PATHMARK TO PILOT POS OFFER SYSTEM 2004-05-03 (2)

MICHAEL GARRY

CARTERET, N.J. -- Next month Pathmark Stores here plans to launch a multi-store pilot of a new electronic offer management system capable of applying multiple electronic promotions to a single item at the checkout.

Pathmark also expects the system, called Retail Media Management, from POSnet, Rolling Meadows, Ill., to help deter Internet coupon fraud, said Trish Cucinelli, the chain's loyalty marketing manager. Pathmark is the first user of the system.

In an interview last week with SN, Cucinelli said that Pathmark has spent about eight months ensuring that the system "worked properly" and could interface with the chain's POS platform "uneventfully."

Last December, the chain installed the system at its headquarters here and formed a network connection to all of its 142 stores, with actual testing in about 25 stores slated to begin sometime in June. The test will run between four and six months, she noted. POSnet has designed its system to be a "single POS interface" for electronically processing offers from any number of promotional distribution channels, said Tim Halfman, president, POSnet. These channels could include coupon Web sites, e-mail, loyalty cards, mobile shopping devices, in-store dispensers and conventional direct mail. Cucinelli said that she is not aware of systems on the market comparable to POSnet's. POSnet describes its system as "first of its kind." As for being its first user, "you always like to be leading edge," she said, adding that Pathmark will evaluate the pilot results to determine whether it will roll out the program chainwide.

Pathmark intends to test the system's ability to manage multiple electronic marketing offers, including online coupon offers and Pathmark's own targeted loyalty card discounts, said Cucinelli.

"POSnet automates all offer-management functions, including electronically taking offers from multiple sources, routing them to each store, validating them at the POS and providing flexible settlement options," she said. "It's CRM [customer relationship management] at its finest."

Pathmark executives also believe the system can help the chain introduce and execute new promotional strategies, she added. Pathmark received a GEM (Global Electronic Marketing) award last fall from Retail Systems Consulting, Naples, Fla.

"The key is that [with the POSnet system] you can execute more than one offer from different sources on one UPC," said Cucinelli. "Today you can't do that." It is not possible, for example, to combine an electronic discount from a manufacturer with a simultaneous offer from Pathmark or Internet coupon on the same product.

"What customer wouldn't want to get more than one discount on an item?" she observed.

In addition, she said, the system offers Pathmark the ability to electronically validate offers that were applied to purchases at the POS, and present that validation to manufacturers.

Cucinelli also sees the system as a means to prevent Pathmark from being victimized by fraudulent Internet coupons. Online coupon fraud emerged as an issue last summer when fraudulent coupons turned up in several marketing areas, including Pathmark's. It's possible, she noted, for someone to print a discount coupon off the Web and "continue making copies indefinitely."

However, the POSnet system requires shoppers using online coupons to key their loyalty card number into their computer, triggering a communication to Pathmark, POSnet and the coupon site to work in concert to validate the offer when the shopper checks out.

While not a perfect deterrent to online coupon fraud, the system contributes to securing the process, Cucinelli said. (Harris Teeter recently changed its policy on Internet coupons -- see story, Page 155.)

Rich Savner, spokesman for Pathmark, acknowledged that POSnet's ability to serve as an independent third-party auditor, validating and settling financial reimbursements for promotions, helps the chain comply with federal auditing rules established in 2002 under the Sarbanes-Oxley Act. As for whether sensitive financial information will be secure under the system, Cucinelli said, "We have every reason to be confident that it will."

She also noted that the system in no way compromises the privacy of customer information, which Pathmark closely protects. All loyalty transactions are "card-number-based," she said. "No names or addresses are attached to it."

The POSnet application runs at Pathmark's headquarters here, while individual stores are simply networked into the system. At the same time, Pathmark's headquarters is connected via a VPN (virtual private network) to POSnet's headquarters, where management and coordination of third-party offers take place. "POSnet manages the offers and feeds the final offer set-up to us and we communicate it to the stores," Cucinelli said.

While Cucinelli declined to comment on Pathmark's investment in the POSnet system, she said Pathmark expects "efficiencies to be derived" from its implementation that would "contribute to an ROI."

Betsy Tucker, a consultant with Retail Systems Consulting (which has worked with POSnet), noted that with sufficient adoption the system could enable manufacturers to conduct national campaigns with targeted electronic offers at the POS.