to Combat Converging Competition

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SAN FRANCISCO (AdAge.com) -- In the face of converging competition for the convenience store customer, 7-Eleven is planning a shift in its marketing strategy to emphasize competitive prices with grocery stores and others, company executives said.

"In 2003 we are moving to a different place from a business development and strategic" point of view, said Russ Klein, 7-Eleven's recently named managing director and chief marketing officer. Mr. Klein, a former advertising executive with Publicis Groupe's Leo Burnett and Interpublic Group of Cos.' Foote, Cone & Belding Worldwide, joined 7-Eleven earlier this month, replacing Bob Merz.

Agency shift
Mr. Merz in February conducted an advertising review that ended with the selection of Omnicom Group's GSD&M, Austin, Texas. After his appointment, Mr. Klein abruptly moved the account to Omnicom sibling Tracy Locke Partnership, Dallas, citing a conflict with GSD&M client Krispy Kreme Doughnuts, which plans to make a push for coffee sales. Mr. Klein noted that fully a quarter of 7-Eleven's daily revenue comes from coffee sales. The split was "amicable and professional," he said.

A GSD&M spokesman said the agency resigned the account.

In a conference call last week, executives at the retailer told Wall Street analysts an advertising campaign starting in March will back a new program of aggressive pricing on high-volume everyday items such as milk and bread to allay the perception its prices are higher than those at grocery stores. At the same time, the campaign plans to push more profitable private-label products, as well as focus on 7-Eleven's fresh-food offerings, the executives said.

Ad spending to rise
Mr. Klein said

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Tracy Locke will be looking at "bigger issues that transcend executional" aspects of creative. Spending on the $30 million account for next year would be increased in the low single digits, he said, adding that he, nevertheless, expects to get more bang for the marketing dollar.

Among the changes he is considering is to use radio advertising, while staying with TV to further the chain's push for its fresh, portable foods, including fresh entrees and salads. "Other forms of media will be pursued in lieu of TV," he said.

Mr. Klien said he liked the GSD&M-introduced "Oh Thank Heaven" tagline framed by a new audio mnemonic device -- "Slurp ... aaah" -- but was uncertain it would continue. Mr. Merz in June launched a humorous campaign backing 7-Eleven's Big Eats deli sandwiches.

Retail convergence
The marketing shift comes at a time when retail outlets of all genres are experiencing a convergence of product and appeal.

Fast-food chain Jack in the Box, for example, most recently announced plans to open some 100 locations over the next five years combining its fast-food restaurants with 24-hour QuickStuff convenience stores and gasoline sales.

"That convergence will always be a pressure on the industry," Mr. Klein said, adding that no competitor is at the moment "bringing anything close" to 7-Elevens coast-to-coast presence and scale.

The 75-year-old Dallas-based chain, with total sales of $31 billion, has 5,800 franchise-owned stores in the U.S. and Canada, along with 18,000 stores in 17 nations. Earlier this month it cited a drop in gasoline sales as helping fuel a 29% decline in third-quarter net income. Overall, however, same-store sales -- that is, sales at stores open more than a year -- have been increasing at 5% for the last four years through the first three quarters of this year, company executives said in the analyst call.

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