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What makes a shopper loyal to a particular store? Retailers have been trying to answer that question forever. These days, with consumers able to buy food staples at any number of different outlets drug stores, convenience stores, mass merchants, clubs and, yes, supermarkets food retailers have been searching more urgently for ways to hold on to their shoppers. Since the late 1980s, many retailers

What makes a shopper loyal to a particular store?

Retailers have been trying to answer that question forever. These days, with consumers able to buy food staples at any number of different outlets — drug stores, convenience stores, mass merchants, clubs and, yes, supermarkets — food retailers have been searching more urgently for ways to hold on to their shoppers.

Since the late 1980s, many retailers have made use of loyalty cards, typically offering store discounts to shoppers who present their cards at checkout. But loyalty-card discount programs have become such common fare that they hardly distinguish one retailer from another. Albertsons LLC, Boise, Idaho, decided in March that the best way to separate itself from the competition at the 46 stores in its Rocky Mountain region was to discontinue offering a loyalty card.

More ambitious retailers have taken to analyzing shopper data collected through their loyalty card programs in order to fashion personalized offers to specific shoppers. For example, Kroger, Cincinnati, has partnered with London-based loyalty marketing firm Dunnhumby to create tailored coupons and brochures that are mailed to its most profitable households.

But in the past year a small but growing number of retailers have decided to leverage electronic media — in addition to, or in place of, direct mail — to deliver targeted offers to consumers. By making personalized offers more readily available, the retailers are hoping to evoke a greater sense of loyalty among consumers.

These shoppers might receive emails alerting them to special offers, or they might use their loyalty card or fingerprint scan to print out a list of targeted offers at an in-store kiosk located near the store entrance. Other communication vehicles include POS receipts and display monitors, fuel pumps, telemarketing and call centers.

A few retailers are piloting shopping-cart screens that deliver personalized discounts or ads to shoppers, while a select group is even starting to use mobile phones to serve up text messages containing offers to willing recipients.

BIOMETRIC TARGETING

One of the latest retailers to use electronic media as a conduit of targeted discount offers is Dorothy Lane Market, Dayton, Ohio, a three-store, family-owned independent. Last month, Dorothy Lane launched Club DLM 2.U, a high-tech upgrade to its standard Club DLM card-based loyalty program.

The new program, provided by Pay By Touch, San Francisco, allows Dorothy Lane shoppers to use a fingerprint scan to call up and print a list of 10 weekly targeted offers at an in-store kiosk and then receive the discounts — and pay for their order — via a fingerprint scan at the POS. They can also receive weekly emails listing the targeted offers. Shoppers who prefer not to use a fingerprint scan for identification may opt to use their loyalty card to trigger the kiosk discounts.

The targeted offers are determined via an analysis of historical shopper data conducted by the Pay By Touch system. “We're truly trying to deliver offers based on what the customer buys,” said Amy Brinkmoeller, director of information services. “And people are really pleased to see items they buy on the offer sheet. Somebody said, ‘I was going to buy those hot dogs anyway.’”

Glenn Hausfater, managing director, Partners in Loyalty Marketing, Chicago, observed that, especially at larger chains, CPG manufacturers are unlikely to fund promotional offers aimed only at shoppers already purchasing their brand.

Convenience is another goal of the Dorothy Lane program. “People can get a relevant deal without cutting coupons or even bringing a card,” Brinkmoeller said. “There's a bit of a coolness factor now.”

During the first two weeks of the program, Dorothy Lane signed up 3,000 customers to the biometric loyalty and payment program. “We are very pleased with the response,” said Brinkmoeller, who added that Dorothy Lane's goal is to have about 40% of its shoppers — about 20,000 — enrolled in the program.

Dorothy Lane also offers uniform discount offers to all loyalty shoppers. Unlike these standard discounts, which shoppers receive whenever they purchase a featured product, the targeted offers are credited at the POS only after the shopper “activates” them at the kiosk or via email. “We found it very intriguing that the shopper has to know they're getting the [targeted] discount to get it,” said Brinkmoeller.

Brinkmoeller, who declined to say what the Pay By Touch system costs, said she sees a return on investment coming from sales and profit growth. In addition, the retailer stands to save money by processing finger-scan-activated payments only via the ACH (automated clearinghouse) network.

