Supermarkets may be the ideal retail outlet for selling prepaid phone cards and retailers are discovering many benefits to merchandising them.
her departments through cross-promotional efforts and tie into the chain's frequent-shopper program.
Given the right program, retailers can greatly reduce their investment in calling-card merchandising. Here is what executives had to say:
SN: How can supermarkets benefit from the growth in phone cards and how do the products fit within the grocery store's merchandising strategy?
Schloss: Phone cards are a profitable business. It's like finding money.
Canty: The supermarket has the advantage of much larger traffic. If the supermarket is in an area where there is a lot of pay-phone usage, especially in ethnic areas, prepaid cards should be made available.
Capka: Any grocery person will tell you they work on the most minimal margins of profit. This product should earn the retailer 30% to 36% net profit with zero exposure.
No grocery store should ever pay for a prepaid calling card until it is sold. They should get terms. For example, you are a 100- store chain wanting to put in the cards. You don't have to pay for the cards until they are sold. You put in a point-of-sale activation system. At the end of the month, the supplier knows how many cards were sold from the electronic data interchange billing. Then he bills you. You have 30 days to pay for the cards. It is like a consignment.
The retailer should structure the deal so the carrier is the one who has to promote the card to make the sale. Build in an advertising allowance. Have him put up all point-of-sale materials. Learn how to sell the cards. Many carriers tell clients they will educate them about phone cards, when they don't give them a clue. They do not actually show them what works because they haven't had tremendous success with the cards. Most telecom companies do not understand retail.
Everyone in the grocery industry wants to make the store more friendly and get customers to return every week. We teach employees to talk about the phone cards. If they can educate consumers to the savings, customers will buy them and that phone-card sale will become a repeat sale.
Schloss: We've been in the phone-card business a couple of years. We are in the process of going strong with a new source. We have a whole new campaign to kick off with a new line of phone cards. The other line we had carried will still be available to customers, but this new one will eventually replace the former line.
What is different about the new program is that we will have the exclusive right to market this phone card in the state of Alaska and it will offer a cheaper price point to consumers. Customers will save 20% to 30% off what they were paying before.
The supplier is providing promotional support, advertising and POS material. They are really going after the business. We have been selling phone cards, but now we will really start marketing and merchandising. We see much more potential with the new program.
The new phone cards will be merchandised at every checkstand in all stores. Customers will buy them when they pay for groceries. It will be like buying postage stamps. The cards will be live, but they are dollar-bill size and kept inside the register. There will be plenty of POS, advertising and shelf talkers. It would not be a bad idea to have the cashiers wear buttons to promote them.
Kaminsky: For supermarkets, there is the obstacle of reducing overhead. By this I mean security and the cost of training people to handle phone cards. Phone cards can be a natural tie-in to frequent-shopper programs.
Veres: Regarding supermarket promotions of phone cards, I have seen some locally at Randalls and Kroger. When Randalls introduced phone cards, it offered a free 10-minute phone card for developing a roll of film. That ran for two months. Now they sell phone cards on a regular basis.
Last Thanksgiving, Kroger had turkey bucks that consumers could save toward getting a free turkey or a free phone card.
About two years ago in Oklahoma and northern Texas, the local Coca-Cola bottler had a free phone card in 12 packs of Coke during the Christmas season only at Dillon's supermarkets.
Goldberg: A phone-card promotion can be tied-in with a retailer's preferred-customer card. Let's say you can either save money on grocery products or get a prepaid calling card when you use the preferred-customer card. This gives you two ways to save at the register. Instead of saving on product X, the more you buy, the larger size [in minutes] phone card you can get.
This could work well with retail at certain times of the year. Many retailers have free turkey or ham programs for the holidays. What if the retailer offered a prepaid phone card with a $50 or more purchase? It could have a holiday theme, such as "Call home for the holidays." Prepaid-phone-card promotions could be tied into other areas of the store, such as meal solutions. The card is a convenience, meant to save time. Consumers can be awarded a free phone card for buying from the meal-solutions area.
A prepaid phone card can help brand the store. It might not work as well for an everyday low-price operator. It can be used to reward customers for spending more money in the store. It can be used in conjunction with manufacturers as part of a program, such as Frozen Food Month. A group of manufacturers and retailers could cooperate on the promotion. The more frozen food the consumer buys, the higher value of phone card he receives.
Prepaid-phone-card promotions can be used to highlight various areas of the store. For example, a retailer can encourage sales of custom-decorated birthday cakes by offering a free-with-purchase prepaid calling card that can serve as a gift.
Schloss: We will be doing a tie-in with the new phone card and our frequent-shopper card. We tell customers to have their Carr's Plus card swiped at the checkout to save money on various products. I am not exactly sure at this point how we will promote the phone cards with the frequent-shopper program. Maybe we will offer $1 off a phone card for every Carr's Plus customer. We want to reward the customers who shop in our stores frequently. In the past, we have rewarded frequent shoppers with videos, and now we will reward them with phone cards.
Capka: We are coming up with promotions for the frequent-shopper cards. When they buy the house brand of coffee, they get free minutes on their prepaid phone card. If they buy private-label diapers, they might get five minutes on the phone card. The theme is, shop at our store and we will give you free long distance. This will explode. The minutes will be applied at activation. Customers will be given a free phone card to bring in every time they shop, so minutes can be added to it based on purchases.
If my private-label coffee sells for $6 and I can make $2 on it, I would rather sell that than the brand-name coffee on which I might make 30 cents. It is worth $1.70 more to me to have the customer buy my coffee vs. the branded. If long-distance minutes cost me 10 cents each, I can give the customer five minutes of free long distance and still make $1.50 in profit.
Capka: In prepaid phone cards, you have products that take up virtually no shelf space because they can be kept in the register. They represent no risk to the store because the retailer is only billed on what is sold. They don't compete with any other product carried in the store. It is an absolutely perfect product for the grocery store. It provides high profit margins, keeps your name visible to your customers and can generate tremendous repeat sales.
