At the Fourth-Annual Electronic Marketing Conference, co-sponsored by Retail Systems Consulting, Supermarket News and Brand Marketing last month, all the critical issues concerning this emerging in-store promotion method were aired. First of all, we presented our joint study on electronic marketing. The study showed significant interest on the part of manufacturers in database marketing (32% current, 13% planned). Unfortunately, they're talking about two different data sources. Retailers typically don't provide names of consumers and purchase data to anyone. Retailers want to keep consumer data to themselves, they say, to ensure consumer privacy and protect from the misuse of names.
Personally, I think it might also be a matter of price. If the value of the information were high enough, I think some retailers would sell names. According to Glen Griffiths from McNeil Consumer Products, however, the value might be lower than some retailers suspect. Griffiths said he can acquire names of his customers and potential customers from surveys and other sources for two to five cents each. He also said retailers have tried to sell names to him for anywhere from 40 cents to two dollars. Apparently, at least in the cough and cold category, retailers are seriously overestimating the value of their data. The only manufacturers I've heard of that pay $2 per name are the tobacco companies.
A few vendors in the audience were chagrined to hear Griffiths' comments. Apparently there are still some who planned on getting involved with selling list data compiled from frequent shopper programs. Citicorp and GTE tried to build their businesses on the sale of names and purchase data to manufacturers and failed. But no one I know ever blamed the demise of those two programs on the fact that the names really aren't worth much. After Griffiths spoke, a vendor in the audience dejectedly shook his head. "Two to five cents a name. You could never build a business on those economics," he said.
In terms of other types of manufacturer involvement in card-based marketing, however, there are compelling reasons for manufacturers to get involved. Richard Kochersperger, professor of Food Marketing at St. Joseph's University, addressed the manufacturers. He said many retailers lack marketing skills and have forgotten how to "retail." They're addicted to "easy money" from manufacturers.
Retailers have become real estate brokers and have forgotten the customer. Manufacturers, according to Kochersperger, have to push involvement with electronic marketing to "save" the retailers. There's leverage here that manufacturers aren't using. Manufacturers control the bank.
I think Kochersperger has an excellent point. Manufacturers should get more aggressive in getting involved with retailers on these new forms of marketing. Real alliances have to be developed. Funds along with marketing expertise could then replace "easy money."
The next Electronic Marketing Conference is scheduled to be held April 1 and 2, 1996. Mark your calendars. We'll undoubtedly be continuing these discussions there.