"Customers like to be treated as the individuals they are." -- Scott Ukrop, marketing director, Ukrop's Super Markets
The idea that everyone wants to feel a little special sometimes is one that shouldn't come as much of a surprise.
But no matter how obvious that is, when it comes to marketing, there's always danger implied in according certain customers rewards that are unavailable to others -- even if those rewarded are highly valued. So many retail marketers tend to stay away from the practice and take pains to underscore to customers that whatever beneficial terms are available to one are available to all. Indeed, that's the essence of the highly popular everyday-low-pricing strategy.
But in the real world there are many exceptions to the level-pricing outlook.
One of the more notable exceptions involves the redemption of manufacturer or store coupons: Those who possess the coupon get the good deal, those who don't have the coupon don't get the cents-off price.
Some special-treatment practices actually have a reverse effect: In-store signs pointing to the values available to those with coupons fully inform those without coupons the exact degree to which they are paying more. Or, consider the message the express checkout lane sends as it awards time savings to those who buy the least.
So the real trick for retailers is to discover a way to identify repeat, high-ticket customers and confer a reward on them, but a reward that doesn't cause ill will among those left out.
As the news article on Page 17 shows, Ukrop's Super Markets, Richmond, Va., is working on these problems by analyzing data gleaned from its pioneering frequent shopper program, which has been in effect since 1987.
Based on a talk given by Scott Ukrop at the MarkeTechnics convention, as reported by SN Associate Editor Denise Zimmerman, Ukrop's is taking a look at customer data representing the purchasing habits of close to 300,000 households. Ukrop's findings probably aren't that extraordinary, but since this type of information is usually closely held, results are worth a special look.
The nub of what Ukrop's found is that there certainly is a core group of customers that should be rewarded individually. At Ukrop's, the top 10% of customers account for 40% of total sales. Each shopper in the group of the top 10% spent an average of $471 during the month of January. Net spending for those individuals comprising the top 10% ranged from $350 to $3,000. The average-spending level of the top 10% compares quite favorably with the $148 spent by the average customer enrolled in the frequent shopper program. And, it seems reasonable to assume that those enrolled in the program at all spend at levels above customers who chance in off the street.
As for the bottom 10% of all enrolled shoppers, they contributed a slim average of $8 for the period, comprised of a range of 50 cents to $14.50. Now, how does Ukrop's reward the top 10%, or other worthwhile customer segments, without alienating all others?
The chain developed a household-specific newsletter for the entire universe of frequent shoppers, each containing coupons tailored to individual households. For example, those who purchase a certain amount of diapers might receive a manufacturer coupon for a free baby blanket.
The promotion system is a sound one since it makes the call to action within the household and because it tilts the call to real needs of specific households, needs not likely to be felt by anything approaching even a majority of households. Here's what Scott Ukrop had to say about household-specific promotions: "We were pleasantly surprised to see that our customers did not mind receiving different offers than their neighbors. "This was a major concern for our organization because the idea of treating customers differently ran counter to the way we've always done business. But customers like to be treated as the individuals they are."
These little bits of useful information from one of the nation's first frequent shopper programs show how much can yet be learned by dipping into bits of the full flow of data that gushes from other frequent shopper programs.
