IMPLEMENTS OF INFLUENCE

NANCY BRUMBACK

The race is on to reach today's consumer in the store more effectively and quickly and influence shopping decisions.

To accomplish that, retailers are testing and installing an increasingly powerful array of in-aisle and shelf-based merchandising systems, ranging from sophisticated, high-tech, interactive video kiosks to electronic coupon-dispensing machines.

There is no question that retailers are searching for the in-store promotional vehicle, increasingly in the form of advanced electronic-based technology, that can deliver the most bang for the buck and boost consumer spending. What isn't clear yet is which merchandising systems will be the big winners in driving store sales upward over the long haul and in attracting the most retailer and manufacturer support.

But retailers are eager and committed to trying new electronic merchandising systems in their stores, and the overall results thus far have been positive.

"In-store couponing is the hot in-store tactic right now," said Phil Kalivoda, director of in-store media for Fleming Cos., Oklahoma City. "Customers like all types of in-store coupons. They especially like them when they are available instantaneously as they shop in the store," he said.

Fleming's retailers find electronic in-store coupons are effective, whether they are dispensed from shelf-based machines, such as Actmedia's in-aisle program, or electronically at the checkout from systems such as Catalina Marketing's Checkout Coupon or Advanced Promotion Technologies' Vision Value Network.

"Everywhere we do these types of in-store coupons, it's extremely effective," Kalivoda said.

Indeed, Fleming's success with advanced in-store promotional vehicles thus far is prompting the chain to expand into other test areas. For example, it will soon begin testing a program from Advanced Retail Marketing called the Super End Aisle program. In that program, a coupon dispenser located within an endcap display gives shoppers who use the coupon an additional savings over the sale price of the featured product,

In addition, several Fleming divisions have also found card-based frequent-buyer programs, which electronically generate instant discounts for members at the checkout, are increasingly popular with shoppers and highly effective in driving promotional sales, Kalivoda said.

The only formats that have not proved quite as popular with shoppers in tests so far, Kalivoda said, are some of the stationary kiosks set apart from other specific product promotional displays. "Customers just don't take the time to use them."

Ron Lusic, president of Sentry Markets, Waukesha, Wis., said the use of electronic in-store merchandising will increase dramatically in coming years. Consumers, he said, are already increasingly turned off by some other forms of advertising.

"The amount of clutter in television, radio, newsprint and even computer bulletin boards" is helping drive the importance and effectiveness of electronic in-store merchandising vehicles, he said.

But retailers need to get even more involved in the development of in-store merchandising programs, Lusic stressed. Sentry, for example, has coupon dispensers, video monitors and audio systems in its stores, and is now considering testing interactive kiosks.

"We don't want to be left behind, so we are testing many things. I don't think there's one single answer so far," Lusic said. The catch is to avoid things that could annoy consumers because they are too obtrusive, and thus act as "silent turnoffs" to the customers in the store, he said.

Sue Hosey, vice president of consumer affairs at P&C Food Markets, Syracuse, N.Y., also said retailers must be careful in selecting the right promotional vehicles to win over customers. In choosing and testing these systems, retailers walk a fine line "between people wanting information and information overload."

One area where in-store promotional programs are proving especially important and effective for P&C is the grocery, or center store, section, Hosey said.

With the growing importance and size of the perimeter perishables departments in supermarkets, including deli and bakery, the grocery section is "rapidly becoming the smallest section in the store."

Effective use of in-aisle promotional vehicles in that part of the store, therefore, is deemed particularly crucial for driving volume higher. As a result, P&C has expanded the use of electronic coupon dispensers to most of its stores, Hosey said.

The chain is finding that customers are using the coupons more and more frequently. "The coupons are about as close to the customer purchase point as you can get," Hosey said.

The chain is also now using hanging LED signs in some stores to boost consumer interest in products. "Any signage helps sell product, and from a retail perspective, they're not a tremendous cost," Hosey said.

Abco Markets, Phoenix, is also taking an aggressive stance in terms of using in-store promotional systems to increase customer purchases. The chain has expanded the use of in-aisle coupon dispensers to 74 of its stores, said Les Knox, senior vice president of sales and marketing.

"I can tell you that the coupons are used frequently because the machines are always getting emptied. We've had no negative customer reaction at all. It seems to be working well," he said.

Knox stressed the value of the systems in luring customers to specific products and increasing sales. "We don't have to maintain the machines, and they provide a terrific value to consumers."

Abco also uses Catalina's coupon system at the checkout and Emarc's electronic signs to boost excitement. Knox stressed, however, that retailers need to be especially careful to choose systems that do not slow the checkout lines. "The whole philosophy is to speed up the checkout," he said.

Winn-Dixie Stores has also installed in-aisle coupon dispensers in most of its 1,200 stores, and customers are using them extensively, said Mickey Clerc, vice president and director of advertising at the Jacksonville, Fla.-based chain. Winn-Dixie also is using hanging LED electronic signs in stores in two of its divisions. The results from such in-store tactics are not always easy for the retailer to measure, though. "The manufacturers who use them are better able to tell how effective they are," said Clerc.

But at Snyder's Food Mart in Oklahoma City, an in-store couponing system has been so successful that the three-store independent has dropped all other forms of advertising in favor of it.

Jim Snyder 2nd, president, reported strong success with the CVC Now coupon program, which targets shoppers based on their checking account number, debit or credit card, frequent-shopper card or, in the case of cash customers, on the amount of their purchases. The customer automatically receives several coupons, usually six to nine, at the time of checkout.

The retailer also uses the system to dispense specific product coupons, especially for the perimeter departments, he said. For example, Snyder's used the program in early November to give each of its best customers a coupon for a free turkey before Thanksgiving. "Our good customers each got a turkey -- one turkey each -- and that eliminated the turkey price wars for us," said Snyder.

