GETTING SHOPPERS WHERE THEY LIVE

FRED PFAFF

Once upon a time, retail marketing meant "merchandising" -- setting an attractive shelf, promoting special offerings in newspapers and sampling in the aisles. The antidotes to stiffening competition were increasing selection and lowering prices.

Many food industry executives now believe that yesterday's approach isn't good enough anymore.

Delivery and takeout options are proliferating. Nonfood retailers are discovering the attraction of selling groceries. Shoppers are increasingly choosing retail stores according to how well the stores serve their lifestyles. Far more than looking for the lowest price on canned tuna, they want drive-through grocery pickup, bag-loading, freshness guarantees and much, much more.

"The old approach is competitively inadequate," said Kevin Price, president of Market Performance Group, a Fairfield, Conn.-based firm that helps manufacturers and retailers build more profitable business relationships. "Within a few years it could be disastrous."

Some industry veterans swear it won't be long before such measures of service are the only features that distinguish retailers. Their prognosis: Chains that resist the move to sophisticated retail marketing will be comparatively out of touch with consumers. On the other hand, they say chains that take on the marketing mandate will base their site location, category and product assortment, and special services on precise definitions of what's important to the kinds of consumers shopping particular stores. The latter will create loyalty among shoppers, and more dollars spent per store visit, by consistently providing an exemplary shopping experience.

"Micromarketing is both an efficiency and effectiveness opportunity for retailers," Price said. "Say you can identify the 20% of households that shop your stores, the 60% that don't usually shop your stores, and the remaining 20% that never shop your stores. If you can effectively target and reach the first 20%, you'll secure your shopper base. Then you can either reach them five times as often with better-tailored marketing messages, or you can simply lower the cost of your current marketing effort by as much as 80%."

That's the secret of the success of such retailers as Marks & Spencer in the United Kingdom and Dorothy Lane Market in Dayton, Ohio. While Marks & Spencer uses proprietary software to project consumer opportunity, base services and track performance over time, Dorothy Lane Market is small enough to base all personalized marketing on actual customer contact.

Dorothy Lane is known for greeting customers by name and for offering such services as curbside loading, advance takeout preparation and store-to-car escorts with umbrellas in the rain. During peak shopping periods, the stores even have service people on the shopping floor to direct people to the products they want to buy.

Marks & Spencer, on the other hand, leaves consumers with the impression that they'll find quality at a value price or the store will make it right. The chain accomplishes this using proprietary software to track consumer information and competition on a market-by-market basis. Demographic and lifestyle patterns of core consumers and prospects are cross-indexed with shopping and purchasing patterns of actual shoppers.

Many retailers have begun to focus on closing the gap between these two ideals and where their chain is operating now. Success, the experts say, will depend on how well the chains use analytical tools on the front end of the store, not merely on retail logistics.

The benefits are enormous. Knowing precisely who the consumers are for specific stores takes the guesswork out of marketing. Store sites can be selected according to accurate projections of consumer demand and retail competition, not simply total neighborhood population.

The mix of categories and services can respond to specific consumers' needs. Product assortment discussions shift from what the manufacturer is willing to spend behind a brand to what stores' particular consumers are likely to buy. Long-term, chains can give consumers special services and track the effect of each offering.

The first step toward the micromarketing ideal is to quantify the overall number, and specific types, of consumers living in each store's trading area, said John Larkin, president of Spectra/Market Metrics, a Chicago-based firm that supplies more than 160 companies in the supermarket industry with micromarketing information and customized local-marketing solutions. Spectra/Market Metrics integrates data on consumer lifestyles, lifestages, purchase behavior and media habits to arrive at a more complete profile for use in store management and marketing.

In a sample analysis, demographic, lifestyle and geographic data for the neighborhoods surrounding Big Bear Stores' headquarters market in Columbus, Ohio, are integrated through a segmentation grid. The result is a trade area shopper profile (see chart below) that identifies the heavy, medium and light shoppers for the chain, based on the types of consumers who populate the stores' trade areas.

That table is compared with a breakdown of consumers in Columbus who say they do most of their grocery shopping at Big Bear (see chart below). This primary shopper profile can be derived from the chain's frequent shopper data base, or from syndicated local market panel studies. The latter are provided by Scarborough Research Corp., New York, which asks consumers where they do most of their grocery shopping.

Compared side by side, these analyses yield a clearer picture of who lives and shops in the Big Bear trade areas.

