ATLANTA -- Kroger Co.'s Atlanta division here is using a direct mail coupon book as a key weapon in its battle to retain grocery aisle share against market newcomer Publix Super Markets.
The 32-page "Power Pages" coupon book contains a 50-50 mix of advertisements and coupons from grocery manufacturers, as well as noncompeting retailers and service providers, such as car dealers, auto repair shops and yard maintenance firms.
The division ran three Power Pages books last year, starting in June. Because of their popularity, the production schedule was stepped up to five, with the latest issue mailed late last month.
Officials at Kroger's regional offices here declined to comment about the coupon strategy. However, a local source involved with the program said the coupon books are proving successful in staving off the competition, especially when coupled with in-store radio ads and Kroger's aggressive store remodeling and expansion program.
"Due to the competitive environment, we wanted to do something that Publix didn't do, like our in-store radio," said Rick Terrill, director of sales at KRGR Entertainment & Media Network here. KRGR is contracted exclusively by Kroger to deliver music and advertising via an in-store radio network, as well as to put together the Power Pages. "We're really concerned about how we're going to compete and not lose share," Terrill explained. "Publix has gained a 10 share with 20 stores, which isn't bad, but Kroger has only lost a share and a half, so most of the other 8.5 share points have come from other retailers," he said. Both Kroger and Publix operate similar formats and target the same customer base, he added.
Terrill said Power Pages has a circulation of 500,000 households and is delivered via ADVO direct mail.
"We select certain zip codes within the Atlanta Metro area that are primarily heavy Kroger shopping zones. We also try to cover the Publix competitive area. We will target zip codes where they have a store. And a lot of times, the Publix store goes in right across the street from our best Kroger," he said.
Terrill said grocery manufacturers are seeing higher coupon redemption rates, as high as 5%, through Power Pages, compared with 2% in a regular newspaper freestanding insert. And some buy-one-get-one-free coupons, such as a deal in the 1994 Holiday issue offering a free 10-load box of Ultra Trend detergent with the purchase of a six-cake Dial soap pack, have had redemption rates over 10%.
"Grocery manufacturers have been very happy with the return. Anything above a 2% return rate is very beneficial to them," he said.
Among the advertisers featured in Power Pages mailings are Coca-Cola, Birds Eye, Mission Tortillas, Lever Bros., Mueller's pasta, Tony's pizza and Tropicana. Featured retailers and services include ValuJet airlines, Pizza Hut, Rooms with a View solariums, Argus alarm systems, Houndstooth carpet cleaning, Duct Doctor duct cleaning, Jim Ellis Mazda and Woody's Woodworks wooden landscaping.
In addition, Toys "R" Us sponsors a children's coloring contest featuring KRGR Kritters.
"Some of our advertisers on the retail side say it is the best vehicle they have ever used. For example, one fence builder said he got orders for 50 fences, and he only paid about $5,000 for the ad. We have some clients who are absolutely crazy about this and wish that we came out more frequently," Terrill said.
Rates for a 5-inch by 8-inch page range from $7,000 for a one-time ad down to $5,000 for a five-time ad. There is also a $250 production charge.
"Several advertisers, including Coca-Cola and Dial, are on what we call multi-unit contracts. The cost goes down as you buy more issues. It is a significant price break off just running one time," he said, noting that advertisers also receive mentions during commercial breaks on KRGR.
Terrill said he has a waiting list of advertisers and is considering expanding Power Pages to 48 pages, but first he has to examine increased production and postal costs to see if it is worthwhile.