Food Lion is increasingly direct-mailing customers coupons for things they buy often or have indicated an interest in, such as baby or pet items.
For creating excitement, however, nothing beats a BOGO. Open Food Lion's weekly circular and you'll find at least a few buy-one, get-one free offers per page.
"I think that our customers enjoy it," said Jeff Lowrance, spokesman for the Salisbury, N.C.-based retailer. "They perceive it as a good value. It also gives them a chance to stock up on some items. And we think it adds a measure of fun."
BOGOs, which have long been a cornerstone of any retailer's traditional promotional strategy, have not changed much over the years. Their original purpose -- to drive volume and create loyalty -- might even seem a bit outdated by today's more sophisticated standards.
Still, they remain popular with countless customers and retailers.
"BOGOs are a very highly effective advertising and promotional tactic," said Carlene Thissen, president of Retail Systems Consulting, Naples, Fla. "Whenever the word 'free' gets put anywhere, consumers react strongly."
Yet in a time when technology is moving promotions to customized offers, some might wonder if buy-one, get-one still has a valid place in food retailing. To hear some critics talk, BOGO and its offshoots are an addiction to be kicked.
"The BOGOs move more volume than any other promotion we see out there," said Joe Robinson, senior partner at Ryan Partnership, a marketing services company based in Wilton, Conn. "The problem is, you're getting a very low price for your product.
"I think retailers and manufacturers know you will get a bump doing a BOGO. But I think retailers and manufacturers agree, it's not the best strategy to build long-term equity and loyalty."
In the short term, BOGOs can create shopper excitement and reinforce a retailer's low-price image. For example, they seem to pop up with more frequency in market battles, as they did recently in her area, where Thissen noticed circulars were teeming with BOGO offers, "a definite sign there's something heating up." When tied to frequent shopper cards, they can encourage shoppers to use their cards regularly.
Even Wild Oats Markets, Boulder, Colo., finds BOGOs good for building shopper penetration, which is generally low. Even though it serves customers who aren't particularly price-sensitive, Wild Oats gets double-digit traffic and sales growth when it runs BOGOs, which it does twice yearly, said Laura Koblentz, director of brand marketing. "It's a great way to generate traffic and new customers."
Retailers have upgraded and fine-tuned the BOGO with technological advancements. Now, they can vary the offer. So instead of forcing shoppers to take two of the same item, most major retailers craft more sophisticated programs that allow shoppers to get a related item free, or choose a second item from a family of products.
The offers are growing in scope. Traditionally funded by packaged good makers, BOGOs were in the realm of Center Store. Now, with better technology, retailers are putting BOGOs on meat, produce and other random-weight goods. The half-price sale has become a popular twist on the BOGO, and is on the promotional calendar of retailers like Pathmark, Carteret, N.J., and ShopRite, the banner of Wakefern Food Corp., Elizabeth, N.J.
Since K-VA-T, Abingdon, Va., began running BOGOs or half-price sales 10 years ago, it has improved its ability to gauge their profitability, said Tom Henry, senior vice president of marketing. "You're a lot smarter in your decisions."
As the promotional execution improves, so does the retailer's ability to gauge success. For example, Bashas', Chandler, Ariz., and others are getting smarter at figuring out which items to put in the lobby when running a BOGO sale in order to maximize profitability. In the old days, when Bashas' ran a 99-cent special but didn't supplement it with higher-ticket items like soda or water in the front end, it realized "you're not getting higher-impulse purchases at a higher ring," said Christie Frazier-Coleman, vice president of sales and customer loyalty.
Now, Bashas' looks at criteria like card data, basket size and how a promotion affected sales throughout the store. Since people often look for the lowest price on soft drinks, for example, "you may have to supplement that with the bananas or milk to get basket size," Frazier-Coleman said. "It's not just about having 30 items in the basket. It's having the right 10."
