WHOLE FOODS EXPANDING INNOVATIVE FREQUENT-SHOPPER PROGRAM

ADAM BLAIR

AUSTIN, Texas -- Whole Foods Market here is expanding an innovative frequent-shopper program that allows customers to earn discounts in specific store departments of their choice. The program reportedly has resulted in increased customer loyalty, frequency of visits and market-basket totals.

The FreshShopper Rewards program, launched as a four-store test program at the chain's Fresh Fields stores in the Philadelphia market in January, will be expanded early next year to the Washington market, where the chain has 12 stores.

"We're looking at several different regions," for further rollouts, said Joe Dobrow, marketing director at Whole Foods. The chain has approximately 80 stores in markets across the country and operates under banners including Bread & Circus Supermarkets, Wellspring Grocery and Fresh Fields.

Shoppers participating in the FreshShopper program are awarded one point for every dollar spent at the four Philadelphia Fresh Fields stores. When they reach the 600-point level, members choose one of eight departments in which to receive a 10% discount.

While Dobrow declined to release specific figures on sales increases from the program, a source familiar with the situation said that some shoppers' spending totals increased as much as 24% after reaching the reward level.

"The problem with most frequent-shopper programs is that they set up the incentives wrong," said Dobrow. "If a supermarket discounts a few hundred items for members, it encourages cherry pickers, and they get a database of people who love those particular products.

"We wanted to do what the airlines do with their frequent-flyer programs, which is reward the customers most who make the biggest contribution," said Dobrow.

Whole Foods also wanted to get customers more involved in the program, so it required them to pick the department their discount would be in. "People shop our stores in different ways. Some people come to our Center City Philadelphia store only for lunch. Others come to us only to buy produce or organic products," noted Dobrow.

"There's no point in spreading a discount all around the store if that's not how people shop," he added.

"The program created loyalty and increased spending, even among the store's best customers," said the source. "It created loyalty both to the store and to the department, and there were also spillover sales in other departments."

"The program has been a happy surprise," said Dobrow. "Giving our best customers a reward is worth it to retain loyalty."

Whole Foods faced several logistical challenges in administering the program. The membership cards had to have bar codes on both the front and back. "The front bar code triggers the departmental discount, while the back one is for member identification," said Dobrow.

In addition, Whole Foods set up several ways for members to check their point totals. "Besides printing the total on customer receipts, we now have an intranet connection set up at our customer service desk," he said. "The clerks use a web browser to access the data. This keeps the information very live and very current."

One store has a kiosk that allows members to check their totals themselves, and the company has set up a toll-free number with an automated response system that shoppers can access 24 hours a day.

While customers' points expire at the end of the year, those who amass 2,500 points in 1997 qualify for a Gold Card and will be automatically enrolled in the program for 1998, said Dobrow.

Whole Foods is considering several different ways to expand the program. "We may partner with some of our neighboring retailers, to offer members discounts there. We're also talking to some of our vendors, and they are excited about the information we're generating from the program," he said.

The management and analysis of the frequent-shopper database, as well as the design of direct-mail pieces sent to members, is being handled by Insight Out of Chaos, New York.