PROMOTIONAL PARTNERSHIPS

When it comes to retail marketing, Safeway, like many retailers, collaborates with manufacturers to differentiate itself from the competition, build brand equity, and drive store traffic.Yet unlike most, the Pleasanton, Calif.-based chain just inked a multi-year deal with Valassis, Livonia, Mich., a marketing services provider, for direct-mail initiatives involving manufacturers, as well as solo category

When it comes to retail marketing, Safeway, like many retailers, collaborates with manufacturers to differentiate itself from the competition, build brand equity, and drive store traffic.

Yet unlike most, the Pleasanton, Calif.-based chain just inked a multi-year deal with Valassis, Livonia, Mich., a marketing services provider, for direct-mail initiatives involving manufacturers, as well as solo category and brand-specific efforts. "Valassis will help Safeway to enhance the value proposition to its shoppers," Talbott Roche, Safeway's vice president, said in a prepared statement.

Co-marketing efforts like Safeway's are on the rise, in large part because they benefit both the manufacturer and retailer. Manufacturers enjoy increased retailer support, improved retailer relations, and increased sales.

Retailers, meanwhile, get increased consumer exposure, enhanced retail brand impact, increased store traffic, and differentiation from the competition.

That's just what most retailers need to survive in the highly competitive world of food retailing, according to Bill Sinnott, group president, Ryan Partnership, Wilton, Conn., a marketing services firm.

"Brand building is more important to retailers than it once was," noted Sinnott.

There are several co-marketing tactics that retailers can use to build their brands. A popular option is co-equity freestanding insert coupons. Co-equity FSIs are when manufacturers sponsor a retailer-specific ad opposite or near their own FSI. The retail ad commonly features price points, retailer logos, in-ad coupons, and other special offers. In return, retailers typically give manufacturers additional merchandising support. Valassis and News America Marketing, New York, are the two main providers of such programs.

Co-equity couponing has grown significantly over the last few years. In 2003, 6.7 billion co-equity coupons were distributed across all retail channels, a whopping 56% increase from 2002, according to Marx Promotion Intelligence/TNS Media Intelligence, Minneapolis, a provider of coupon information.

Kroger, Cincinnati, is the No. 1 distributor of co-equity coupons, according to Marx. In 2003, the retailer distributed 1.1 billion coupons, a 44% increase from 2002.

Drug store chains are increasingly using the tactic as well. CVS, for instance, ranks No. 2, distributing 433 million coupons in 2002, a 167% increase.

Along with Kroger and CVS, the other top 10 co-equity coupon retailers are Ralphs, Albertsons, Walgreens, Kmart, Vitamin World, Eckerd, Giant and Stop & Shop, respectively. The top 10 brands featured in co-equity coupons were Oral-B toothbrushes, Schick, Tide, Vitamin World products, Downey, Crest White Strips, Bounty paper towels, Banquet Homestyle Bakes, Folgers coffee and Charmin toilet tissue, respectively.

Research indicates one reason for the tremendous growth is that co-equity FSIs influence shopping patterns. Co-equity coupons generated a 13.6% increase in coupon redemption rates in supermarkets, and an 11.5% increase across all channels, according to Valassis research, which was conducted by NCH Marketing Services. The study compared 166 co-equity FSIs with 166 FSIs without a retailer tie-in distributed from 2000 to 2002.

"Co-equity promotions create differentiation between a retailer and the competition, drive traffic, and can be used as a tool to eliminate channel surfing," said Lou Czanko, vice president, retail sales, Valassis.

Along with its Safeway partnership, Valassis has exclusive targeted-marketing relationships with Food Lion, Salisbury, N.C., and Kroger.

Under the Kroger partnership, Valassis coordinates all targeted-marketing mailing and sampling programs utilizing Kroger's proprietary frequent shopper database. The agreement encompasses all Kroger corporate solo, cooperative and sampling direct-mail programs, including co-marketing efforts with consumer packaged goods manufacturers and suppliers.

Along with partnering with marketing services firms like Valassis, retailers are strengthening their co-marketing efforts in other ways. Take Foodtown, Carteret, N.J. The 53-store chain works with manufacturers on promotions involving its S&H Greenpoints program. S&H Greenpoints, a digital version of the S&H Green Stamps program that originated in 1896, rewards consumers with points based on their supermarket purchases. Consumers can use their points to get merchandise, gift certificates and other rewards. Or they can use their points to save money on their grocery bill. About 375,000 shoppers are enrolled in the program at Foodtown, according to Patty Youchock, Foodtown's manager of target marketing.

Foodtown employs the Greenpoints program for its co-marketing purposes by using manufacturer funds every few weeks to give consumers bonus points if they purchase certain products. This month, for instance, shoppers could get select General Mills cereals for 99 cents if they redeemed 300 points.

Teaming with manufacturers in this way helps Foodtown separate itself from other retailers in the market, according to Youchock.

Foodtown co-markets with manufacturers in other ways, too. The retailer leverages its loyalty card data to send direct-mail promotional pieces to consumers on behalf of select brands, including Nestle and Tropicana. The mailings, which incorporate the Foodtown logo, commonly feature coupons and product information.

Such programs put Foodtown at a significant advantage over its competitors because they give the chain added exposure directly in the consumer's home, according to Youchock.

Co-Marketed Coupons

Kroger, Ralphs and Albertsons are three of the Top 5 retailers involved in co-equity couponing.

Top 5 Retailer Co-Equity FSIs

Retail: Total number of FSI co-quity coupons distributed, 2003; Change in distribution, 2003 versus 2002

Kroger: 1.1 billion; 44%

CVS: 433.3 million; 167%

Ralphs: 400.5 million; 4%

Albertsons: 384.6 million; 33%

Walgreens: 351.7 million; 118%

Source: Marx Promotion Intelligence/TNS Media Intelligence