Keeping the offer simple for shoppers is key to making BOGOs and their variations successful, said Mark Heckman, a consultant who founded Strategic Retail Solutions, Bradenton, Fla. Heckman, a former marketer for Randalls Food Markets, Tempe, Ariz., and Marsh Supermarkets, Indianapolis, recalled promotions coupling meat with potatoes, and cereal with milk, that flopped at one of his former employers because the paired items couldn't be merchandised near each other.
The lesson? "You start to see the benefits of portable refrigeration," Heckman said. Some contend that buy-one, get-one offers are losing their appeal. Now that warehouse stores and conventional supermarkets sell large package sizes, BOGOs are less relevant to pantry-building shoppers, said Ryan Partnership's Robinson. Jim Norred, president of the J. Brown Agency, Plano, Texas, which does promotional analysis for manufacturers, doesn't see retailers measuring BOGOs' effectiveness well, and said they don't help them on price image.
"The only way to beat Wal-Mart is on service, or better selection," he said. "I don't think BOGOs are a great way for traditional supermarkets to attack Wal-Mart."
For manufacturers, buy-one, get-ones require sacrificing profit, he said. Robinson tells manufacturer clients that unless they're trying to get rid of inventory, "don't go in with a BOGO. Go in with a value-added offer," one designed to change shoppers' behavior over time.
Retailers are using card data to target shoppers, but it's slow going. Thissen estimated that while 40% of retailers have frequent shopper programs, few use that data to send offers to shoppers based on their individual buying history.
Bashas', like many retailers, segments its shoppers into groups based on their profitability, and targets them with corresponding offers. With its best shoppers, it might offer a Catalina coupon for a signature item as a way to expand their ties to the store. The next-best group might get an offer for an item in a department that group doesn't already shop in. "It's more about basket size than giving away another coupon," Frazier-Coleman said.
Eventually, retailers will be able to track a shopper's loyalty to a brand, make them an offer accordingly, and see what kind of offer it takes to get her to buy the next time. "If you have frequent shopper card info, they don't have to give a BOGO to everybody who walks in the door," Thissen said.
Still, customized marketing is in its infancy, and BOGO remains the one thing retailers can count on to drive volume.
"It's very successful," Heckman conceded of targeted marketing, "but it just doesn't reach a lot of customers because there's not enough money in it."
"You always have to have a mass market program that appeals to everybody," Frazier-Coleman added. "Even within your top shoppers, not one thing appeals to the whole group. You still have to pull in traffic, you still have to pull in new customers and occasional customers, and get them to fall in love with your store."
BANG FOR THE BUCK
Variations on BOGO let manufacturers preserve margin.
Trade promotional spending by manufacturers, at 17.4% of gross sales, is at an all-time high, according to Cannondale Associates, a Wilton, Conn.-based consulting firm, even though it seems manufacturers are less than keen about buy-one, get-one free promotions.
Why? Consultants to manufacturers said that as retailers consolidated, they faced more pressure to compete on price, and now that they have become bigger, they have more sway with manufacturers. If a retailer wants a BOGO promotion, there's little a manufacturer can do. Instead, manufacturers appear to be trying to find a middle ground, such as frequent shopper programs.
However, even these programs are costly and have limited impact, said John Carlson, a Cannondale partner. Meanwhile, variations on BOGO -- for example, 2 for $3 or 3 for $5 -- have gained popularity as a "way to get a lift without having to go to the deepest discount," he said.
Retailers need to make it easy for shoppers to calculate the savings and know which items are included in the deal, given the perception that stores raise the price of an item before putting it on sale, said Mark Heckman, a consultant at Strategic Retail Solutions, Bradenton, Fla. One retailer told him that customers' biggest complaint was that it was hard to compare that store's BOGO deal to another retailer's temporary price reduction.
"When you're grocery shopping, the last thing you want to do is make it a cerebral exercise," Heckman said. "You have to ask, 'Is this a consumer-friendly promotion?"'