NEW YORK -- Supermarkets may stand to gain the most from implementing frequent-shopper programs, but they are far from the only class of trade now seeking to reap substantial benefits from understanding and targeting customers.
The ability to track shopper behavior and purchasing patterns in detail and devise highly effective marketing programs to boost sales among specific customer groups and product categories is emerging as a major strategic weapon in many retailing segments.
Neiman Marcus Stores, Dallas, for example, a high-end specialty store retailer, is certainly not a supermarket operator, but the chain's success in rolling out a comprehensive and thriving customer-loyalty program sheds additional light on how retailers are employing technology today to lure new business and hike profitability.
"Neiman Marcus has built a very detailed knowledge base about who its customer base is, and how its customer base behaves," said Mark Kingdon, partner at Coopers & Lybrand Consulting, New York. "Neiman Marcus understands on an extraordinarily detailed level who the customer is, what she wants, when she wants to buy it and how she wants to buy it."
The retailer's program, he said, relies on a multidimensional relationship database used to store and analyze customer data and purchase behavior. The database tracks information in areas such as demographics, geography, purchase records, response to promotions and total purchases made at the chain by individual customers.
"The database allows us to target key customer mailings to our customers as narrowly or broadly as we want," said Burton Tansky, Neiman Marcus's chairman and chief executive officer.
Tansky and Kingdon spoke at a workshop session here earlier this month at the annual convention of the National Retail Federation, Washington.
"For example, we can mail 1,000 special-event invitations to a group of customers, or have 200,000 Chanel catalogs inserted in our monthly 175-page coffee table catalog publication," Tansky said.
But that is just the beginning. Sales associates at Neiman Marcus can also now tap into an information-rich database at the point of sale to better understand individual customer preferences and shopping history.
"Our sales associates can instantly reference customer color preferences, buying patterns, children's birthdays and even help a shopper open a new Neiman Marcus account on-line in 17 seconds, including the credit check," Tansky said.
The POS system also enables associates to target customers more effectively with some suggestive selling, such as extending an invitation to attend a special event for a favorite designer, offering customers a preview of preferred merchandise or even contacting a customer in advance when a long-admired ensemble is about to go on sale, he said.
Both the multidimensional database and the POS system are playing a key role in strengthening Neiman Marcus' core customer-loyalty program -- known as In Circle. Under the program, similar to an airline frequent-flier program, customers earn one point for each dollar spent at Neiman Marcus.
After customers accumulate 3,000 points in one year, they become In Circle members, entitling them to attend, for example, private shopping parties, special speaker programs or elaborate trips to visit a rain forest in Rwanda or take a chartered Concord flight to Mardi Gras in Venice.
"Last year 1,000 'In Circlers' took trips on Neiman Marcus," said Tansky. "We even sent one member around the world for 30 days, compliments of In Circle."
Seizing another opportunity to cement customer loyalty, the retailer also launched an electronic gift certificate program called the Neiman Marcus Gift Card. The gift certificate functions like a credit card, with purchases charged against the balance automatically each time the customer uses the card.
"If a customer shops with a $200 card, the balance is automatically recalculated at the POS system each time a purchase is made," he said.
Based on the card's early success, Neiman Marcus rolled out in November 15 additional gift certificate cards, each targeting a special designer. It is also offering cards for special-occasion gift-giving opportunities.
According to Tansky, Neiman Marcus' success in driving heightened sales with its customer-loyalty offering is clearly reflected in the retailer's bottom line. "Fiscal 1996 was the most successful year in Neiman Marcus history," he said.
The chain now generates more than $2 billion in sales, with operating earnings of about $160 million.
"Our store's productivity is the highest on average in specialty retailing business, and over $400 per square foot," he said.
"Shareholder value is created when retailers understand with great intensity who the customer is, and add technology to enhance the shopping experience," said Coopers & Lybrand's Kingdon. "Neiman Marcus has done this and broken down barriers that keep consumers separated from the retailer."