In the Columbus example, younger households (adults 18 to 34 with and without children) in traditional families, middle-class to upscale suburbs and metro-elite areas are the groups most likely to shop at Big Bear Stores. Yet there are fewer than the average number of these households in Big Bear's trade areas.

By contrast, downscale urban households are extremely well represented in Big Bear's trading area. And many of them do most of their grocery shopping in Big Bear stores.

By comparing this profile to competitors' profiles, it is possible to determine the differences or overlap in committed shoppers. This clarifies who is worth pursuing to convert via targeted marketing efforts. Once that's established, a closer look at the primary lifestyle and media habits of the highest-potential consumers provides clues as to what media and promotions they'll respond. Prospects can be isolated to individual stores, store clusters, neighborhoods or households.

For retailers, the payoff comes in streamlining product merchandising, and in spending advertising and promotional dollars more wisely.

Larkin said this approach is especially powerful when combined with sophisticated tracking measures such as check-cashing and frequent shopper cards.

"Retail marketing demands a shift in focus from what's sold historically to what we can sell," he said. "To spend marketing resources where they'll count, you need to know where you're underperforming against the consumer opportunity."

What do retailers need to accomplish this? One, they need syndicated data on consumer consumption, lifestyle habits and media habits (principally from Mediamark Research, A.C. Nielsen, Information Resources Inc. and Scarborough Research). Two, to do this efficiently requires micromarketing software that can integrate reams of data without taking thousands of man-hours.

For many retailers, this is but a first step. Turning the information into profitable marketing action demands an information-driven marketing process headed by the vice president of marketing or merchandising.

The record shows that the gains a handful of major retailers and many manufacturers have made in understanding the consumer all depend on reshaping the marketing process to work powerfully with micromarketing information. After all, information is only as good as its use.

Potential Shoppers: Big Bear's Big Picture

Who's available to shop at Big Bear Stores' hometown of Columbus, Ohio? Here's a trade area shopper profile of the Big Bear store trading areas within the Columbus market. Indices of 120 or above indicate unusually high concentrations of households, while indices of 80 or below indicate significantly below-average concentrations.

Life Stages

Lifestyles 18-34 18-34 35-54 35-54 55-64 65 Total

w/kids w/o kids w/kids w/o kids Lifestyle

Upscale Suburbs 89 87 99 98 109 113 100

Traditional Families 85 83 86 85 87 84 85

Mid/Upscale Suburbs 116 116 119 120 116 120 119

Metro Elite 100 110 104 110 111 117 109

Working-Class Towns 87 90 88 87 90 94 90

Rural Towns/Farms 95 94 94 93 94 94 94

Mid-Urban Melting Pot 120 151 107 124 104 111 129

Downscale Rural 91 96 86 87 83 82 87

Downscale Urban 130 141 130 134 136 142 137

Total (Median) 97 98 98 98 98 99 100

120 = heavy consumption Source: Spectra/Market Metrics and U.S. Census Data

Actual Shoppers: Who Big Bear Is Reaching

Micromarketing enables a chain to market according to the opportunity to sell products to tightly defined audiences. Here's a primary shopper profile of Big Bear Stores in its headquarters market of Columbus, Ohio. An index of 120 or more indicates this type of household shops significantly more than average at Big Bear, while 80 or under indicates those households shop significantly less than average at Big Bear.

Life Stages

Lifestyles 18-34 18-34 35-54 35-54 55-64 65 Total

w/kids w/o kids w/kids w/o kids Lifestyle

Upscale Suburbs 105 93 84 83 62 102 88

Traditional Families 129 117 99 76 97 43 97

Mid/Upscale Suburbs 209 166 99 139 12 130 123

Metro Elite 172 157 100 130 126 91 137

Working-Class Towns 69 14 48 85 52 140 70

Rural Towns/Farms 76 37 96 87 66 74 74

Mid-Urban Melting Pot 131 132 71 85 0 134 117

Downscale Rural 107 50 123 101 110 92 99

Downscale Urban 90 216 115 165 194 142 147

Total (Median) 109 107 93 102 81 101 100

120 = heavy consumption Source: Spectra/Market Metrics and U.S. Census Data

Six Steps to Success

Industry observers say success in retail micromarketing involves the following steps:

Identifying the highest-potential shoppers for your stores and your competition's stores.

Identifying what services, categories and brands your shoppers want in a supermarket.

Locating your best prospects. Where do they live in relation to your stores, and where do they currently shop most often?

Evaluating media on the basis of how effectively each medium will reach these consumers.

Clarifying the message that will attract these consumers into your stores.

Tracking the consumers' visits -- when they visit, how often they visit, what they buy when they visit.