Dorothy Lane previously delivered offers based on spending level via a monthly newsletter mailed to top-tier customers; the newsletter also contains information on new items, special events and recipes. More targeted offers on postcards were also mailed several times per month. The newsletter will continue to be used, albeit with a declining number of offers, but the postcards are being discontinued.

The new program “gives offers that are far more relevant and on a more frequent basis than in the past,” said Brinkmoeller.

The Pay By Touch loyalty program launched by Dorothy Lane made its debut at Green Hills, a one-store independent in Syracuse, N.Y., in April 2006. During the first three months of the Green Hills initiative, shopping frequency among participating shoppers increased 4.5%, while spending grew 2.5%.

OTHER KIOSK SOLUTIONS

Pay By Touch is not the only company to provide kiosks with targeting capabilities. Hartford, Conn.-based Tactical Retailing Solutions/Entry Point Communications markets kiosks that give loyalty shoppers a sheet of about eight targeted offers; the kiosks are being used by Ukrop's Super Markets, Richmond, Va., and Price Chopper Supermarkets, Schenectady, N.Y. (See “Getting Personal,” SN, June 18, 2007, Page 28.)

A kiosk delivering targeted coupons was also featured by more than 650 Albertsons-operated stores, now part of Supervalu, Minneapolis. However, these kiosks were removed from the stores about two months ago after having been deployed for about a year, said John Hennessy, vice president, sales and marketing, Concept Shopping, Lisle, Ill., which provided the software supporting the targeted offers. A Supervalu executive did not respond to a request for comment.

Some observers question using kiosks as a promotional vehicle. “Kiosks should help you do something you would do anyway,” said Hausfater of Partners in Loyalty Marketing. “They shouldn't be just another thing you need to do when you're already time-pressed.”

At Albertsons, the kiosks were part of a loyalty program called avenue, which continues in the form of electronic digital media in stores and targeted coupons that can be accessed online. Shoppers can log on to one of the Albertsons division's websites (Albertsons, Acme or Jewel-Osco) and enter their loyalty card number to pull up a page of 12 targeted offers, which had previously also been available at the kiosks. Or they can just opt to receive emails with the offers. Like the Pay By Touch program, the Concept Shopping program requires shoppers to pull up the offers to get credit for them at the POS.

Though fewer shoppers make use of the targeted offers since the kiosks were removed, those who do access them online “are more rabid shoppers who spend more and buy more of the items on the sheet,” said Hennessy. The offers are funded by about 100 CPG companies participating in the program.

Hennessy next plans to make targeted offers available to shoppers via text messages or Web links on their cell phones, if they opt to receive them that way.

Another kiosk that presents personalized offers to shoppers has been developed by Hewlett-Packard, Palo Alto, Calif. Called Retail Store Assistant, the kiosk can also provide product information about sales items, as well as third-party reviews, price and product availability. The kiosk has not yet been deployed in a retail store.

Another relatively recent system designed to deliver targeted messages electronically is Enterprise Offer Management, provided by NCR, Atlanta, and its Teradata division. Deployed this year by Meijer, Grand Rapids, Mich., the system incorporates Teradata's customer relationship management (CRM) solution, which determines which offers should be made; its offer optimizer system, which assembles a bank of offers and offer requirements; and NCR's Copient Logix offer-delivery software.

The Teradata/NCR systems represent “a culture shift to a customer-centric approach vs. a product-centric view,” said Mark Swenson, principal consultant for retail CRM solutions, Teradata. “The retailer gains more control vs. just selling manufacturers' deals.” He declined to provide pricing details, though the system is geared toward chains with at least 100 stores.

Meijer is using direct mail, email, the POS and telemarketing to tell consumers what targeted offers they have qualified for, said Swenson. (Meijer declined to discuss its use of the technology.) Other retailers are using kiosks or fuel pumps, or have set up call centers, to communicate the offers to consumers. At the POS, retailers can employ receipts or the display monitor to disseminate the offer information.

CART SYSTEMS

Another vehicle for communicating targeted offers, among other functions, is the shopping-cart screen/scanner system. The most prominent example of this has been the Shopping Buddy, deployed at 16 stores in New York, Massachusetts and Connecticut run by Stop & Shop Supermarkets, Quincy, Mass., a division of Ahold USA.

