MINING FOR DIAMONDS

SARAH MULHOLLAND

SYRACUSE, N.Y. -- Green Hills Farms here, a single-store operator noted for its innovative loyalty card program, is ready to take loyalty to the next level of targeting and rewarding its best customers that it calls diamonds.

The retailer will soon install a fully integrated point-of-sale system, said Gary Hawkins, chief executive officer.

Green Hills is a fourth-generation, family-owned supermarket that has continuously operated for 68 years. It has, said Hawkins, kept its small-town feel while adding technological refinements that keep it competitive with larger retailers.

Independents have to contend with limited resources when it comes to investing in technology, Hawkins said.

At the same time, he explained, independents must be prepared to make the commitment to technology to differentiate from the competition.

While the larger players spend their technology dollars on logistics and lowering product costs, Hawkins said, "smaller companies should become interested in their customer."

Hawkins not only knows most of his customers personally, but with the use of a sophisticated loyalty card program he knows their buying habits as well.

Green Hills uses technology like an electronic version of the proverbial mom-and-pop store, forging faithful relationships with the store's best customers.

The retailer launched its loyalty program in 1993, relatively early in the history of frequent shopper programs. Within a couple of years, costumer data gleaned from the cards at the point of sale had created a new business model for this supermarket.

"We had enough understanding of technology to realize that the name of the game was information," Hawkins said.

Last year, the store received an Innovator Award from the Peppers and Rogers Group, a global management consulting firm based in Norwalk, Conn., for its loyalty card program.

Said Jo Bennett, an associate with the consultancy, "It is not the loyalty card per se that caught our attention, but the approach behind it. By using customer data to treat customers differently, Green Hills really carries the loyalty concept a step further. Most supermarkets don't target their customers this way. They collect all this information and they don't do anything with it."

Bennett said Green Hills' dynamic pricing model sets its program apart from others.

The model uses information from the loyalty cards and segments customers according to their spending levels. There are five levels of spending characterized by precious gems -- diamond, ruby, pearl, opal and quartz. Loyalty card customers' spending range from $100 or more a week for diamond shoppers to $10 or less for the convenience shoppers who are categorized in the quartz segment.

Based on their spending status, shoppers receive preferred pricing. They are notified in advance through mailings and the preferred price is automatically registered when a card is scanned at POS. This enables the store to reward their best customers -- with a half-price Easter ham, for example -- without losing money by having to advertise it.

The entire operation revolves around consumer data, Hawkins said.

As an example, shoppers' comments and suggestions are checked against the customer database. While all questions are answered, a diamond shopper may receive a different answer from that of a ruby.

In addition, services such as check cashing are tied to a customer's frequent shopper status.

Markdowns and ad items are factored in on a weekly basis to come up with a true picture of the most profitable shoppers, Hawkins said. That information is then used to plan merchandising schemes and allocate space, he added.

The 22,000-square-foot supermarket pulls from a 30-mile trade radius and generates $15 per square foot in sales per week, said Hawkins.

While Green Hills was recognized for its outstanding customer-driven solutions, industry observers say a frequent shopper card alone is not good enough.

It is the degree to which Green Hills can integrate the data garnered from POS that gives the retailer an advantage.

Hawkins said, "A lot of retailers are only going through the motions. They view [loyalty] as a marketing program or just as a vehicle for clipless coupons. Few really make use of the customer data in how they go to market."

The store does not have self-checkout, but Hawkins said he is considering it as another way to serve preferred customers in the future. The self-scan lane might be positioned as a privilege for the store's best customers, he said.

This highly nuanced approach to customer relationship management requires a sophisticated POS system and Green Hills is still looking for a system that fits its needs. According to Hawkins, a new system is slotted for the second quarter of this year. However, he declined to give specifics on what is under consideration.

"The new system will be more flexible and better able to communicate with our customers one-to-one as well as deliver customer-specific information," Hawkins said.

While the open-system the store currently uses accommodates multitiered pricing, it does not integrate with the entire store. The self-service Hobart scales installed in the produce department a year ago, for example, cannot communicate with the front-end system.

At this point, the scales simply enable customers to produce a bar-coded label for random-weight items.

However, Hawkins continues to work with Hobart to build a scale that offers preferred pricing, or displays the number of points a customer has accrued when the card is scanned.

Sometimes cost is a prohibitive factor for independents when competing in the high-tech arena, Hawkins said. Proprietary software supporting loyalty card programs can get very expensive, he explained.

While Green Hills requires a comprehensive CRM package, smaller operators can circumvent the system by using off-the-shelf software.

Hawkins said it is possible, for example, to use Microsoft's Access relational database to store information gathered at the POS.

Either way, Hawkins believes these initiatives are key if retailers want to stay focused on the customer.