Does this really matter when using a traditional water heater?

Say you have a fairly average 40 gallon water heater.  It is kicking on and off 
all day long trying to keep water at the desired temp.  You use 8 gallons 
taking a shower, the first gallon is water in the pipes that is probably in the 
walls.  So now you are adding 7 gallons of cold water over several mintes to 30 
plus gallons of hot water.  How much does this matter compared to the cost of 
implementing such a system?

Wouldn't you be better of replacing your water heater with an on demand system? 

Does anyone here have experience with onn demand systems?  I am looking at 
replacing my water heater in the next month or two and would like more 
information concerning on demand systems from someone other than a sales person.

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