DALLAS -- The electronic frequent shopper program under way at Lees Supermarket, Westport, Conn., has boosted the average transaction size 10% and decreased customer count 5% by sending undesirable "cherry pickers" to shop elsewhere.
Albert Lees Jr., chairman and chief executive officer, said the single-store independent examines point-of-sale data regularly to better understand its shopper base, particularly the top-spending 40% of customers who account for 77.95% of all cardholder sales.
"I am confident a frequent shopper program, properly used, will add a minimum of 30% to your bottom line," he told retail executives from various trade channels during a seminar at Retail Systems '96. The conference was sponsored by Retail Systems Alert, Upper Newton Falls, Mass.
Lees detailed how merchandising, advertising and front-end staffing have been realigned to best serve -- and reward -- its most loyal customers.
"A frequent shopper program will shed new light on your customer base and your profitability that will change forever the way you look at and operate your business," he said.
Lees tracks frequent shopper card members' purchases and assigns each shopper to one of 10 "deciles" according to spending level. Analysis of shopper groups' behavior enabled Lees to better understand its most profitable and least profitable shoppers. Among the results:
The top-spending 40% frequent shopper members represent 77.95% of all cardholder sales and 78.67% of total gross profit, including sales from noncardholders.
The same group accounts for 62.85% of all cardholder visits and 75.74% of all items bought by card members.
Customers whose spending levels put them in the top 10% tier visited the store an average of 2.11 times weekly, while the lowest-spending 10% of customers shopped less than once every two weeks.
Although shoppers in the top 10% tier were spending the most per visit, only 4.69% of the items they bought were on special; among the lowest-spending shoppers, meanwhile, 8.5% of items purchased were discounted.
"We wanted to reverse that," Lees said, and give the best shoppers the best rewards while sending cherry pickers elsewhere to collect sales items.
"Due to the studies we have done we now feel secure in redirecting most of our ad dollars to areas that affect our top four deciles the most," he added. Lees has discontinued all conventional advertising and replaced it with an 8- to 12-page newsletter sent biweekly only to the 40% of cardholders at the highest spending tiers.
Lees said although the move did not result in advertising savings, the newsletter more effectively targets best shoppers and gives them a "warm, fuzzy feeling."
The newsletter's next issue will carry a theme of "exclusively yours" and feature "insider prices" available only to Lees best shoppers. Later, Lees will promote the "insider prices" concept in-store to encourage lower-spending shoppers to step up a level to qualify for discounts.
"Using the data collected, we are resetting and remerchandising our supermarket based on the items, brands and categories our preferred customer group wants and likes most," Lees said. "Our preliminary studies show that we can decrease our inventory by 25% yet increase sales to our best customers by better presentation."
Lees has also revamped front-end staff scheduling, and added cashiers to the 10 a.m. to noon slot, when the best customers shop.