COUPON DRIVE

CHRISTINE BLANK

Supermarkets and manufacturers are narrowing their approach to coupon merchandising in an effort to target the right consumer for specific reasons.

Whether it's to entice new customers into the store, get shoppers to sample a new product or reward the retailers' most loyal customers, many in grocery retailing are moving beyond the tried-and-true freestanding inserts that pull from a broad demographic. Instead, many retailers are targeting shoppers through loyalty card data, shopping basket analysis and previous purchase history.

Particularly now with the sluggish economy, experts expect consumers' coupon use will rise. Many consumers still find them through FSIs.

"We find that almost every manufacturer we deal with is taking a fresh look at coupons because the economic news is making consumers nervous and more savings-conscious than they have been in 10 years," said Phil von Stade, president, Westport, Conn.-based VSI Targeting Systems.

In addition, manufacturers are sharing more funds with retailers to place ads adjacent to the Sunday FSIs. "The trend that we've seen increasing is product manufacturers and grocery retailers teaming up to run retail-specific ads right in the FSI, so the consumer gets an additional discount when they redeem the coupon at the specific retailer," said Lynn Liddle, vice president, investor relations and communications center at Valassis Communications, Lavonia, Mich.

However, Skagway Stores, Grand Island, Neb., is offering fewer "double coupons" -- combined from the manufacturer and retailer FSIs, since manufacturers FSIs are published in the Sunday newspaper and the store's FSIs are published in the Wednesday food section.

"We're fighting to change the [newspaper's] food day to Sunday. We like to be a coupon store and show value to the customer," said Jim Phipps, vice president of Skagway.

In lieu of doing many manufacturer tie-ins, the chain is using its loyalty card with vendor support. If the item is running for 89 cents, Skagway may charge cardholders 49 cents, when the promotion is supported with manufacturer dollars. More supermarkets are sending targeted coupons to their frequent shopper cardholders.

"We've seen a pretty substantial increase in the number of retailers sending out truly targeted offers," said Gary Hawkins, owner, Green Hill Farms, Syracuse, N.Y. Since database mining is an expensive and time-consuming process for grocers, Hawkins said supermarkets are partnering with consumer goods manufacturers to fund the targeted offers.

Typically, manufacturers agree to send higher value coupons to non-users of their brands, and minor discounts to regular shoppers of their brand, Hawkins added.

Valassis, through its relationship marketing program, uses retailers' frequent shopper card data to analyze 12 months of shoppers' habits. Targeted offers (with the retailer's name) are mailed to individual households. The flier includes a list of items pertinent to the customer, along with the coupon amount. The offer is imbedded in the frequent shopper database, so the offer can be scanned at the store, or the shopper's card can be scanned to get the discount. "From a consumer standpoint, it is totally clipless," Liddle said.

This program is used by about 2,000 stores, and that number is expected to jump to about 4,000 this year, according to Liddle.

Although each item featured on the monthly flier varies in value, the combined offers total between $15 and $25.

Remke's Markets, Covington, Ky., is also seeing good returns from targeted monthly coupon offers to its in-house database of frequent shopper cardholders. Although the monthly mailings had traditionally rewarded Remke's Top 30 customers with free items, the retailer began adding two coupons to each mailing over a year ago -- with noticeable success. "Those are directed at customers that have certain behaviors. If they don't shop at the deli, I give them incentives to bring them back into the category. Those have worked very well," said Pat Isaillo, director of customer relationship marketing at the seven-store Remke's Markets.

Isaillo wants to increase mailings to the chain's best customers, but that depends on marketing dollars available.

However, he is further targeting coupons with the test of a software program that can predict shoppers who are likely to redeem the coupons. For example, if Isaillo wants to find likely redeemers of refrigerated gelatin products, he examines the baskets of people who purchase refrigerated gelatin products and those who do not. Then, the software determines, based on items in their baskets, which shoppers would be most likely to buy the gelatin products. Isaillo declined to say what software program was being used.

After testing the software for four months, Isaillo said redemption rates are much higher than usual. "As opposed to [our usual] 4.5% redemption rate, we've had over a 20% redemption rate," he said.

Some grocers are running triple coupons (supermarkets agree to triple the value of the manufacturer's coupon), but often it's to compete with area grocers, rather than move product.

Acme Markets, Malvern, Pa., a division of Albertson's, recently launched a triple coupon program in the Philadelphia area for a limited time.

Green Hills Farms routinely advertises double coupons, but its competitors in the Syracuse area are running triple coupons.

"The retailers run a validator (voucher or coupon), which consumers tear off and put with a manufacturer coupon and the retailers triple it. We're seeing some competitors say they'll accept validators from other supermarkets,"

Hawkins said. Hawkins does not want to start offering triple coupons, because he will be selling items below cost.

"We don't see a need to go to triples. For Easter, a lot of our competitors were selling hams below cost. We went to our best customers with the best price on ham. It just comes back to the basics of, do you want to give something away to anyone who walks in the door, or reward your loyal customers?" he said.

More retailers are also using electronic coupons, printed at the checkout and based on the customers' purchases.

"Retailers like the programs because there is no paper to push," said James Santella, president of Santella & Associates, Elmwood Park, Ill.

Boise, Idaho-based Albertson's recently said it would utilize St. Petersburg, Fla.-based Catalina Marketing's electronic coupon service in all of its divisions, increasing its reach by about 870 stores.

"This technology allows Albertson's to target customers on an individual market-basket level with special retail programs," said Pam Powell, group vice president of marketing, Albertson's.

In addition, the deal will grow Albertson's on-line coupon program.