The maxim that "good things come in small packages" is ringing true at supermarket checkouts as retailers report more impulse sales of prepaid phone cards.
Key components contributing to greater sell-through in supermarkets are packaging and display. This is especially the case now that advanced technology in point-of-sale card activation can overcome the security issue that has hampered prepaid card sales at retail.
The consensus among retailers and suppliers polled by SN is that growth of the phone-card category at supermarkets depends on the synergy among POS activation, in-store merchandising and impulse buying.
"You're going to see more swipe activation, making it easier for the customer to buy a phone card," said Chris Duley, vice president and general manager at McKenzie Buying Co., a wholly owned subsidiary of Western Family, Tigard, Ore. As a result, "phone-card suppliers are putting out more sophisticated packaging," Duley said.
Since the use of POS-activated cards greatly reduces pilferage, it is no longer necessary for supermarkets to hide cards behind the counter. They can now display them openly in packages at various locations throughout the store.
"Phone-card packaging is very important in competing with other packaged goods in the store," said Brad Newsome, chief financial officer at Foodtown Supermarkets of Kentucky, Lexington, Ky.
Foodtown is about to introduce its first store-brand prepaid card program, from LCI International Worldwide Telecommunications, San Antonio.
The cards will be displayed at checkout lanes, where cashiers will activate them using telephone lines after the shopper has made the purchase.
This will be Foodtown's first prepaid-card offering, said Newsome. Cards will be displayed in the selling area instead of from behind a counter or from a cash drawer at checkouts. "It gives you a little better response. Customers will actually get their hands on the cards quicker. This hopefully should lead to higher [sales] volume," he added.
Steve Blain, vice president of J.P. Pratt, Shawnee, Okla., says that packaging is on a par with POS materials in terms of importance. "There has got to be POS information that lets shoppers know that these cards are in the store," he said.
Pratt uses point-of-purchase danglers hung from the ceiling and weekly ads to promote the cards. The private-label cards are activated in batches of 100 and sent live to stores where they are stored behind the service counter until they are sold.
Some J.P. Pratt stores sell about 50 cards a month, said Blain. "Our stores do extremely well with phone cards," he stated. As security becomes less of a concern for many and product awareness and use is up, suppliers are concentrating on how best to capture the impulse purchase at retail through package design and merchandising.
MCI Telecommunications' strategy is being built around creative in-store merchandising. "Phone cards must be available on the supermarket floor so that customers can look at the package, pick it up and feel it," said Bill Laffeigne, senior manager of marketing programs for MCI PrePaid, Atlanta.
"If they remain hidden somewhere behind the counter, the only people buying cards are those familiar with the product who are going to the store for a planned purchase. It's our goal to grow this category by capitalizing on new users and gaining incremental impulse purchases."
MCI PrePaid has its own marketing division consisting of three designers and three project managers who devote all their time to designing and merchandising phone cards and POP materials. The company sells two separate card lines -- utility (time-only) and gift (five social-expression cards, including Happy Birthday). The cards are ideally displayed at checkouts and in the greeting card and gift section.
Supermarkets that sell MCI cards are provided with posters, static cling, stickers and mobiles as well as stand-alone 6-foot-high kiosks. "Since we first introduced these kiosks at Wal-mart Supercenters they have boosted sales of our gift series around 400%," said Chris Smith, director of marketing for MCI PrePaid.
Other leading suppliers, such as Sprint and AT&T, also are implementing new packaging and display techniques.
"The introduction of our 'instant-activation' Spree prepaid Foncard not only resulted in a new package design but also gave retailers the ability to get the product in front of the consumer," said Marlene Waltz, Sprint's director of prepaid cards, Kansas City, Mo.
Prior to POS activation, MCI packaged its cards solely for the convenience of the retailer, inside acrylic dispensers designed to fit in cash drawers.
Spree activated Foncards with a magnetic stripe printed on the back have been designed to fit into slimmer packages that can be swiped through a magnetic card reader by clerks at the cash register. "Phone cards can now come out of hiding and successfully compete with other products for floor space through use of stand-alone displays and can also get increased exposure by using more endcap and J-hook space,"
Waltz noted. AT&T in Basking Ridge, N.J., is another supplier that focuses attention on the importance of merchandising in stimulating sell-through at retail. "The most important thing for retailers to keep in mind is to display something that catches the consumer's eye and makes clear what they're buying as well as the value of the item purchased," said Sharon Robbins, director of marketing for AT&T prepaid cards.
After entering the prepaid market later than both MCI and Sprint, AT&T has also jumped on the "activation bandwagon" with the recent introduction of its own redesigned POS-activated prepaid card.
"Retailers now have more options than ever before in displaying our prepaid cards," said Mark Evans, general manager for AT&T PrePaid Card.
AT&T intends to move its POS cards gradually into the supermarket channel. "Right now we're still in the experimental stage in developing a variety of display units that can be used by retailers who will decide where they want to place them in the store," said Robbins.
At present, most of AT&T's prepaid cards are sold by vending machines in service at such chains such as Pathmark and Grand Union. These machines are typically located in front of cash registers or adjacent to the exit and entrance doors.
In-store merchandising and POS materials direct customers to these vending machines, which automatically activate and dispense the card after the customer makes the credit or cash payment.
Another major supplier, Worldcom Prepaid in Vancouver, Wash., uses vending machines to sell its Talk n' Toss prepaid calling card.
Worldcom statistics reveal that from 1994 to 1998 vending sales were four to five times higher than over-the-counter sales. These machines have proved to be ideally suited to supermarkets and other high-traffic areas such as shopping malls and convenience stores. A key selling point that appeals to retailers opting for vending is that it maximizes customer convenience while minimizing security and labor. It also eliminates the cost associated with inventory control.
Co-branding, where both the name of the store and the supplier appear on the card, is another option that the supermarket channel may choose to incorporate into phone-card packages.
Suppliers such as MCI, which have been successful in co-branding ventures, emphasize that consumers are more likely to buy a co-branded card when they see that a reputable company is backing the product.
Duley of McKenzie Buying Co., who is in the process of introducing a new private-label phone-card program from MCI to Western Family retailers, said it's important to combine "overall attractiveness with a quality image." This reflects the two high-quality names on the product -- Western Family, a well-recognized regional brand, and MCI, a well-recognized international brand, he pointed out.
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Another specialist in co-branding is LCI. "About 80% of our cards are co-branded, and we try to keep it simple," said Simon Bradwell, LCI's director of sales of enhanced services. "We sell minutes, and the retailer can choose whatever image they want to appear on the card."
LCI's prepaid cards are on sale at Market Basket Food Stores and Shaw's Supermarkets as well as 7-Elevens, Texaco and Exxon stores across the United States.
At Cable & Wireless in Vienna, Va., cards are designed to fit in with local and regional themes. "In developing store-branded packages we have had success creating images with a regional flair that are consistent with the store's image and incorporate the telecom carrier's own brand," said Alan Stiffler, vice president for North America of global card services at Cable & Wireless.
When it comes to package design, Stiffler goes on to say that "more expensive packaging often allows for enhanced features such as coupon combinations, sweepstakes cards and other items that give consumers value."