RETAILERS ANSWERING PHONE CARD CALL CAREFULLY

Supermarkets are proceeding cautiously into the world of phone cards.Because some chains have been burned by useless phone cards from vendors that suddenly disappeared into the night, retailers said, they are closely scrutinizing their potential suppliers and their services.Before a retailer signs on with a company to supply prepaid phone cards, there are at least five items being considered:The supplier's

Supermarkets are proceeding cautiously into the world of phone cards.

Because some chains have been burned by useless phone cards from vendors that suddenly disappeared into the night, retailers said, they are closely scrutinizing their potential suppliers and their services.

Before a retailer signs on with a company to supply prepaid phone cards, there are at least five items being considered:

The supplier's reputation.

What promotions are going to be offered.

Product education and training.

Security protection.

Profitability of the overall program.

"I did some checking before signing up," said Dale Eichenlaub, general merchandise director at Friedman's Supermarkets, Butler, Pa. "I was concerned that the company we choose would stay in business and be able to service our customers." Friedman's Supermarkets currently sells cards through a vending machine provided by Talk 'N Toss, Vancouver, Wash.

Tom Bollinger, vice president for promotions at John C. Groub Co., Seymour, Ind., is also concerned about the reputation of the supplier. "We're looking at their history. So many companies go out of business. It has to be somebody who's big and secure," he said. Promotion is important to Bob Hunt, director of general merchandise at Price Chopper, Schenectady, N.Y. Currently, he sells MCI phone cards through self-contained machines located at the front of 95% of his stores. He is concerned about customer awareness and thinks the phone card companies could do more to promote the cards.

"We put in a few ads to spark sales but I wouldn't say we've had our best marketing effort against phone cards. We haven't done anything to make that business really rock," Hunt said. "We need to get more customer awareness through signage, additional advertising and some kind of value-added offer to buy the card."

Phone card suppliers are well aware of the importance of promotion and advertising, regardless of how the cards are sold. Many card companies are currently putting together marketing programs that have themed displays, such as a Christmas tree light exhibit with cards hanging from it.

Companies are also working on systems that allow the cards to be activated upon purchase. This will enable them to be displayed throughout the store, instead of hidden and sold from behind the service center or through machines.

Richard Teich, executive vice president of SmarTalk Teleservices, Los Angeles, said his company is experimenting with displaying empty phone card boxes on the shelves. Consumers then bring the empty box to the checkout where they are stocked, much as video stores do for tape rentals.

Paul Sebatis, marketing director at Winn-Dixie Stores in Dallas, said suppliers are doing three things correctly. "They are helping with point-of-sale displays, they are helping with drop-bins and they are helping with structured promotions," he said.

Sebatis mentioned that he has tied-in with phone card promotions for holiday and calendar events and is pleased with the results. MCI, for example, is developing a Social Expressions line for 1997 on such themes as "Happy Birthday," "Get Well" and "Congratulations," among others.

"Our supplier gives us promotional support from many different angles -- sometimes it's displays, sometimes it's money," Sebatis added.

There is great debate within the industry over whether phone cards should be merchandised like any other packaged goods item. Some phone card companies have hired packaged goods professionals to lead their marketing teams and many are working on design displays where customers can see and touch the cards, hoping this will spur sales. Other phone card companies feel that phone cards cannot be treated as a packaged goods item because consumers are still generally unfamiliar with the category. They are stressing sampling, displays and education for both consumers and employees. Talk 'N Toss, for example, provides four retail-training materials: a customized video, a store-operations manual, a cashier-reference guide and a toll-free help line.

According to Teich at SmarTalk, only one out of 10 consumers has used a prepaid phone card in the last year. "There's so much more market to tap," he said. "Any form of education we can do, whether it's with the retail staff or the general public, is going to help sales. That's why we are so committed to education."

Teich believes that retailers are choosing his cards because of their overall quality and because they have addressed the issue of theft.

Teich added that they have worked with retailers to come up with creative types of merchandising programs like clip-strips, dump-bins and other ways to get the products exposed throughout the store, while still addressing the issue of theft.

Bollinger of John C. Groub Co. is just now looking into phone cards. "We never did get into it because of the problem of security." He said his company is currently looking into programs where the cards are activated through machines or phone calls upon sale. Bollinger also feels that promotion has some importance, along with profitability.

"We found it very expensive to sell cards through customer service," said Jim Buhr, controller at Bashas', Chandler, Ariz. That's why he feels the best thing phone card companies can do is supply vending machines.