DOROTHY LANE IS TRACKING TOP TIER SHOPPER LOYALTY

DAYTON, Ohio -- Having documented lower-than-industry-average shopper defection rates, Dorothy Lane Markets here is also confident it is losing the "right" customers through its electronic frequent shopper program.The retailer determined its overall defection rate of 18.8% was largely attributable to its least profitable shoppers. By contrast, the best customers -- whose spending levels put them in

DAYTON, Ohio -- Having documented lower-than-industry-average shopper defection rates, Dorothy Lane Markets here is also confident it is losing the "right" customers through its electronic frequent shopper program.

The retailer determined its overall defection rate of 18.8% was largely attributable to its least profitable shoppers. By contrast, the best customers -- whose spending levels put them in the top 30% tier -- accounted for only 2% of the total defection rate.

Industrywide, retailers estimate at least 25% of shoppers in their stores today won't be back next year. Many fear their defection rates are far higher but don't have the data to know for certain.

Dorothy Lane has been tracking individual customer's shopping patterns through its Club DLM program for more than a year. It is now in a position to analyze the data long-term and on a deeper level, identify trends and develop targeted marketing programs, said Amy Brinkmoeller, director of information systems.

The defection rate and breakdown by shopper spending groups was revealed in a report that examined point-of-sale data gathered from June 1, 1996, to July 23, 1996, and compared it to the same eight weeks in 1995.

"And in that same period of time, 42.7% of customers increased their spending and only 18.4% decreased their spending," Brinkmoeller said.

The transaction count went down in that one-year period, "which we would anticipate, but it's almost heresy to say that -- retailers never want to see their transaction count go down, but it's evolving and I think we are losing the right people," she said.

Dorothy Lane uses trend analysis software from RMS, Stamford, Conn., to identify its best customers and reward them with special discounts and gifts. This month, for example, the top 25 customers at each of its two stores will receive a bouquet of flowers to commemorate the retailer's 48th year in business.

Another way Dorothy Lane recognizes its best customers is through handwritten thank-you notes sent to some customers weekly and on special occasions, Brinkmoeller said.

Using the data analysis program, store department managers are able to identify their top-spending customer during a given week and that shopper receives a handwritten note and invitation to meet the department manager. At Christmas, 75 top shoppers receive a handwritten thank-you note and a gift.

The key to Dorothy Lane's program is to market to the individual and reward the best customers, especially through its monthly Club DLM Market Report, mailed to the top 25% of shoppers, Brinkmoeller said. Weekly circulars were discontinued in September 1995, just four months after launching the frequent shopper program.

"In everything we do, we try to differentiate. Every time we send out a Market Report, we might send out three or four different offers within the same Market Report, so what [offers] I might get and what you might get would be different based on our spending," she said.

Last month's mailing, for example, offered a 10% discount to shoppers whose spending put them in the top 5% tier; shoppers in the top 10% tier received an 8% discount, and shoppers in the next 10% group received 6% off.

Unlike most mailings sent only to the top 25% spending shoppers, July's report went to all club members in an effort to get lower-spending customers to increase their market basket. A 5% discount was offered to those shoppers on a minimum order of $50. "We required a $50 purchase to try and increase their spending because they had on average $16 to $34 per week," Brinkmoeller said.

Dorothy Lane is looking in the future to increase its targeted mailings, perhaps through postcards. For now, Brinkmoeller said, tracking shopper spending lends great insight into each shopper -- and even provides guidance in responding to shopper inquiries or requests.

"Anytime anyone complains now, we look them up" and review their spending history. "We try to fulfill special requests, but if we have to jump through hoops to do it, we're going to first look at who the customer is," she said.