Over the years, product manufacturers have had limited involvement in card-based frequent-shopper programs. Proponents of loyalty marketing have long advocated more partnering with supermarket retailers, who own the purchase data collected from shoppers. Yet, the level of co-marketing has been essentially flat for years.
That is changing.
Today's competitive marketplace is causing executives to look more closely at these programs. Based on interviews with retailers, manufacturers, vendors and consultants, it is clear that a new chapter in co-marketing may be at hand.
"There has never been a better time in our industry's history for these partnerships to succeed," said Mark Heckman, president of Strategic Retail Solutions. "Brands are looking for a more measured and efficient approach to reaching consumers at account-specific levels. Card-based retailers are under pressure from new formats and alternative retail channels to protect their market share. Their consumer data is arguably the best tool they have in this new competitive environment."
Rebecca Kane, director of customer relationships and target marketing at Pittsburgh-based Giant Eagle, agreed that manufacturers are now looking for more effective ways to spend their promotional dollars.
"They understand the value of targeted marketing and the frequent-shopper databases," she said. "This knowledge leads them to look for programs and retailers that will allow them to talk to their target consumers directly rather than being forced to communicate in the more traditional 'mass' vehicles. Our manufacturer partners want to provide a differentiated offering based upon the consumer's current and potential value to their business."
Establishing and leveraging co-marketing partnerships will be discussed next week in Orlando, Fla., at the annual Global Electronic Marketing Conference (GEMCON). Executives from Pathmark, Bashas' and Meijer told conference organizers they wanted to make presentations and urge manufacturers to get more involved in these electronic promotions.
These retailers and others have created an infrastructure to handle partnerships and co-branded initiatives, and thus are having the best success, reported Heckman.
"It's always difficult to do something ad hoc, or not have dedicated positions within the brand or retailer organization to manage these programs," he said.
Heckman and other experts listed several major manufacturers that have been proactive in card-based frequent-shopper programs. They include Coca-Cola, Kraft, Procter & Gamble, Pillsbury, Unilever, and others.
In many ways, getting trading partners to work closely on these programs is a paradigm shift, according to Carlene Thissen, president of Retail Systems Consulting, Naples, Fla. Manufacturers care about how much of their own product they sell, and not so much where it is sold. Retailers care about how many sales they get, but not so much about which specific products are sold. What they both have to learn is to focus on category building and targeting specific consumers, she explained. Retailers and manufacturers gain from that approach.
"Manufacturers gain tremendous insight into their consumers," said Carlene Thissen, president of Retail Systems Consulting, Naples, Fla. "Retailers have data about individual consumers that manufacturers cannot gather on their own, including buying patterns, total basket purchases, propensity to switch brands, and sensitivity to promotions."
Manufacturers have been co-marketing with Price Chopper over the years, according to Mona Golub, manager of consumer services for the chain that operates 105 stores in six Northeastern states. Most programs involve a co-branded direct mailing to shoppers using a third-party company that coordinates the offer with the manufacturer.
"The direct relationships with manufacturers are still few and far between, but growing," she said. "We control the direct mailing and the database. Protecting the integrity of our database and access to our consumers is critical."
A few months ago, Price Chopper partnered with Olay, the international skin care company, to send samples of a new product to consumers. The retailer worked with the manufacturer and a third party to determine which segments to target. Therefore, the retailer could afford to send an actual sample and a coupon to a select group of people vs. just a coupon to hundreds of thousands more. This resulted in greater redemption and more interest in the product itself, according to Golub.
Giant Eagle's Kane said the chain partners on a regular basis with manufacturers on card-based promotions, including direct-mail programs, new-product launches, sweepstakes, and special programs for top shoppers. "We work with manufacturers to identify programs that reward our shoppers for their loyalty, and bring unique value opportunities that are exclusive to Giant Eagle," she said.
Manufacturers typically fund basic co-branded promotions, including coupons, the cost of advertising, and in-store signage. Sometimes, they get involved with designing the program and data analysis.
"There have been times where the manufacturer helps to organize and run the promotion," said Joe Ramirez, spokesman, Penn Traffic, Syracuse, N.Y. "For example, General Mills would help design the program -- help do the artwork for ads, participate in deciding what products would be involved, and what purchasing requirements would be. Basically, they got involved in how it would work and be implemented -- not just fund something that was wholly implemented by Penn Traffic."
Penn Traffic launched its Wild Card loyalty program in its Big Bear banner in 2000, and in its other three banners a year later.
Sara Owens, formerly director of consumer promotions at ConAgra and now a St. Louis-based consultant, said, "Retailers are sitting on a gold mine. But they often don't have the time or resources to use the data effectively. That is something that a manufacturer can provide."
However, retailers are very protective of their customer data. Most are leery of sharing it with manufacturers for analysis. That's why third-party analytic firms play an important role for trading partners.
"We enhance the collaboration between the two parties because the retailer is concerned about sharing this data directly with manufacturers. We are the third party that comes in," said Terry Montgomery, president of Data Ventures, a Charlotte, N.C.-based firm that provides analysis of loyalty card intelligence.
Retailers don't give up the identities of their consumers, noted Thissen. The manufacturers work with purchase data, but not specific identities.
Retailers told SN that by working with manufacturers on these programs, there is more to gain than a short-term sales spike.
"We think there is a benefit in terms of general customer loyalty, return visits to the store, and general preference for one of our stores as opposed to some other supermarket they might shop," said Ramirez of Penn Traffic.
Kane of Giant Eagle said, "Partnership with manufacturers on card-based programs delivers several benefits, including improved return on investment and programs that are more relevant to our consumers and deliver significant value."
Yet, some retailers aren't satisfied with their level of co-marketing. They are looking for a closer relationship with their trading partners.
"We're always looking for that magic promotion that will set the world on fire," said Patty Youchock, manager of target marketing for Foodtown, Carteret, N.J. "But what we've learned in the last three years is that no one promotion does that.
"How would we want manufacturers to get involved? That's the challenge as we get better in providing data, showing them results of promotions, and showing them the ability to target. I don't think we've come anywhere close to tapping into targeting the one-to-one marketing that you hear so much about in this business. That is the elusive element of electronic marketing that we don't have our hands around," she said.
In its 53 stores, Foodtown operates a branded rewards program from S&H greenpoints. Arthur Sweetser, senior vice president of marketing and partner services for the Salem, Mass.-based firm, said he would like to see half of the program be manufacturer-driven. "They have seen that it works both by product shipments and by the data that we supply back to them," he said.
Price Chopper would like to do more cooperative mailings, said Golub. She called the results a "win-win" for both partners.
"We've known for years that we can direct market very accurately and very well," she said. "I think manufacturers are starting to realize that more and more. The more they realize it, the more they will reevaluate the dollars they spend promoting their products alone rather than investing in our ability to do that with them."
Retailers and manufacturers should look for common goals and synergies from a customer perspective. Once that is identified, the rest is easy, according to Kane of Giant Eagle, which has operated its Advantage card program since 1995 and now has 3.6 million enrolled customers.
"Retailers and manufacturers should focus on improving data analysis to evaluate the effectiveness of applied tactics," she said.