In the wake of the big push on technologically driven promotional vehicles of the last few years, retailers still regard circulars and coupons as the cornerstone of their promotional and advertising activity for Center Store products.
But, beneath the surface, technology is hard at work.
Retailers use the data from loyalty programs to determine the product mix of circulars, as well as to help them target delivery. Independents especially look to technology for innovative and cost-effective ways of promoting their stores.
"We see the traditional promotional vehicles -- printed circulars and coupons -- being primary channels for many years to come," said Jeff Lowrance, spokesman, Food Lion, Salisbury, N.C. "Shoppers still use printed circulars and coupons and expect to receive them," he said.
Meanwhile, Food Lion is emphasizing the targeted delivery of such vehicles by market or region for its 1,200 stores. "This trend is likely to continue," he said. "At the same time, as a larger percentage of grocery shoppers become Internet-savvy, Web-based promotions will become increasingly important."
"The way to think of it is, not how do I do old-style circulars, or how do I embrace the new technology, but rather how do I leverage the new technology to improve my circulars," said Ken Wyker, president, Wyker Marketing, Charlotte, N.C., once a Food Lion executive.
"I don't see the traditional promotional forms going away and the new promotional concepts replacing them.
There will be a modification or migration of the way traditional programs are run to leverage some of the new capabilities," Wyker added.
Bernie Rogan, spokesman, Shaw's Supermarkets, West Bridgewater, Mass. The 185-store retailer participates in the U-pons program from the Chicago-based planet U, has an aggressive loyalty card program with items from it promoted in the circular, and does other promotions like offering a free ski lift ticket or learn-to-ski package with the purchase of eight participating Center Store items.
"Our flier remains our principal advertising medium and will for the foreseeable future. We mail out over 4 million of them every week, both direct mail and newspaper insertion all throughout New England. So it continues to be the primary source and it works very successfully," Rogan said.
One change Shaw's made recently was to move the day of the circular to Friday to get a jump on competitors that publish on Sunday.
"I don't see circulars ever going away," said Rick Fry, vice president of grocery, Superior Super Warehouse Grocers, Lynwood, Calif. "They are still probably the most efficient way to target the customer who has the most probability of shopping in your store."
Operating 13 stores in an ethnic area with many first-generation immigrants, "if we used other media, we'd be paying to reach an awful lot of people who would not be within range of our markets," Fry said. Although Superior has a Web site, it does not engage in other forms of electronic marketing, such as a loyalty card program. "In the near term, that's not going to be a big part of our business."
Dale Instefjord, general manager, Blue Goose Supermarkets, St. Charles, Ill., has replaced newspaper advertising with direct mail to target the top 40% of customers in his loyalty card program.
A newspaper ad will reach 40,000 households, but he estimates his customer base at 6,700 households a week. "That is a colossal waste of time. So we are covering the Top 4 deciles in our card program -- what we call our 'committed customers' -- and we have gotten great results," he said. The one-store operator has done some image advertising in the past eight months, though, he noted.
One independents, Churchill Supermarkets, Toledo, Ohio, has taken drastic steps to survive. The retailer once had five units, but closed some, sold others, and now has one small store that it has converted to an upscale operation focusing on prepared food and other perishables, along with wine and some groceries. It is using an e-mail database to communicate with its customers, said Bill Stimmel, vice president, operations.
"It started out with about 300 customers, but it has nearly tripled in size in the last eight or nine months," he said. The retailer sends out a newsletter with product information, wine pairings, specials, and what is new in the store, he said.
"There are also some targeted coupons that the customers can download, print off and bring into the store. That has been a pretty effective database," Stimmel said.
Even a company with a policy of no advertising, like Dahl's Foods, Des Moines, Iowa, needs to promote Center Store products.
The 12-store retailer buys certain high-profile products direct, breaking up and redistributing the loads at a depot, and then selling them for an everyday low price, said Ross Nixon, vice president, merchandising. These products are displayed prominently with signs that identify them as a "Dahl's Special."
"On those types of items, we try to stick with an EDLP that matches up very closely with the supercenters. Although our primary merchandising throughout the store is high-low, we do price products like Tide, Bounty and Charmin at an EDLP," Nixon said.
"Promotion has always been with the industry, and will continue to be with the industry, but it will morph and change as time goes on," said Sue Klug, president, Catalina Marketing Services, St. Petersburg, Fla.
More of the big chains with various divisions that used to do their own promoting are starting to coordinate their efforts across a network of stores, she said. The chains are also going smaller with much more targeted promotions, addressing consumer groups with common interests, such as those with babies or with pets, she added.
But for all of this, "technology is the enabler while having a solid, basic promotional concept is the key," she said.
The industry also is starting to recognize that Center Store promotions have to provide a return on investment. "Technology would certainly play a role in this because it allows you to measure that entire cycle. In some cases, with frequent shopper cards, for example, it allows you to execute the promotion itself," Klug said.
Consumer-driven promotions are the key to increase sales, said Doug Falls, chief executive officer of value-added marketing service Martmenu, Port Clinton, Ohio. "If promotions are driven by the brand guys and they don't connect with the consumer -- and the supermarket is really the vehicle for connecting with the consumer -- I don't think they are going to be successful in the future," he said.
Both retailers and consumer packaged goods manufacturers need to make a greater commitment to the management of data that will result in better promotions, said Ken Robb, principal at marketing research and management consulting firm Technomic, Chicago. Robb heads the firm's retail consulting practice and, until last year, he was senior vice president of marketing at Dick's Supermarkets, now owned by Fresh Brands, Sheboygan, Wis.
"It's not a software-hardware technology thing. It's a people expertise thing. They need to hire the people who know how to do this stuff," he said.
Many retailers are using their loyalty programs just to deliver price incentives to their customers, and some have been successful with this strategy, Robb said.
"It's not about data collection and it's not about targeting, but it's about another way to deliver price reductions. But there will come a time in the not-too-distant future when card programs will not be able to generate that kind of consumer interest just on the basis of temporary price reductions.
"The real promise is the one that uses the program for true one-to-one marketing," he said.
"With the emphasis that retailers like Wal-Mart and others have placed on price, they have focused the consumer and competing retailers so completely on price that it's difficult for more innovative promotional ideas to succeed," Robb said.
Coupons are another area that are not likely to change in the near future, he said. For example, 80% of all coupons come through freestanding inserts, he noted.
"I don't see the electronic methods eliminating coupons by any means," said Charlie Brown, vice president, marketing, NCH NuWorld Marketing Limited, Lincolnshire, Ill. "If you take the frequent shopper card as an example, it has been in existence for more than a decade. The numbers I see are that 60% to 70% of the American population has a frequent shopper card. Yet coupons have continued to be very strong."
Coupon use also is counter-cyclical and with the economy trending downward, redemption rates are picking up, Brown said. For example, when the numbers are in, Brown believes the fourth quarter of 2001 will show a significant increase in coupon use, following the long economic expansion when coupon redemption went down.
"Coupons will continue on a pattern very similar to what we've seen in the last several years, and the use of this vehicle will continue to be strong as marketers look at coupons as the direct incentive to motivate the consumer," Brown said.
