Associated Uses Demographics to Build Sales

ELLIOT ZWIEBACH

SALT LAKE CITY — Independent retailers are learning who their actual potential customers are, and how to do a better job of marketing to them, under a customer segmentation program being offered by Associated Food Stores here.

Under the program, the cooperative conducts extensive research for its retail members to determine a store's specific demographic needs, then presents that information to them and encourages them to develop a plan of action.

“Retailers are starving for this kind of information,” Lenny Sperry, director of market segmentation for Associated, told SN, “and we want to help them obtain it and use it to become better operators.

“We provide detailed information in areas some of these retailers never looked at before, and armed with that data, they usually decide they want to improve their operations.”

Over the last three years, Associated has helped 18 customers, including a handful of its 23 corporate stores, use demographic data to remodel and update their operations — resulting in sales increases that have ranged from 5% at some smaller stores all the way up to 40%, Sperry said.

Associated intends to pick up the pace of remodeling this year, with plans for 48 makeovers — virtually one store a week, Sperry noted. “And there's a waiting list for other customers interested in the full segmentation program,” he added.

Associated formed the market segmentation department in 2004 at the request of Rich Parkinson, the cooperative's president and chief executive officer, who oversees it directly.

The three-member department includes Sperry, who came from the retail side of the business; Steve Rich, director of community marketing, from the marketing side, and Ryan Ogden, marketing segmentation analyst, whose background is consumer research.

To help retailers determine how they can make their stores more effective, the department begins by studying updated census data that clusters stores and defines their customers based on various demographic characteristics rather than geography, Sperry said, including household size, age, income, education levels, employment, expenditures and ethnicity — “data that helps us map out where business opportunities exist so we can put together different sets of schematics for retailers.”

That data, which provides facts, is supplemented by firsthand research that provides personality, Sperry noted, including phone calls to a store's customers followed by focus groups with customers and with store employees.

“Then we make a presentation to the retailer and encourage him to use the data to come up with a business plan that may involve a total remerchandising of his store or a total redesign of his marketing program.”

For example, research indicated one retailer needed to enhance his price image and cater more to Hispanics, while another needed to expand his offerings of health and wellness products, diet foods and energy drinks because of the younger-leaning demographic makeup of his customer base, he said.

“One of the things we learned through our research for one store was that we were missing the mark on how many shoppers actually fell in the 18-35 age range,” Sperry noted. “We thought it was around 15%, but census data showed us it was running as high as 40%.

“We were also missing the mark on just how large the influx of Hispanics was, running as high as 25% in Salt Lake and up to 40% 50 miles away in Ogden. It just kind of snuck up on us, and it was so subtle we didn't see it. So until we started looking at the data, we didn't realize they were there in such large numbers.”

Besides helping retailers hone in on their actual customer base, the research also helps Associated merchandise more precisely, even in a category like suntan lotion, Sperry pointed out. “Once we looked at the data, we realized people in Park City, Utah, an extremely wealthy area, were buying suntan lotion that blocked out the sun entirely, while those in the resort area of St. George wanted suntan lotion with aloe vera to use after heavy sunburns, and people in price-sensitive areas were buying the cheapest brand available — yet we were merchandising the shelves the same way, so we were missing sales.”

The segmentation program has also helped Associated become a better wholesaler in other ways, he added. “At the first store we remodeled under this program three years ago, we committed to putting in a wide assortment of organics and specialty foods — until we realized we didn't have a program to back that up on the supply side.

“So this effort has been as beneficial to us as a wholesaler — helping to bring us into the realm of where we need to be — as it has been for the retailers,” Sperry said.