Effective loyalty marketing, employing data mining of frequent shopper information, can reach beyond price and establish deeper bonds with shoppers.
Creating this intimacy with customers is touted as the brass ring for operators seeking to seize sales by capturing a larger percentage of customers' market baskets.
As frequent shopper programs flourish, creating less of a competitive advantage, and price and convenience outweigh loyalty, retailers are called to do what retailers to best -- merchandise.
"Loyalty as a practical matter has more to do with earning a larger share of your own shopper's market basket," said Bill Bishop, president, Willard Bishop Consulting, Barrington, Ill.
"Consumers spread their spending around. Loyalty programs that give an off-shelf price discount are not very differentiated. Retailers that target and make their frequent shopper program relevant and valuable will be seen as beneficial."
These efforts result in tailored mining of frequent shopper data, which focuses retailers on consumer buying patterns -- not simply product movement.
Bishop, and other experts, suggested that frequent shopper data be applied to create different offers, which are meaningful to targeted customers making the best of information that is collected.
"The cost of customer acquisition is absurd," said Linda Brennan, vice president of loyalty marketing, Spectra Marketing, Chicago.
"Customers in the stores are not buying all that they could. Retailers need to pinpoint what customers they want to target and decide how to manage them into bigger market baskets."
In a presentation earlier this year at Food Marketing Institute's MarkeTechnics 2001, Frank Badillo, economist and principal consultant for PriceWaterhouse Coopers, Columbus, Ohio, suggested that supermarket operators have taken too narrow a scope when data mining their frequent shopper bank.
Straightforward incentives to stimulate purchases are easy to duplicate by the competition, he pointed out, suggesting that the value for shoppers is in "stealthy incentives," ones that are not easily recognized.
Dorothy Lane Markets, Dayton, Ohio, has shifted its marketing budget from print advertising to bolster its loyalty program.
It has honed its program to focus on its best customers. The operator has given its top 100 customers French copper saute pans, emblazoned with the store's logo, and Zyliss cheese graters with a pound of Parmigiano Reggiano cheese.
During a recent price war on milk, Dorothy Lane Markets sent coupons to its best customers focusing on their shoppers, not the competition.
Moreover, a monthly newsletter is sent to more than 9,000 customers with different versions addressed to individuals with different spending levels.
At Foodtown, front-end screen alerts indicate to cashiers that they are serving a level one, two or three customer. The store's manager is discreetly called out to chat with customers, who are considered important.
Shaw's Supermarkets, East Bridgewater, Mass., has also tucked an extraordinary benefit into its frequent shopper card program.
Using this method, Shaw's is able to employ data mining techniques when a product notice, warning or recall needs to be put into action, said Bernie Rogan, spokesman.
This function proved beneficial this summer when the possibility of nonharmful particles included in a ground beef item in one unit was unveiled.
With more than 86% of all transactions captured by Shaw's, the recall was expedited by the ability to track down consumers who had purchased the product.
Additionally, there was no need to alert shoppers outside the marketing area of the isolated unit where the potential problem existed.
The largest boon of frequent shopper data mining -- increased sales -- remains elusive to operators.
Evaluating and reevaluating frequent shopper data has proven to be a roadblock for most retailers seeking to yield sales opportunities as they wade through the wealth of statistics.
Retailers report that they are buried in data with little or no time to sift through information, let alone implement actions aimed at boosting sales.
Spectra Marketing has come up with a system for retailers who need more than loyalty marketing data.
The product, dubbed Household Sharecast, is a tool to assist retailers in drilling down into a shopper's data to discover what percentage of the market basket they're capturing.
Operators usually know the specific products and categories selected by frequent shoppers; however, what is purchased elsewhere is lost information.
Sharecast employs a proprietary method of applying data and cross indexing to a lifestyle grid that measures the potential realized and the potential lost.
"Some targets respond to print advertisements, others to in-store demonstrations, others prefer the Internet as their medium of choice. There are different themes consumers connect with, different media vehicles," Brennan explained. "It's nice to know your data. Now the data can be put to work to tactically manage the business.
"Technology has been driving frequent shopper programs; now strategy can as retailers vie for transactions."
This program helps analyze who the customer is, what categories they are buying, and what other retailers and classes of trade the share of market basket is being lost to.
"You can't market to everyone in the same way. Loyalty data does not tell you about loyalty and loyalty does not equal top spenders. Target marketing delivers a better percentage of dollars a consumer spends on groceries at your chain. If a retailer can get three more items in a consumer's cart, profits will rise."