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CULTIVATING DATA

Many retailers are reaching the conclusion that the true value of their frequent-shopper programs lies less in providing discounts to shoppers and more in the data gathered during all customer interactions.This data, warehoused and mined using advanced applications, is being used to shape numerous marketing programs, ranging from demographically targeted direct mail and e-mail to in-store promotions

Many retailers are reaching the conclusion that the true value of their frequent-shopper programs lies less in providing discounts to shoppers and more in the data gathered during all customer interactions.

This data, warehoused and mined using advanced applications, is being used to shape numerous marketing programs, ranging from demographically targeted direct mail and e-mail to in-store promotions and displays. A few distributors are partnering with manufacturers, providing them with relevant customer data in exchange for funding and expertise.

After only seven months of operating its "Wild Shopper" loyalty program, Wild Oats Community Markets, Boulder, Colo., has established highly targeted marketing efforts in 22 of its 56 stores. The natural-food retailer has zeroed in on specific groups of shoppers with several direct mailings of coupons and educational material.

One recent mailing, directed toward Wild Oats' aging baby-boomer cardholders, featured a 16-page, full-color "educatorial" that included discounts on dietary supplements such as calcium, along with education on the products and the importance of calcium in the diet. "In the health-food market, you tend to have to do more education," said Jay Robinson, director of electronic marketing at Wild Oats. The mailing also included discounts totaling $40, he added.

The chain further targeted its mailings, sending $5 discounts on beef to cardholders who usually purchase meat, and a five-panel brochure with a $5 store coupon to the top 30% of its customers, Robinson said.

Another campaign, sponsored by multiple vendors, targeted the chain's female cardholders with dietary supplements, health and beauty care products and books.

Consumers have responded very well to all the promotions, said Robinson, especially the "aging baby-boomer" mailing. Although Americans claim they do not want junk mail, Robinson believes shoppers appreciate targeted promotions. "When you target the right people, they use the coupons," he said.

Wild Oats plans to increase its targeted mailings to specific groups of people from the current schedule of promotions every other month. Customer groups include vegetarians and shoppers interested in its upscale health and beauty care products.

Less than half -- 45% -- of retailers have some type of frequent-shopper program, according to the Food Marketing Institute, Washington. Many of these retailers have begun to realize that launching a program and providing customers with discounts is only the beginning.

About 80% of retailers with frequent-shopper programs say they implemented them to gain information on shoppers, while 64% started loyalty programs to increase best shopper sales, according to FMI research.

"Now we've got to focus on the end result: providing [specific] products, rather than just pushing them," said Ron Cook, manager of electronic marketing at Nash Finch Co., Minneapolis. About 50 of the wholesaler's stores are using a loyalty program; another 20 are on a waiting list and 80 more will make a decision after a presentation.

Once Nash Finch ramps up its customer-loyalty program, which has been in development for four years, the wholesaler will analyze data down to the stockkeeping unit level, according to Cook.

Supervalu, Minneapolis, recently started working with retailers and manufacturers on tailored in-store customer promotions, with costs shared between the wholesaler and manufacturers.

Shopper data collected by Supervalu is the basis for retailer promotions of specific nonfood "category killers," according to Ron Saurer, loyalty marketing manager at Supervalu. "We're trying to get the center of the store back from mass merchandisers. We've lost business in soap, paper and other items," he said, adding that Supervalu stores have also increased soft drink and snack promotions.

Smaller retailers can often target their customers with laser-like precision. Brodbeck Enterprises, Platteville, Wis., which operates Dick's Supermarket, used its cardholders' purchasing history to help a third-party company craft customer-specific "shopping lists" delivered via direct mail.

Cardholders purchasing products on the weekly lists received discounts at the point-of-sale. About 60% of cardholders who received lists in the mail used them, with 30 manufacturers participating in the program, according to a source familiar with the situation.

Food Lion, Salisbury, N.C.; Price Chopper Supermarkets, Schenectady, N.Y.; and Randalls Food Markets, Houston, plan to launch programs employing some elements of the "shopping-list" concept this fall, added the source.

Many retailers are also taking advantage of targeted cardholder promotions at the checkout. Supermercats Pujol S.A., which operates Plus Fresc stores in Catalonia, Spain, has separate printers at the front end to issue messages to individual customers, including notices when items the customer requested are in stock.

Customer-loyalty data can also be used to shape in-store promotions and the very look of the supermarket. Gerland's Food Fair, Houston, worked with a research firm and manufacturers to mine out the "main-basket" items purchased by its top cardholders, then set up promotions around those items.

Items now more often given endcap displays include ketchup and other condiments, along with soft drinks discounted by 15% to 25%.

"We've had extremely high success with sell-through of [these] products," said Kevin Doris, president and chief executive officer at Gerland's. "We're sending different awards to customers, but we're also displaying products better."

Gerland's also reaches certain customers with interactive kiosks in some of its stores. After cardholders swipe their cards at the kiosk, it prints coupons based on their purchasing habits.

Although Gerland's will not eliminate direct mailings, use of the in-store kiosks will help the retailer reduce them in order to "eliminate as much of the paper for consumers as possible," said Doris.

Loyalty marketing has appeared to pay off for Gerland's. Its customer retention remained high last year, for example, even though there were numerous competitive store openings in that period.

Retailers told SN some of their keys for successful customer-loyalty data mining. One recommendation was to work closely with product manufacturers. Many are willing to provide all or partial funding for targeted promotions, and will share their own data on shopping habits.

"We explain to manufacturers that this is a funding avenue they need," Cook said. "It is performance-based, very accountable and gives us more information than we would get from mass market approaches."

Retailers also advised asking as many questions as possible on the card-application form. "That is your best time to get as much information as possible. You will learn purchase patterns and demographics up front; many retailers wish they had asked more later," said Wild Oats' Robinson.

Wild Oats asked shoppers questions in several categories, including product interests, health problems (food allergies, diabetes, etc.), lifestyle and sports/fitness.

The card application even asks if the applicant is interested in investing in the chain, and asks for customers' e-mail addresses to notify them about classes held at the stores.

To convince cardholders to fill out the long form, Wild Oats' literature explains that the retailer can offer shoppers better discounts on certain products when it knows its customers' interests.

TAGS: Supervalu