Custom Made

JEFF WELLS

It might seem odd at first that Mike Haaf received a degree in electrical engineering, yet ended up as head of marketing for Food Lion. When looking at the comprehensive, detail-oriented approach he brings to the position, however, it all makes perfect sense.

“It's really given me a deep desire for clarity, structure and goal orientation,” said Haaf of his training.

Colleagues and business partners cite Haaf as a man of many talents — that rare combination of creativity and analytical know-how chief among these.

Since his appointment to Food Lion four years ago, there has been one ongoing project that typifies Haaf's drive toward clarity. It's an ambitious undertaking — one that looks to process mountains of information in pursuit of one deceptively simple-sounding goal: customizing the shopping experience for the consumer.

That Haaf has the commitment to undertake such a hefty project is admirable. That he has developed and is executing a systematic approach that has brought success to bear for the company is laudable, and for that SN gives Haaf its Marketer of the Year Award, which was to be presented yesterday at the Friends of the Industry Dinner during Food Marketing Institute's Midwinter Executive Conference in Grand Lakes, Fla.

In a retail culture founded on the concept of offering something for everyone, the idea of tailoring stores to specific groups of consumers seems paradoxical. But that is exactly what Haaf is doing. To start with, he and his team set out to better understand the consumer. They conducted exhaustive research that more closely resembled social science than it did marketing strategy, surveying close to 1 million individuals in Food Lion's operating regions. Food Lion looked at not only shopping habits, but also general lifestyle topics and how people viewed the overall retail experience. Methods included one-on-one interviews, shadowed shopping trips and customer satisfaction surveys that were not merely limited to Food Lion customers.

“It's based on who consumers are,” Haaf said, “not what they do or how they behave in your store, but who they are and what their wants and needs are.”

Haaf and his team gathered this information along with loads of technical data representing millions of consumers, and then sat down to process everything. This was the truly difficult part, to be certain. Many retailers avoid wading into this complex realm, choosing instead to customize based on cut-and-dry information such as age, region and income. But Haaf believes in the power of customization. No better way is there to sell something, he says, than to give the customer exactly what he or she wants.

Nuanced Approach

Food Lion President and Chief Executive Officer Rick Anicetti couldn't agree more.

“Today's shoppers are savvy,” he said. “They know what they want, and they don't all want the same thing. If you try to give them everything in one place, you will not succeed in the long term.”

However, it's difficult to be able to target specific consumers without alienating others. The end result must be nuanced, perceptive to the tiny details of people and their community.

Eventually, Haaf and his team came up with eight segments. Together, these eight groups embody all consumers — those who are current Food Lion customers, and those who could potentially become customers. Parsed apart, they can be focused and enhanced to varying degrees in order to accommodate consumers in a specific region, at a specific store.

“We've developed these segments that are mutually exclusive, yet comprehensively exhaustive,” Haaf explained. “That is, they are separate from one another, yet they represent the whole business. And the real power occurs when we can bring store operations, category management, pricing and marketing to bear all at these intersection points.”

According to the system, each store embodies all eight segments, but in varying degrees. In studying the data and assigning these segments to stores, a pattern emerged: Food Lion's 1,300 stores, when segmented, fell into 13 clusters. Further grouping their data this way helped simplify and solidify the structure Haaf was establishing.

Ultimately, the segmentation and clustering information will be used across the business, marketing and supply spectrum. It will determine the role of products within the store — how much they cost, where they are placed, what services are associated with them. The information will also determine how Food Lion brands its stores. Currently, the company is developing branding strategies to coincide with the 13 clusters.

For a specific example of his customization work in action at the store level, Haaf highlights Food Lion's most prominent segment: the “Golden Country Family” group. This segment includes retired individuals and families in rural areas. According to Haaf, a store emphasizing this group might have a seating area to rest or have a cup of coffee. The store might also have health information on hand, and possibly have lower shelves for easier access. There's also an insight that people in this group enjoy coconut candy, he said, so Food Lion might stock to accentuate that category.

“We've really developed a rigorous, well-structured approach to understanding intimately the wants and needs of different customer groups,” Haaf said.

New Banners

Already the segmentation and clustering work has helped establish Food Lion's two banner stores, Bloom and Bottom Dollar. It has also helped the company make a number of other decisions regarding expansion.

“Right now we use this information for everything from real estate site selection to determine what markets to enter next, to identifying what type of store to put in an existing location,” Haaf said. “We are rolling this information out as quickly as we can in some of the largest clusters.”

Shane Faucett, vice president of customer relations for PepsiCo, works with Haaf on a buyer-vendor basis. He explained that Haaf's segmentation and clustering campaign is an innovative step forward in supermarket marketing.

“The work that went into understanding shoppers, by segments, by neighborhoods, by needs, by yesterday's purchases and tomorrow's assumptions is where Mike brought a redefined definition of marketing to grocery retailing,” Faucett said. “What keeps him awake at night is how a specific group of shoppers identify with, feel about and respond to a specific brand of store. He is employing a brand-management strategy in grocery marketing.”

Cathy Green, chief operating officer, Food Lion, cites Haaf's experience outside of the supermarket industry as a major asset to the company. Prior to coming to Food Lion, Haaf was executive vice president of marketing at Office Depot.

“Because he wasn't steeped in the grocery industry, he offers a fresh perspective to our marketing and business strategy,” Green said. “In addition, he easily balances art and science as it relates to marketing.”

Customers will appreciate customized options, according to Haaf. Manufacturers will also appreciate customization, as it will concentrate their sales and conserve resources.

“What we've found is that in a couple stores or in a couple hundred stores a product will work incredibly well, and it will fail dismally in the rest,” said Haaf. “That's valuable information.”

Haaf's ambitious campaign can also pay off in terms of brand image. According to Anicetti, this means Food Lion becomes — in an age where many people complete their shopping across multiple grocery outlets — the one and only option.

“There are a myriad of options, and shoppers will go where they find what they want in an environment that feels natural to them,” he said. “That's one of the reasons our multi-banner approach has been so successful. The closer we continue to get to our customers, the greater our ability to meet their needs. At that point, we become the grocery store of choice, not just one of the choices.”