Shoppers use Shopping Buddy by taking a unit off a recharging rack, placing it in a holder at the front of the cart, and scanning their loyalty card. As they shop the store, targeted offers appear on the screen, as well as offers designed just for Shopping Buddy users. Shoppers can scan and bag items during the trip, leaving only the payment function for the front end. They can also order deli items and locate items in the store.

There have been some changes in the technology companies supporting the Shopping Buddy. Its software provider, Cuesol, merged with MobileLime in March to form Modiv Media, Quincy, Mass. The original Cuesol software is now designed to run on a new hardware platform, a handheld device, the MC17, from Motorola Enterprise Mobility Business (formerly Symbol Technologies), Holtsville, N.Y.

According to Bob Wesley, CEO of Modiv Media, the Shopping Buddy at Stop & Shop stores will continue to run on an IBM hardware platform. The MC17 device, offering much the same functionality as the Shopping Buddy, but on a much smaller and less expensive platform, will be implemented at food retailers later this year.

Meanwhile, another shop- ping cart system, MediaCart, based in Plano, Texas, is being tested at two ShopRite stores, one in Oakland, N.J., and one in Parsippany, N.J. The Oakland store's test has been under way for four months, the other for seven weeks.

Unlike the Shopping Buddy, the MediaCart screen is already attached to the shopping cart and is located in the rear of the cart instead of the front, with a scanner and a control device built into the front handle and an RFID reader underneath the basket.

Another difference is that MediaCart displays brief full-motion video ads for CPG and private-label products as shoppers pass by those or related products in the store. MediaCart is currently running 35 CPG ads and 15 private-label ads, said Jon Kramer, chief marketing officer, MediaCart. Retailers share in the ad revenue generated via MediaCart.

At the Parsippany ShopRite last week, 150 of the 500 shopping carts were outfitted with the MediaCart equipment. The store is one of two ShopRites owned by Ned Gladstein and part of the Wakefern cooperative. According to Kramer, 75% to 80% of the shopping carts at the test sites will have MediaCart technology by early next year.

The in-store technology supporting MediaCart includes charging racks and RFID tags embedded in shelving throughout the store, as well as a Cisco wireless in-store network. Kramer declined to disclose the cost of the MediaCart system.

In addition to video ads, the MediaCart screen displays a list of specials — some taken from the store circular — for the section or department through which the shopping cart is passing. Shoppers are also able to scan items to check their price and to use a product locator that maps an item's location.

Starting next week, said Kramer, the MediaCart system will feature a calculator that tallies the total cost of scanned items, and a selection of recipes. The recipes will be listed by ingredient and emailed to the shopper's home; initially, the recipes will also be available on cards at a rack in the store. In October, shoppers will be able to download shopping lists from their home computers and have the list broken down by aisle.

MediaCart can be programmed to allow shoppers to scan and bag their items in preparation for paying at the front end, as Shopping Buddy does. However, said, Kramer, the Parsippany store's POS system is not yet set up to accommodate that functionality, and it lacks a produce bar-code scale that would also be required to support scanning a full order. The MediaCart is also not yet offering targeted offers to shoppers based on their shopping history, as the Shopping Buddy does. The functionality ultimately “depends on how the retailer wants to customize it,” said Kramer.

Scott Emerson, assistant store manager at the Parsippany ShopRite, said the feature consumers like best about the MediaCart so far is the ability to check the prices of items. The product locator also elicits positive comments. However, shoppers have found that the screen “gets in the way of unloading the cart,” he said, adding that over time shoppers should be able to get around that issue. He said he has not gotten much feedback yet on ads or specials. According to Kramer, 22% of transactions have been with MediaCart carts.

Emerson said the store benefits from receiving reports that measure store traffic in different sections based on RFID reads of MediaCart carts.

A few shoppers at the Parsippany store queried by SN liked what MediaCart had to offer but were not aware that they needed to scan their loyalty card to activate the price check and product locator features. Kramer said MediaCart will offer additional training to shoppers during a major reintroduction of the system in September.

By the end of the year, MediaCart will report on changes in basket size associated with use of the MediaCart system.