GREGERSON'S CUTS COSTS TO FUND ITS CLUB GREG

CHICAGO -- Faced with a $250,000 price tag to launch an electronic marketing program in its six stores, Gregerson's Food Inc. successfully instituted a series of steps to boost operating efficiencies and help defray start-up costs.An enhanced front-end system Gregerson's had to purchase to introduce an electronic frequent-shopper program, for example, enabled the retailer to save about $25,000 annually

CHICAGO -- Faced with a $250,000 price tag to launch an electronic marketing program in its six stores, Gregerson's Food Inc. successfully instituted a series of steps to boost operating efficiencies and help defray start-up costs.

An enhanced front-end system Gregerson's had to purchase to introduce an electronic frequent-shopper program, for example, enabled the retailer to save about $25,000 annually in administrative functions, said Peter "Greg" J. Gregerson, president of the 10-store independent based in Gadsden, Ala.

A revised check-cashing policy, linked to the new frequent-shopper program, resulted in another $8,000 to $10,000 in annual savings, Gregerson said.

Gregerson outlined how his chain developed and financed its frequent-shopper program at the Electronic Marketing Conference held here late last month. He spoke at a session titled, "Electronic Marketing: Retailers Sold on the Concept, Now How Do We Go About Paying for This Thing?" The two-day conference was sponsored by Retail Systems Consulting, Chicago.

Gregerson pointed to the growing interest, especially among smaller retailers, to take advantage of electronic marketing programs.

"At least among the independent retailers, electronic marketing has a more universal appeal than many of the other current hot topics. Retailers are grasping the concept of electronic marketing much more easily. They can see the return and it's exciting to them," he said.

But launching the programs can be expensive. Gregerson, though, showed how retailers can take steps to minimize long-term investment costs by streamlining other areas of operation while implementing an electronic marketing program.

In addition to taking advantage of its new front-end system to reduce administrative costs and revising its check-cashing policy, Gregerson's also abandoned some promotional programs that were failing to build shopper loyalty substantially. Discontinuing ad-matching and double-couponing programs freed up more than $500,000, Gregerson explained.

These measures and other pricing and service changes under way are helping Gregerson's expand its card-based frequent-shopper program. The program, called Club Greg, was launched in May.

Gregerson said he became excited about electronic marketing through his participation in a Retailing Research Council assembled by Coca-Cola Co., Atlanta. As part of that council, he learned about other retailers' electronic marketing success stories and failures -- the latter most often caused by a lack of continued funding.

"Because of that research, we went into the [electronic marketing] program with our eyes wide open, and with the full knowledge that we could expect very little assistance from any quarter, including our vendor and supplier friends. Anything we got from them down the road was going to be 'gravy,' " he said.

Instead of seeking outside financial support, Gregerson's looked internally and found a new income source at the check-cashing counter. Shoppers cashing their payroll checks now receive 1% of the amount in the form of "Gregerson Bucks," which are redeemable only for purchases made at the chain.

"It seems that many of these bucks get lost or are otherwise not redeemed," Gregerson said. "This income has amounted to approximately $8,000 to $10,000 annually and helped to offset the cards' cost."

To generate even more income from check-cashing services, Gregerson's is considering charging a $1 fee to shoppers who are not members of the Club Greg frequent-shopper program.

Another funding resource Gregerson's turned to was its existing promotional program. Rather than spend new money to kick off the frequent-shopper program, Gregerson's redirected funds spent on conventional promotions, such as double couponing, ad-matching, sweepstakes and senior citizen discounts.

"We quit them cold turkey," Gregerson said. Those programs, he said, are "scatter gun" in approach because they don't focus on individual customers. "Most of the marketing that we had been doing has proven to be ineffective. We just didn't know it," he added.

Dropping those promotions, which were popular, did not come without cost, however. Average sales in Gregerson's price-competitive market slipped nearly 5% as a result of the move, he said. "And that hurt."

However, Gregerson's is now building new sales through its Club Greg program, and doing so without increasing its advertising budget. "In fact, we have already reduced our advertising expense by 10% and plan to reduce it by another 20% after the first of the year," Gregerson said.

The chain is enjoying further savings attributed to new efficiencies made possible by point-of-sale hardware and software upgrades. New computer memory boards helped streamline accounting and auditing procedures, saving about $25,000 annually.

As Gregerson's builds its frequent-shopper data base, it also may yield information valuable to the chain's vendors, who in turn could be willing to negotiate more favorable prices.

"They would prefer to target their dollars just like we do," said Gregerson. "Instead of spreading their marketing dollars all over the board, they can now identify that they can move 'x' number of cases for 'x' number of dollars to the consumer, not to just wholesale or retail."

The data base does not contain enough information to do that yet, but Gregerson expects to begin evaluating it sometime in October. Point-of-sale data is currently being collected and stored by Dynamic Controls Inc., Manasquan, N.J., which provided promotional materials, enrollment services and the cards for Club Greg.

Hardware and software upgrades were provided through Innovax Concepts, Irving, Texas.