Selling consumer packaged goods is not a high-tech art. However, bright signage and flashy pricing may no longer be enough in the two-front war against club and mass. Retailers are looking to technology for an added inducement to keep shoppers in the Center Store aisles.
The plastic card -- and the data it delivers -- is fast becoming an integral part of the grocer's arsenal. Roughly 60% of supermarkets nationwide offer loyalty cards, according to statistics from Retail Systems Consulting, Naples, Fla.
For the progressive retailer, a loyalty card is far more than an electronic circular. An effective program can be used to manage and expand key categories, and offer personalized offers to top shoppers. In addition, cards can be powerful tools for generating excitement in lackluster aisles.
Green Hills Farms, an independent operation in Syracuse, N.Y., uses a multitiered approach to its loyalty program, according to Lisa Piron, director of management information systems. Shoppers are divided into five categories: diamond, ruby, pearl, opal and quartz. Diamond shoppers are the biggest spenders, spending a minimum of $100 on the card in a week. On the other end of the spectrum are the quartz customers, spending less than $25 per week.
All club card carriers are eligible for weekly specials advertised at shelf-level throughout the store, Piron told SN. However, diamonds and rubies are the recipients of direct mailings and special offers designed to reward the store's best customers. This system has been a hallmark of service at Green Hills since 1993.
The independent faces stiff, neighborhood competition from Wal-Mart, Wegmans and Price Chopper and, therefore, has begun to highlight its specialty selection, hoping to carve out a distinctive niche in a saturated marketplace. The store's loyalty program plays a key role in driving store traffic, Piron said.
"Everybody is selling the same traditional grocery products," Piron said. "We are integrating more specialty and all-natural products throughout the aisles. Our deli has always had that distinction. We are trying to create that impression in grocery as well."
The strategy's ultimate success hinges on the ability to turn shoppers on to novel products. These products tend to be more expensive, she said, and they may be harder to spot than the more familiar brand names. Piron is using direct mailings to attract her best shoppers.
One recent promotion involved Stonewall Kitchen products, a line of specialty jellies and syrups. All diamond and ruby shoppers were mailed a coupon for $2 off any of the line's products.
"It is often up to the retailer to give customers a reason to take a look at these products. There are no manufacturer coupons," she explained.
Indeed, promotional support is scarce in the specialty field, and the discounts often come from the retailer. However, the gross profits on these items are generally higher. From Piron's standpoint, it is a worthwhile investment.
Pat Iasillo, director of customer relations management at Remke Supermarkets, an eight-store chain out of Covington, Ky., takes the data gleaned from the stores' loyalty cards one step further by offering custom promotions at the individual level.
"Any retailer knows there is something going on in the Center Store," Iasillo said. "You don't need a loyalty card to see declining sales."
Loyalty data identifies the problem shopper and provides the retailer with insight on how to solve that problem, Iasillo explained.
For example, some solid customers may buy pet food, but on a very limited basis. The conclusion: They have a pet and are buying the bulk of their pet food somewhere else. In this situation, Iasillo will send these customers a pet food promotion in an attempt to bring this shopper back to the pet food aisle at Remke.
Iasillo sees huge potential in the realm of one-to-one marketing. He is currently looking for a more efficient medium of communication. Mail is expensive, he said, and the cost of mailing tends to offset the increase in incremental sales. Point-of-sale communication offers the most cost-effective model, he said.
"Eventually, we would like to communicate with every consumer at every point of interaction," he said.
The information is also used to manage underperforming categories. Iasillo found that of his best customers -- represented by the top 30% in sales -- 60% were not buying any laundry detergent. Laundry detergent is a problem area throughout the industry, with mass and club stores making a significant dent in sales in the food channel, Iasillo noted. This defection causes peripheral losses as many cleaning supplies and like products are in the same aisle, and customers simply aren't shopping it. Iasillo used information about sales patterns from the loyalty cards to fine-tune product assortment and merchandising strategy. Within a couple of months, the statistic for non-buyers was reduced from 60% to 50%.
Some retailers are turning to third-party outfits to give their card programs added vigor. S&H Greenpoints, Norcross, Ga., is a digital rewards program that ties into the retailer's loyalty program. The program is currently found in roughly 3,000 lanes across the country, according to Arthur Sweetser, a spokesman for the company.
The system operates on a point basis. A customer earns points every time the loyalty card is used. The more money spent, the more points earned. Those points can be used to "buy" products from the S&H Rewards Catalog -- which run the gamut from movie tickets to tropical cruises -- or they can be redeemed with the retailer for a discount on select items.
Items can also be run for bonus points. For example, if a customer buys a box of Brand X cereal, she receives 500 extra bonus points.
Peter Lavoy, president and chief operating officer at Foodtown, Avenel, N.J., has been using the Greenpoints system for two years. At Foodtown, there may be as many as 400 bonus-point items per week. Often, these specials will run for as long as a month.
"We have found bonus-point items to be more effective than a general price reduction in moving product. We see a lot of out-of-stocks when an item is run on bonus," Lavoy said. He distributes bonus items across Center Store categories, and tries to have four or five major, market-basket items available every week.
Lavoy is more than satisfied with the program's performance in his stores so far. He did not offer any specific numbers, but said he has seen a "major improvement" in the size of the average order since launching Greenpoints.
At Carter's Markets, Charlotte, Mich., where the Greenpoints system has been in place for over a year, bonus items exhibit a 70% to 75% sales lift on average, according to Rex Harcourt, president of procurement and marketing for the chain. The typical TPR yields a lift somewhere between 50% and 70%, he said.
The system was launched in tandem with the chain's loyalty card over a year ago. Harcourt was looking for a loyalty program to establish a true point of difference between Carter's and the big-box competition, and he wages an effective offensive by offering bonus items in the hardest-hit categories.
The program works in concert with the chain's baby and pet clubs, Harcourt said. He hopes to take the program further by developing a more targeted, one-to-one marketing approach.
