LAS VEGAS — Wholesalers are beginning to redesign their advertising programs using data in ways that allow retailers to direct their messages to potential customers based on lifestyle clusters rather than on geography, executives said in separate presentations at the National Grocers Association's annual convention here.
Dan Murphy, senior vice president, perishables and retail support, Unified Western Grocers, Los Angeles, said his company is reducing its 16 ad groups down to four using software that enables the company to track purchases based on scan data — a program that will enable it to develop merchandising and marketing programs geared to consumer preferences regardless of neighborhood.
Unified is one month into the process, which will take “some time” to complete, Murphy told SN following his presentation.
“We're able to study data from 1,700 of the 3,000 stores we serve, and then cluster them to develop more specific programs to help our members do a better job at retail,” he explained in his presentation. “In the past we tried to do one-size-fits-all in our circulars. But by reorganizing our efforts based on actual preferences, ads can be designed to have more impact for each group and to manage shelf allocations better.”
Based on the new knowledge, Murphy said Unified has learned that its members' customers fall into four groupings: large, affluent urban and suburban households; mid- to downscale rural seniors; large, low-income urban households; and bicultural and unacculturated Hispanics.
In another presentation the next day, Jerry Dewey, vice president, retail services, for Associated Food Stores, Salt Lake City, said his company has been able to reduce 338 trade areas across its eight-state operation down to 20 clusters based on a software program that defines customers by household characteristics rather than geography.
“Even for stores within five miles of each other in the same city, different lifestyle groups dominate,” Dewey explained.
“Clustering is not a function of geography,” he added. “Rather, it depends on store formats, competition, demographics and segmentation tapestries.”
The process is so important to Associated's future, Dewey noted, “that [Chief Executive Officer Rich Parkinson] has put together an 18-person executive team whose sole purpose is to help our members implement new information on merchandising, pricing and segmentation at the store level.
“This program helps us map out where business opportunities exist,” he explained, “and we're now putting together different sets of schematics based on our research.”
The software enabled Associated to determine that most of its stores fall into one of four groups: high-end/resorts/seasonal, metro/urban, suburban per-iphery and small towns.
Indicating how complicated the process can be, Dewey said that determining the makeup of each cluster requires 32 separate calculations.
In other workshop presentations:
Eric Anderson, senior vice president and chief marketing officer for Fresh Encounter, Findley, Ohio, said a consumer trend that's growing across the country is an interest in locally produced products — “as long as they taste good, are convenient and are priced right. This is an opportunity for independent retailers to get out in front of customers with something mass marketers cannot do.”
Mike Abney, president and general manager of Northwest Grocers, a Seattle-based wholesaler, said inner-city stores that cater to the specific customers in their neighborhoods can prosper. “But you've got to know who your customer is, how your customer shops and what your customer shops for,” he said.
Rick Graap, president of DCS Design, Tualatin, Ore., said retailers should consider their store as advertising and use design to support the customer perceptions it hopes to project. “Use design to create a meaningful point of difference, to connect with the community and to slow the shopping experience down a bit,” he said.