ELECTRONIC MARKETING CALLED PROMOTIONAL KEY

DENISE ZIMMERMAN

CHICAGO -- To launch an electronic marketing program without making it the company's core promotional vehicle is an exercise in futility.

"You have to live and breathe it. And not many companies do that," said Larry Friedman, director of financial services at Price Chopper Supermarkets, Schenectady, N.Y.

"You can't afford to run double and triple coupons" while continuing other traditional practices that drain promotional budgets without supporting electronic marketing efforts, he said. "Something has to give."

Retailers that rethink and redirect promotional strategies to align with electronic marketing will build a program that can harness the most profitable shopper and drive sales, according to three very different types of retailers speaking here at the Retailer and Consumer Trends symposium sponsored by MasterCard International, New York.

Other retailers who shared what they've learned from electronic marketing -- and what trends they foresee -- were Joe Wood, marketing manager at Roundy's, Pewaukee, Wis., and Peter J. "Greg" Gregerson, president and chief executive officer of Gregerson's Foods, Gadsden, Ala.

As frequent shopper programs become more prevalent and cards compete for the shopper's "wallet real estate," the retailer's challenge is to offer -- and more importantly, communicate -- value to the customer, Wood said.

"There's only so many slots in there for cards. And as more cards become available, the more valuable ones stay," he said. Roundy's new kiosk-based program offers discounts based on an individual's purchasing patterns and has generated double-digit sales increases at both the retail

and wholesale levels.

Wood, Gregerson and Price Chopper's Friedman discussed program results and addressed other key issues such as funding, shopper privacy concerns and what constitutes "value" to the customer.

"Remember the mustard!" is now the battle cry at Price Chopper, said Friedman, who recalled early beginnings of the chain's electronic marketing efforts. Launched in 1988, the Advantage program was supported by secondary brand manufacturers and featured specials on products such as mustard, light bulbs, mops and three-bean salad.

"We really didn't have the right items," he said, noting that the program was initially conceived to be manufacturer-driven. However, "we started learning that it's not going to be a [manufacturer-driven] revenue maker. It's time to make this a real part of our marketing program, to make it our primary promotional vehicle and not look at the [manufacturer-generated] revenue aspects of it."

Once the shift was made and electronic marketing became the foundation for the chain's total promotional strategy, Friedman said, the program took off. Pilot tests in three markets resulted in sales increases, improved margins and item movement jumped from 55% on coupons to 75% to 80% on the Advantage program.

Additionally, shoppers surveyed in all three test markets rated the program highly.

In Plattsburg, N.Y., for example, 86% of shoppers were familiar with the program and 91% rated it "excellent" or "good." In six weeks' time the card base tripled. Friedman said other markets produced similar customer recognition rates and today Price Chopper's Advantage program counts 2.3 million cardholders across 80 stores.

As target marketing proliferates, and shoppers become more vocal about privacy concerns, Friedman urged retailers to publish a corporate privacy policy "so there's never any concern over the use of the data."

Roundy's Wood agreed and said the wholesale and retail company may share market basket data with manufacturers but will not sell customer-specific information. "We never want to lose the personalization of our program or damage our credibility with our customers," he said.

The kiosk-based electronic marketing program at Roundy's has resulted in a valuable data base of shopper transactions, Wood said. "It allows us to begin to treat our customers a little bit differently."

Roundy's stores feature kiosks at the entrance where shoppers scan their cards to receive a personalized list of 15 electronic discounts. The discounts are selected based on the individual's purchasing history, which is accessed from store data bases via satellite technology.

"What's unique about a customer-specific kiosk program is that it's like stealth marketing," Wood said of the program introduced last fall. "If you surrender all of your [promotional] vehicles over to that, your competitors really don't know what you're doing."

Currently, shopper transactions are recorded at the Universal Product Code level, but Roundy's will track purchases even more closely, perhaps by fluid ounces. "We are going to start to measure category consumption by household," Wood said. For example, shoppers who regularly buy cola -- whether in 2-liter bottles or the occasional six-pack -- will be targeted with discounts on the product when they are most receptive.

"There's an element of value there when you think of the timeliness," he added.

Roundy's will develop new ways to add value to the program, Wood said. By contracting with a long-distance telephone service provider, for example, the shopper card now doubles as a renewable calling card -- and can serve as another marketing tool.

"If we were in a mode to improve our private-label sales, we might say something to the customer like, 'If you buy five Roundy's private-label products, you receive 10 minutes of free calling time on your Savers Club card.' "

At Gregerson's Foods, getting closer to the shopper and communicating value is a top priority -- and no small undertaking, said Gregerson. Start-up costs for the electronic marketing program launched in six stores last year approached $300,000.

All promotional resources were dedicated to the new program while double coupon offers, sweepstakes and ad matching were discontinued. Gregerson said sales initially dropped between 5% and 10% at each store, but six months later, sales rose 5% above the baseline.

"As our data base matures, we'll continue to segment our customer base and differentiate the offers we give to them," he added.