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Grocery Chains Target The 0.7 Percent With Mobile Offers

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Those coupons that used to be available from red dispensers on grocery store shelves and have moved more recently to offers printed at checkout, are increasingly moving to mobile phones. That’s courtesy of Catalina, a marketing company which helps retailers and grocery chains understand what individual customers want and then goes to work encouraging them to buy.

The challenge is staggering enough to make you wonder why anybody goes into the grocery business. All those long aisles with thousands of food and health products are widely ignored by shoppers who typically buy less than one percent of the Universal Product Codes (UPCs) in a grocery store.

Those weekly circulars that arrive in the paper, are mailed or are waiting for shoppers at the store don’t seem to help much, as Catalina’s year-long study of 32 million shoppers who spent over $55 billion across 9,968 U.S. grocery stores showed.

The Catalina report said: “Examining a major retailer’s Memorial Day shopping circular, we found that two-thirds of all shopping baskets didn’t include a single item among the 1,172 advertised. Looking at the following week circular from the same retailer, 74 percent of shopping baskets did not include a single item.”

The obvious response is to dump the stuff very few people are buying. Walmart tried that.

“Walmart,  the world’s largest retailer, reversed directions on a major SKU rationalization program in 2011,  announcing it would bring back 8,500 items it had taken off store shelves.”

John Caron vice president of marketing at Catalina, isn’t surprised. People are adept at tuning out advertising.  It’s probably a matter of survival.

“Each of us receives over 5,000 media impressions a day, and so much of that is ineffective,” he said. Messages need to be relevant to the consumer, which requires delivering personalized communications based on their shopping history.

Ahold’s Stop & Shop supermarkets use a Catalina mobile phone app that shoppers can turn on as they approach the store. It will then offer a coupon wallet targeted to the individual.

“Three friends can walk up to a Stop & Shop and each will have personally targeted offers based on what we think you need next,” Caron said.

As a shopper moves through the store, she can scan items with her phone and keep a running tally of her total cost. For a Coke buyer who picks up one 12-pack a week, the message might be a simple reminder to pick up Coke, or an offer to induce her to buy two 12-packs.

The shopping app can tell where you are in the store and eventually it will be configured with each store’s layout so it could combine your purchase history with your location in the store and configure a shopping list that updates in real-time. You have just bought your monthly supply of Bounty paper towels and are heading toward Coke. Now you are passing Windex, which you haven’t bought in four weeks, so you get an offer.

At least one retailer is piloting mobile payment, so you keep a tally of your shopping by scanning bar codes and then use your phone to make a mobile payment, skip any physical checkout and just show a store associate the receipt on your phone. (See Apple wallet story on left)

Drawing on massive amounts of data, the app can detect odd behavior like scanning three jars of caviar and then deleting them, or conducting no scans for 45 minutes -- variations that can trigger an audit as the shopper leaves. In studying tens of millions of shopping trips, Catalina has concluded that mobile self-bagging and checkout results in no higher rates of shrinkage, as the industry calls theft, than other means of payment.

“Imagine grocery stores without checkout lanes and with 30 percent less advertising,” said Caron.

Industry experts were concerned that keeping a running tally of the shopping trip’s cost would reduce spending, but the opposite proved true. A shopper with a budget of $80 for a trip who spent only $72 would think of the remaining $8 as her budget for a small splurge.

Shoppers ignore 99.3 percent of what is in a grocery store and buy just 0.7 percent of what is offered -- only 260 different products in a year on average. The average number of UPCs in each store was 35,372. On a quarterly basis, the average shopper bought only 83 different items, or just .23 percent of what was available.

It would be so much easier for grocery stores if everyone wanted to buy the same 260 items, but that clearly isn’t the case.

“When you boil that down to a weekly basis, it is a tiny number of different products which means shoppers go through the store with blinders on to get out as fast as possible...

“Brands have dramatically extended product lines—and introduced thousands of new, targeted products that offer specialized scents, sizes, flavors, fashions and functions for today’s more selective consumer needs and preferences. It’s a trend that will only grow as America’s consumer population continues to diversify. The rest of marketing needs to keep pace.”

Even with 32 million shoppers across nearly 10,000 stores over the course of the year, no two shopping carts had the exact same content, Caron added.

“We buy so little, but we don’t buy the same things,” Caron said. Walmart tried to reduce the number of  SKUs and had massive pushback. What they found was that data showed a shopper will go to Walmart or to a Stop & Shop, One of the items they want is a favorite hot sauce. When that hot sauce disappears from your shelves, you have lost the whole shopping trip.” Kroger found something similar with kosher butter -- it didn’t sell many units, but if they deleted it they lost those shoppers entirely.

The key to success is providing personalized offers, payment and loyalty, Caron said, citing Starbucks as an example. When a company launches personalized offers to scanning it doubles the participation.

“Payment people miss that. The deals in Google wallet are not integrated into the overall shopping experience. You load up your cart in the store, then take everything out and put it on the belt and put it back in bags into your cart. What’s easier -- fumbling around to a mobile payment or taking out your credit card? If there is an incentive for me to use mobile payment, I will.  Mobile gets traction when integrated into the store shopping experience. You have your phone open, scan everything, then pay and walk out of the store.”