CHICAGO -- Gerland's Food Fair, a 20-store Houston chain, is rolling out software that analyzes frequent shopper club members' performance in much the same manner as category management systems are used to evaluate and drive product profitability.
"You hear a lot about item category management today and our next step is to go to customer category management," said Kevin Doris, chief operating officer of Gerland's.
He outlined how the chain uses data generated by its "Customer Advantage" electronic frequent shopper program during a seminar titled, "Frequent Shopper Programs: What Do I Do With All This Data?" at the Food Marketing Institute's annual convention here this month.
Gerland's uses daily reports based on point-of-sale transaction data to track sales, card usage, customer defection and other activities related to its frequent shopper program, Doris said. The chain is also testing in all stores a data analysis tool that calculates individual shopper profitability rates.
The sales report ranks shoppers according to spending levels and groups them into 10 deciles, each containing an equal number of shoppers. Looking at the data in this manner enables Gerland's to better understand the purchasing patterns of shopper clusters.
"Decile 10 contains members in the highest spending group and decile 1 has the members in the lowest spending group. With this report we can recognize and understand member dynamics and the
most active group of members," Doris said.
For example, Gerland's learned that shoppers in the top two groups, deciles 9 and 10, spend twice as much weekly as shoppers falling into the next two groups, deciles 7 and 8.
"And our bottom five deciles contribute only 12.8% of our business, so 50% of our transactions represent only 12.8% of our business," Doris said.
Another report based on POS data ranks shoppers according to three criteria: how recently they visited the store, how often they visited, and how much, on average, they spent per visit.
"This 'recency, frequency and spending' report is the foundation of customer category management," Doris said. "Using this report we can group our customers into different categories and set up custom awards for each group."
Other features of the data base application, called Customer Relationship Marketing, from S2 Systems, Dallas, enable the chain to develop promotions targeted to specific shopper groups, project the results and track progress of promotions.
A recent Gerland's promotion that rewarded shoppers with a 5%-off discount for each $250 spent resulted in a 3.5% weekly increase in the number of households shopping the store during a 13-week period, Doris said.
Gordon Harris, vice president of A.T. Kearney, Cambridge, Mass., also spoke at the presentation and said calibrating promotions precisely for particular shoppers is critical to building shopper loyalty.
"The key is to reward customers for positive behavior changes," he said, and not merely to subsidize existing habits.
