Monro Says It’s Shifting Its Focus From ‘Transactional’ To Customer Lifetime Value

At the company’s inaugural Investor Day held May 21, the management of Monro Inc. discussed a number of strategic initiatives being implemented across the company. The programs — some of which have already been rolled out and some of which are still in the planning stages — are wide-ranging, touching on a number of issues including customer experience, store image, e-commerce and shop productivity.

President and CEO Brett Ponton told Investor Day participants that — while Monro is in the early stages of executing its strategy — the company has already begun to capture some benefits, particularly as it relates to technology and tools that rolled out during the fourth quarter of fiscal 2018, which ended March 31, 2018. This includes investments made in data-driven analytics.

STORE OPERATIONS … Monro launched tablet-based dashboards and a cloud-based standardized store review process during Q4 fiscal 2018, which management believes will provide greater visibility and better insights for leadership at all levels of the company. “Our tablets and dashboards will allow our store operation leaders to more effectively evaluate and manage each store’s performance across numerous key performance indicators, such as customer satisfaction and online reviews, traffic and sales trends by category, margin performance, and staffing and labor metrics, to name a few,” Ponton said. “Managers will have the ability to track these metrics versus budget, historical trends, and their peers, with information flowing to them in near real-time.”

Ponton added that the new store review process — called Store Operations & Asset Review (SOAR) — is now standardized across all of Monro’s districts.

“Overall, we believe our data-driven approach and related investments in technology will drive efficiency in our stores and our field management organization, reducing the time they spend identifying underlying causes of performance issues and allowing them to prioritize their time and attention to coach our store teams on improving their results,” Ponton explained. “The cloud-based systems will also increase the transparency and accountability throughout our organization and eventually drive consistent improvement in execution across all of our stores.”

ONLINE REPUTATION … The company also has launched a technology-supported customer satisfaction and online review management system — part of a larger effort to improve Monro’s online reputation, deliver a consistent “five star” experience in-store and improve the perception of its shops (including their physical appearance).

“The changes we are making at Monro are more than just about online reviews. At its core, we are fundamentally changing our culture — shifting away from a transactional mindset to one that is focused on the overall lifetime value of our customers, and how we can deliver a ‘five star’ experience to them every time at every one of our store locations,” Ponton told participants.

He extolled the “virtuous cycle” of improving customer experience, noting that it leads to improved online ratings, which drive better visibility online, which leads to increased conversion and, ultimately, higher traffic.

“Our increased efforts to solicit customer feedback has driven a fivefold increase in the number of online reviews. Leveraging the insights from this feedback, we are making improvements to our store operations, which, in turn, is leading to a material improvement in Monro’s overall star rating across online review sites,” Ponton said.

According to Ponton, higher online traffic has led to more actions being taken by consumers, ranging from clicking to call a store, to clicking to get directions to a store, to making an online appointment.

CONSISTENCY … Ponton told participants that creating consistency and quality across Monro’s store base is paramount to delivering a “five star” experience. To do this, the company is working on brand standards and standard operating procedures for every major touchpoint. “From the first impression to the final review, we want to provide a best-in-class experience for our customers,” he explained, “and we want that experience to be the same no matter which store our customers decide to visit.”

New chief operating officer Evan Naylor told participants that Monro is improving its inspection process by providing customers with a more easy-to-understand form and by giving its technicians an easy-to-follow process to help ensure consistent execution of vehicle courtesy checks. As part of this revamped inspection process, Monro also provides customers with a new scheduled maintenance review.

“In the future, we will also introduce an electronic version of the courtesy inspection. This will improve the overall inspection process and will also provide our customers with real-time communication about their inspection,” Naylor stated.

APPEARANCE … Ponton said that it’s important that these standards are aligned with the appearance of Monro’s shops. This is noteworthy considering how Monro has grown by acquisition over the years, leading to a store base that includes a variety of shops and formats.

“We are standardizing our appearance to drive consistency across our markets. In order to accomplish this, we will be executing a store reimage initiative that will begin in Q3 of fiscal year 2019,” Ponton stated.

Along these lines, CFO Brian D’Ambrosia told participants: “By driving consistency and increased productivity across the business, we will be able to more efficiently integrate acquisitions. Clear standards for how we look and how we operate will also benefit our integration process, increasing the value we realize from the companies that we acquire.”

