Marsh Supermarkets: Top Customers Driving Ad Sales

MICHAEL GARRY

ROSEMONT, Ill. — As the economy continues to squeeze shoppers, Marsh Supermarkets is finding that its best customers — not bargain hunters — are generating much of its promotional sales.

Marsh's most loyal shoppers — 154,000 people who represent 24% of its active customer base — account for 57% of the sales of front-page items in the weekly circular, according to Mark Heckman, vice president of marketing for Indianapolis-based Marsh, which operates 101 stores. While core shoppers' average basket size is $35, when they buy front-page circular items, their basket size jumps to $98.

“Our core shoppers, as good as they are — and they are our most profitable customers — are driving the success or failure of our weekly circular,” said Heckman during a presentation last week at the LEAD Marketing Conference here.

“This is something I wasn't expecting to see. Intuitively, you expect to see cherry pickers engage your ad and the rest be not as engaged. I attribute this to the economic times that we're in.”

In another reflection of the economy, half of privately held Marsh's overall annual revenues of $1.2 billion now come from items on promotion, said Heckman. That compares with 35% of sales being promotion-driven two years ago. “If we don't write an ad that drives at least 50% of our items to be sold on promotion, we don't have a successful sales week,” Heckman said. “That's just the new reality we're living in.”

Using data from its loyalty card program, Marsh divides its shoppers into nine segments, divided into three categories: core, secondary and occasional. The core shoppers, consisting of “ultra loyals, affluent families and loyal budget,” accounted for 64% of sales from July through September of this year. On a weekly basis, they spend $49.16 and visit the store 1.4 times, twice what an average shopper does.

The loyal budget segment represents 5% of active households, but is growing. “Many used to be affluent shoppers who are now seeking how to save money,” said Heckman. They are particularly partial to soft drinks and purchase a high level of private-label and front-page ad items.

But affluent families are also drawn to circular discounts. Representing 6.2% of all customers, they make up 10% of the shoppers buying page-one circular items, purchasing 3.5 page-one items, twice the average number.

DIRECT MAIL IMPACT

Marsh has started sending “VIP” direct-mail promotions specifically to core shoppers on a quarterly basis. In August, the chain sent them an offer for $2 off 10 or more produce items, as well as an offer for a free reusable grocery bag valued at 77 cents. The bag offer resulted in a 12% redemption rate and a $91 average basket size; the produce offer led to a 13% redemption rate and $83 basket size.

The three-week produce offer also caused produce department sales to jump 10%. “Our vice president of produce asked me, ‘Can we do this again?’” said Heckman. Moreover, the chain saw a 3.7% gain in produce market share, while the 10 Marsh stores with the biggest produce gains saw a 1.27% rise in comp-store sales.

Marsh, which does its own printing of direct-mail promotions, employs digital presses and plans to generate “variable offers” using that technology, Heckman said, adding that direct-mail pieces will become “progressively targeted.” Marsh has also started sending weekly targeted email promotions this year to its base of 100,000 email subscribers.

Heckman noted that Marsh is starting to form more partnerships with CPG vendors in support of the VIP direct-mail pieces and other targeted promotions. “We're starting to use shopper data on an ad hoc basis to help brands and category managers,” he said. “It needs to be more formalized.”

While traditional trade funds remain outside the scope of targeted marketing campaigns, Marsh is seeking other sources of funding from CPG firms, such as “shopper marketing dollars,” residing in “conditional budgets” for these programs. “Brands are thinking about how to interact with retailers like Marsh so they can start to get a better return on their dollars,” he said.

In addition, he is getting a “firm commitment from higher levels of the organization” — including Marsh's owners, Sun Capital — that leveraging shopper data for targeted marketing purposes “is the direction we want to go.”

Marsh also plans to employ shopper data to help merchandisers decide where categories and departments will be placed in stores. “That is coming this year,” Heckman said.