COLOR COUPON TEST YIELDS RESULTS

MICHAEL GARRY

TAMPA, Fla. - Following a test by Sweetbay here, shoppers in thousands of U.S. supermarkets will begin seeing more colorful coupons presented to them with their receipt at the checkout lane.

That's because Catalina Marketing, St. Petersburg, Fla., plans to install new four-color, in-lane inkjet printers from Epson across most of its network of about 17,000 stores nationwide, replacing existing thermal printers that print out the traditional red-framed black-and-white coupons. Some of the legacy printers date to 1984. The rollout is slated to kick off in mid-2006 and is expected to conclude by the end of 2007.

The rollout, to be managed by Catalina, will follow a test of the new color technology taking place in 10 Sweetbay stores and 10 stores run by another chain Catalina declined to name.

"We would love to roll [the printers] out when they're ready," said Steve Smith, vice president of marketing, Sweetbay/Kash n' Karry.

When the rollout is completed, color coupons will account for more than 85% of Catalina's U.S. distribution of about 70 million coupons per week, according to Dick Buell, Catalina's chief executive officer. Catalina is investing about $85 million in the new printers, which are free to retailers.

Since launching the test in mid-2005, Sweetbay has observed a "significantly higher" redemption rate for the four-color manufacturer coupons compared to the two-color coupons, according to Smith. "That's the name of the game. It's an action vehicle that triggers buying behavior." He declined to provide specific redemption figures. Catalina coupons are typically targeted to shoppers based on current or historical purchases.

Buell said that Catalina will release redemption figures for the color coupons upon completion of studies being conducted this year.

Ad Vehicle

In addition to their traditional role as a promotional tool, both Smith and Catalina executives see the four-color coupons as serving a brand-marketing and image-advertising purpose for both manufacturers and retailers. The color concept "fits well with the Sweetbay brand, which is vibrant and food-oriented," Smith said.

Sweetbay, for example, has been employing the color coupons to support the grand openings of new Sweetbay stores, which are Kash n' Karry conversions. There are currently 25 Sweetbay stores, with another 84 Kash n' Karry outlets to be converted through 2007.

"This is now a better brand-communication vehicle, not just transaction-oriented," Smith said. "With the color, you can have better visual representation of foods and packaging, and of our logo. We've been trying different internal campaigns, and they look and feel better in color than in black-and-white."

For the Sweetbay grand openings, the color coupons have been used to create awareness of particular departments, such as the butcher shop, produce department and Nature's Place natural/organic department. "So if somebody buys [organic] cereal, we let them know there's a Nature's Place department in the new store. It's used like newspaper or TV. We can show products to make it more appetizing. We don't have to offer dollars off the next order."

Sweetbay is thinking of using the color coupons to promote the cake decorating department, which lends itself to "compelling visuals," Smith said.

Asked if departments promoted with the color coupons have experienced more customer traffic, Smith said it was too soon to tell, adding that the chain plans to conduct a test with controls to determine the effect on customers.

Still, stores have been reporting positive feedback from shoppers. "People have been saying, 'Wow, what's this? I've never seen this before," he said. "The color obviously pops because they've been receiving the black-and-white coupons forever."

New Color Printer

Catalina has been working with Epson to upgrade the color printer, and plans to unveil the final version at Food Marketing Institute's Marketechnics show in San Diego at the end of the month. The upgraded model will offer "better resolution" and printing speeds of four inches per second, equal to the speed of the thermal printers that generate Catalina's black-and white coupons, said Eric Williams, Catalina's chief information officer.

The color printer will require a new inkjet cartridge about every 90 days. The color system will also require software upgrades in Catalina's in-store servers.

Catalina plans to install the printers and software - both free to retailers - in most stores in its network. The exceptions will be stores that lack the network bandwidth to receive four-color files and those whose point-of-sale systems are not able to link up to the new Windows XP Embedded operating system Catalina will use in its store servers. Those stores will continue to use black-and-white thermal printers.

Retailers share revenues collected by Catalina for distributing manufacturers' coupons. About 300 manufacturers distribute coupons via the network.