NEW/EXISTING CUSTOMERS … Monro’s new senior vice president of marketing and merchandising, Deborah Brundage, told participants that leveraging customer relationship marketing (CRM) is the company’s No.-1 priority for keeping the customers it has. “CRM allows us to develop long-term, one-to-one relationships with our customers based on specific vehicle needs,” Brundage explained. “It just makes business sense. We’re able to be more efficient and productive to leverage analytics to deliver tailored messages to our customers, especially after they’ve just received a ‘five star’ experience in-store.”

Another key part of Monro’s customer retention plan is its private-label credit card (the Drive Card), which — because it’s in a customer’s wallet — drives top-of-mind awareness, especially for the cost-conscious consumer. “We had a strong Year 1, and, as we begin Year 2, we’re continuing to see nice growth in applications,” Brundage said. “And, early indications are showing higher loyalty and higher spend versus non-Drive Card users.”

Monro plans to leverage its CRM platform to retain these customers by tailoring offers designed to drive them back in-store. 

To bring in new customers, Monro is working with a customer analytics firm to get market segmentation and demographic data on areas in close proximity to its shops. The goal is to identify high-value “lookalikes” and market directly to them, as well as to help management identify key markets for greenfield shops and acquisitions.

E-COMMERCE The company also is working toward a seamless, omnichannel buying experience for Monro customers. This will be done in two phases: The first is modernizing the company’s website for mobile users, while the second is creating a way for customers to view and purchase tires online, schedule appointments, and then go “in store” for installation.

Brundage also stressed the importance of being a preferred tire installer for third-party online sellers.

“This strategy allows us to leverage our core marketing strategies. First, we get to meet the consumer where they are, which is purchasing tires online,” she explained. “Second, we can drive new customer acquisition, since 50 percent of these consumers are new to Monro. This gives us the opportunity to inspect their vehicle, recommend any add-on services and drive conversion in-store. Once the customer is in-store, we can drive retention by adding them to our CRM database and begin to build long-term, one-to-one relationships.”

Monro’s timeframe for rolling out its CRM platform is Q2 of fiscal 2019, with targeting high-value new consumers (working with the new consumer analytics partner) in Q4 fiscal 2019. The website modernization is expected in Q2 fiscal 2019, with the omnichannel program coming in fiscal 2020.

MERCHANDISING … Naylor told participants that Monro can generate higher in-store conversion and expand margins with a stronger merchandise strategy across good/better/best product options. He said Monro has undertaken a comprehensive analysis of its product and service offering in order to develop a more clearly defined merchandise strategy.

“As a result of this analysis, we launched good/better/best service packages in Q1 fiscal 2019 to provide customers with clear options to choose the right services for their vehicle,” Naylor explained. “Offering several options keeps the customer education and in-store selling process simple, and gives our teammates the opportunity to trade customers up to higher-value packages and also increase attachment sales.”

Additionally, the company has optimized Monro’s tire pricing strategy. “Historically, Monro has included the price of the tire installation with the price of the tire, while the majority of the industry sells these items individually,” Naylor stated. “Unless the customer has read the small print, this may have led them to believe our tires were priced higher than our competitors. To alleviate any potential misconception, in Q4 fiscal 2018, we changed our online pricing approach to unbundle tires from installation.”

“Tires are an important part of Monro’s category, given that they represent half of our sales. Therefore, it’s critical for us to offer the right tires at the right price point,” he went on to say. “Through our product assessment, we identified considerable gaps in our tire offering, especially at the higher- and mid-price points. We have taken near-term steps to correct this and optimize our tire assortment.”

Additionally, Monro sees potential in leveraging data analytics to align its tire assortment with consumer demographics, allowing the company to provide the right items for the vehicle population surrounding its stores. “This will further be supported by better sales tools and visual merchandising to educate our customers on their tire options, which we plan on launching across our stores in Q1 fiscal 2020,” Naylor added.

PRODUCTIVITY … Naylor told participants that Monro is working on optimizing its store staffing model as well as offering its employees a clear path for career advancement, including an enhanced training program.The company plans to roll out cloud-based curriculum called Monro University in Q3 fiscal 2019.

“We see the opportunity to recruit technicians at an entry-level capacity, and create opportunities for them to grow and develop by leveraging the online training that we’re going to develop with Monro University,” Ponton said.

“As a service business, staffing and scheduling is a critical aspect of our productivity. Based on our initial analysis, we have identified labor productivity opportunities for improvements to our staffing and scheduling model,” Naylor said. “We want to make sure we have the staffing in each store that’s aligned with its needs. … We will do this by optimizing the right headcount, including both part-time and full-time teammates.”

Additionally, Monro is implementing a new data-driven scheduling system.         — Marc Vincent