SYRACUSE, N.Y. -- Targeted coupons and in-store kiosks have become common tactics for supermarkets seeking to boost sales by making it easier to save.
Green Hills, a one-store operation here, is wedding the two in a pilot test for a new coupon application that began last month. The retailer, which is fond of rewarding its frequent shoppers, distributed to 550 preselected loyalty card holders a key chain-size, optical scanner from Scan Aps, Los Angeles, that lets them record manufacturers' coupons anytime before visiting the store. Once in the store, the shoppers plug the scanner into a kiosk that downloads the coupon data into their loyalty card account.
For retailers and customers, the plan has several benefits: There's no need to clip or print paper coupons and have them scanned at the checkout, and shoppers are induced to spend more at the retailer because scanned coupons may be redeemed only at the retailer that issued the scanner.
The hope is that the convenience draw will lift sales of not only coupon products, but all items in the store, said Donna Cleveland, customer service manager at Green Hills.
"This is a huge benefit to the retailers because it forces customers to come back to the same chain of stores," said Vijay Chetty, president and chief executive officer of Scan Aps. He projected that in three years' time, a retailer could see 10% to 15% of its customer base using scanners, resulting in a 3% to 7% lift in annual sales.
Green Hills, which plans to test the scanners with customers for three months, also will use its kiosk to display customized offers to loyalty card holders based on buying behavior, Chetty said. Participants will receive postcards containing Green Hills offers that can be downloaded to their loyalty card account with a wave of the scanner. Scan Aps also is trying to convince manufacturers to devise individualized offers for kiosk users, he stated.
The technology faces hurdles. Will people adopt the habit of scanning their coupons, and will they like the gadget enough to pay the $12 to $18 annual per-scanner fee Scan Aps seeks to charge shoppers and retailers? In addition, kiosks have an uneven track record. They rarely succeed if they don't fulfill a core shopping function, such as ordering food or getting cash, pointed out Glenn Housefater, managing director of Partners in Loyalty Marketing, a Chicago-based consulting firm.
"The extent to which it is convenient may be offset by the need to come in the store and put something in a kiosk," Housefater said. He recalled a similar kiosk experiment that failed because "it was very difficult to get consumers to focus specifically on going to the machine to get offers."
Dennis McCoy, kiosk project manager for Lund Food Holdings, Edina, Minn., which has widely experimented with kiosks, echoed that sentiment, saying, "It has to provide some useful, valuable function."
Retailers also err by putting kiosks in the "dead zone" at the front of the store, where customers don't see them, Housefater observed. Green Hills may have sidestepped that problem by putting its kiosk by the registers.
Chetty acknowledged that convincing users to pay will be a challenge. Yet he said he's encouraged by the results of a smaller test he did last year with Homestead Market, a Chicago store that has since gone out of business. Participants reported they liked the convenience of not having to carry around coupons. "Nobody has to know I'm a coupon-clipper" was a common comment.
Chetty said he expects to reveal by December a "major national chain" that would begin a second trial of the scanners in February 2005.