While economic conditions have gone up (sometimes) and down (often) over the past decade, one constant in the supermarket industry has been Kroger Co.’s sales gains.
Amid all the volatility, the Cincinnati-based retailer is working on a streak of 37 consecutive quarterly same-store sales gains. One reason for that, Kroger officials say, has been the result of decisions made with the help of customer data collected through loyalty cards behind Kroger’s partnership with the analytics firm Dunnhumby USA.
Future Leaders Can Learn From the Best
Loyalty marketing is nothing new in the supermarket industry, where schemes to encourage repeat visits through offers like trading-stamp programs have existed almost as long as supermarkets themselves. But Kroger has become a modern leader in the field by using its data as a means to tackle a variety of functions beyond personal offers, observers said.
“Everybody thinks of a loyalty card just as a way of target-marketing people. But there is a really wide set of merchandising applications that can be driven by shopper insights that Kroger was among the first to hit upon. And they are probably still leading the pack,” Jim Hertel, managing partner at Willard Bishop, Barrington, Ill., told SN in an interview.
“They [use loyalty data] to inform how they think about pricing, and about space, adjacency and flow [and] how to think about creating complementary product presentations in a way that can drive a bigger basket,” Hertel added. “There’s so much more than just, you get points and we’ll send you a quarterly mailing with coupons that consumer goods companies will pay for. Kroger was the company who said, ‘There is an awful lot more.’”
Hertel said retailers large and small can learn from Kroger’s example by asking more of the data they already collect. “What Kroger has done is recognize that the data is rich from a merchandising standpoint, and not just a target-marketing standpoint,” he said.
Kroger officials say adherence to data could have greater payoffs over the long term. In a presentation to analysts last year, Michael Donnelly, senior vice president of merchandising for Kroger, said that between card data and customer surveys the company is growing its knowledge base exponentially. “If you think about in 2020, what potential data is out there, it will be 50 times the amount of data that we have today,” he said.
“The real question is it isn’t what you know, it’s how you use it,” Donnelly added. “And so when we look at the future, we look at actually strategically making decisions. We look at it based on our partnership with Dunnhumby and how we use our insights today and then how we’re going to use this data going forward to better actually drive our business.”
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