"I've dropped all forms of advertising and put that money into the cost of these types of programs and coupons. A shopper might get $7 or $8 worth of coupons. We've done the free turkeys, fryers for 19 cents, Pepsi and Coke promotions at the same time. I've eliminated the cherry-pickers and sales have gone up," said Snyder. About a dozen stores reportedly are now using the CVC system.

Jerry Nelson, co-owner of Nelson's Foods, Faribault, Minn., is finding that promoting a card-based system of electronic coupons is "enabling us to maintain sales at a time [when] our overall sales base has been eroding." The Faribault store offers an electronic coupon program using APT's Vision Value Network. Every four weeks, Nelson's runs a full-page newspaper ad listing the 90 to 100 electronic coupons that will be available to card holders over the next four weeks. The coupons are also identified in bag stuffers. "People know they can get those discounts without the hassle of having to cut out coupons if they have a card. That makes the cards very valuable to them," said Nelson. About half the discounts Nelson's offers are manufacturer coupons. The remainder originate at the store and use promotional allowances. The store also prints out coupons at the checkout for special promotions and its perimeter departments.

In addition, Nelson's shoppers can accumulate points and redeem them for premiums, "kind of like electronic Gold Bond stamps, but it doesn't cost the retailer anything," Nelson said. The independent is planning to build a second store in Albert Lea, and will add the system to both stores in that town when the new one opens, he said. Nelson's wholesaler, Minneapolis-based Supervalu, "has encouraged us to try the system," although the retailer is financing it on its own.

Industry observers also said the increased use of in-store electronic promotional vehicles is having a growing impact on product sales. The systems, they said, are gaining wider consumer acceptance. But determining the correct mix to achieve optimum results, without adding confusion to the always crowded shopping environment, remains a challenge.

"Some shoppers find these types of systems add a lot of excitement. Others find they add clutter and they already perceive the store as crowded. The industry is having a hard time sorting out the point of saturation or overload," said Fred Schneider, executive director of Smart Store at Andersen Consulting, Chicago.

"In the future there will be a lot more in-store promotional vehicles because many purchase decisions are made in the store and promotion opportunities are more valuable there," he said.

Schneider, however, feels that the best is yet to come in terms of effectiveness and efficiency in these types of in-store promotional programs. Retailers and manufacturers have hardly begun to tap the consumer-knowledge data bases that can be developed through point-of-sale devices, he said.

As those data bases are developed and used, in-store merchandising "will become tied to frequent-buyer programs. The coupons won't be distributed on the way out. Instead, they will be available when shoppers walk in the door. They will swipe a card and get a list of specials and coupons tailored to purchase needs," Schneider said.

Current in-store devices are filling the gap -- but with drawbacks -- until even more advanced, targeted marketing systems are available, he added.

"Coupon dispensers seem to be working well, but they do clutter the aisle and can be intrusive. Kiosks have a problem because most people dislike going to the grocery store, and anything that delays them is not going to attract most customers. "VideoCart [electronic screens on the shopping cart handle], on the other hand, offered an easy way of finding items in the store, but didn't address the needs of the consumer," Schneider said.

Betsy Tucker, senior consultant at Retail Systems Consulting, Chicago, agreed that point-of-purchase promotions, both electronic and traditional, will continue to draw increased spending because these promotions reach people in the store.

"But retailers should understand what message they are sending to their customers with these promotions and make sure programs being used in-store match the image they want to project," Tucker said.

For example, with in-aisle coupon dispensers, the retailer needs to consider both physical clutter and promotional clutter. "How many other promotions are currently running? Will a store that's double-couponing double in-store coupons? If not, will the shopper be confused? If you run price messages on electronic signs, are the prices accurate? Those kinds of things need to be addressed," she said. "Ideally, in the future, scanning, shelf labels, kiosks, signs will all be integrated so a retailer can design a total store promotion that works. But that's probably more than five years away," said Tucker. "I see retailers starting to take more control over what is happening on the shelf. They will have to find out what the consumer needs. Consumers do look for information, but tune it out when it becomes intrusive," said Larry Wojciechowski, president of Retail Media Management, a Ridgefield, Conn.-based consulting firm.

"In-store programs have been successful, and shelf-based programs have been most successful, but they have increased to the point where clutter is becoming an issue," he added.

Manufacturers also indicated they believe the demand for in-store merchandising equipment should continue to increase as supermarkets look for ways to differentiate themselves from their competitors and manufacturers seek better ways to influence the purchase decision.

Supermarkets today "are in almost a commodity business, and each is looking for an edge," said Tim Simmons, vice president of retail sales at Advanced Promotion Technologies. APT's Vision Value Network develops a customer data base using purchasing history, and then enables the store to communicate with the specific customer with tailored promotions distributed at the time of checkout.

"If stores start promoting to their own customer base in the store, they can then also target a small remaining base in the store's market area by mail. The stores promote very effectively and won't have to spend money on circulars and radio. I see this evolving to replace existing media, and I think we'll start to see that in the next 18 months," Simmons said.

"Grocery manufacturers are becoming better at targeting their market," said Jon Rubin, vice president of marketing at Actmedia. "We are a long ways from targeting a single individual, but there is movement to targeting a retailer and specific store profiles." A.C. Nielsen's decision to track in-store coupons as a separate category for the first time in 1994 is an indication of how popular this form of marketing is becoming, Rubin added.

"I definitely think in-store merchandising dollars are going up," said George Off, president of Catalina Marketing Corp. "Manufacturers are looking for effective ways to reach customers. So many of the old ways are fragmented -- television channels, newspaper readership down. In-store makes a lot of sense." Off pointed to large sales increases by the two major players in the in-store promotional field as further evidence that "more and more manufacturers see this as a valid marketing approach."