CATEGORY MANAGEMENT, LOYALTY LINK CAN DRAW 'BIG SHOPPER'

DEENA AMATO-McCOY

LOS ANGELES -- Customer-loyalty programs alone aren't sufficient to get the most valuable consumers to concentrate their spending with one retailer. To encourage these heavy shoppers to spend more in one store, loyalty programs need to be linked to category management efforts to create the most appealing product mix.

These heavy shoppers represent a significant business opportunity for retailers, according to Bill Bishop, president of Willard Bishop Consulting, Barrington, Ill.

"The average chain only captures 50% of heavy shopper spending, because these customers give an abundance of business to a variety of retailers," said Bishop. "Typically, a heavy shopper household is spending over $4,000 annually, but spends only a little over $2,100 of that at a typical chain. Retailers need to go after this $2,000 gap to gain heavy shopper spending dollars."

Bishop and Glenn Hausfater, president of Partners in Loyalty Marketing, Chicago, spoke on "Loyalty Marketing and Category Management: Building the Link," at the MarkeTechnics convention here Feb. 22 to 24. The convention was sponsored by the Food Marketing Institute, Washington.

"Progress is made by understanding what shoppers want," said Hausfater. Though targeted offers are proven tools in reinforcing loyalty, "there is nothing a retailer can put in a consumer's mailbox that will build loyalty if customers enter the store and find product they don't like, arranged in a way that doesn't please them or at a price point that is not competitive.

"Retailers need to meld their loyalty data into their existing category management process -- each working together to meet the needs of their heavy shopper," he added.

"Once you get the heavy shoppers in your store, you need to maximize their visits and move them up your loyalty ladder," Hausfater added. "You receive 50% of their business right now. You will not achieve 90% just by putting a frequent-shopper card in their hands. However, you can easily achieve 55%."

He highlighted one 500-store Southwestern chain that has used these principles to attract heavy shoppers. Stores in the chain's top one-third, measured by performance, were able to attract four times as many heavy shoppers as those in the bottom two-thirds.

"Analyzing loyalty data is the method to evaluate which are the strongest categories and how to set your strategy for promotions," Hausfater said.