KROGER IN PARTNERSHIP WITH U.K. LOYALTY CO.

MICHAEL GARRY

CINCINNATI -- Kroger has entered into a 50-50 joint partnership with dunnhumby, a London-based loyalty marketing firm, to create dunnhumby usa, based here near Kroger's headquarters.

Edwina Dunn, chief executive officer, dunnhumby, told SN that the joint venture continues an 18-month project, still in the pilot stage, to analyze Kroger's frequent-shopper data to develop more customer-specific strategies; these strategies would probably be applied in the areas of store assortment, layout, promotions and pricing, said Dunn.

"Our first focus has been to look at how U.S. shoppers respond to discounts and to competitors' [offers]," said Dunn. "Knowing that, we will look at what we can do to better orient the business around differences in customers." She said Kroger was not planning to use a targeted mailing program, though it's "an option in the future."

Dunn declined to give further details on the pilot, but said a "gradual" rollout was expected. Kroger declined to comment.

In the United Kingdom, dunnhumby, specializing in data management, customer analysis and insight-led planning, has worked with Tesco, House of Fraser, Procter & Gamble, BMW and Virgin Atlantic, among others. Dunn said that dunnhumby usa would have 45 employees by the end of the year, up from about 10 currently. Last week, dunnhumby usa named former P&G executive Steve Goodroe as CEO.

Dunn said Kroger originally approached her company as a result of its work with U.K. supermarket leader Tesco, a nine-year client and now a 53% owner of dunnhumby. In a prepared statement, Don McGeorge, executive vice president at Kroger, said, "We admire what dunnhumby has achieved in the United Kingdom, and believe that our customers will benefit significantly from this expertise."

Tesco, the leading supermarket chain in the United Kingdom, worked with dunnhumby to develop a loyalty program that rewards Clubcard-holders with a quarterly rebate equal to 1% of what they spent at Tesco; the rebate is mailed as coupons that can be used to buy anything at Tesco. Loyalty shoppers also get supplier-funded coupons tailored to their shopping history.

Out of Tesco's 14 million shoppers, 11 million "regularly use the card," said Dunn. Tesco, which spends about $251 million annually on the loyalty program, "can validate the impact of the program on traffic and spending," she said. In addition, anonymous loyalty card data is sold to suppliers.

Dunn said that dunnhumby was not planning on repeating the Tesco program in the United States, but said that the value of its work with Kroger could be worth "10 times" what has been done in the United Kingdom.

While focused on Kroger, dunnhumby usa may eventually market to other retailers in the United States, Dunn said, adding that she hopes to soon to announce another retailer client outside the United States.