Putting the customer first

Consumer-centric technology strategies help grocers build loyalty and stand out in a crowded retail landscape. By Deena M. Amato-McCoy The economy may be on an up­swing, but grocers still struggle to build loyalty among cost-conscious shoppers. By transitioning to more consumer-centric strategies that localize pricing, promotions, even staffing based on customers’ needs, supermarkets will successfully drive customer loyalty and bottom-line sales in a recovering economy. The goal of supermarkets is to improve gross margin and sales per square feet, but this remains a challenge as wary shoppers continue to be cost-conscious even as the economy slowly recovers. As a result, many chains are over-stocking shelves in hopes of appealing to a broader depth of shopper segments. “And this problem only gets deeper as they try to introduce more variety on store shelves,” says Marc Dietz, vice president of marketing for DemandTec, based in San Jose, Calif. “What ends up happening is chains begin alienating shopper segments.” This also reduces grocers’ ability to make a profit. Worse, as inventory sits idle on shelves, it ties up capital that could be invested elsewhere in the company. Conversely, more conservative retailers are pursuing SKU rationalization strategies and reducing the number of brands or types of merchandise they carry to free up capital and drive sales. “Some retailers will cut up to 25% out of their SKU base,” says Jeff Weidauer, vice president of marketing for Little Rock, Ark.-based Vestcom Retail Solutions. “For example, chains may trade five types of toothpaste for two brands and one private label. “Reducing SKUs is not a benefit to shoppers,” he says. “If shoppers can’t find merchandise on your shelf, they will shop at a competitor that does carry it. Retailers can no longer dictate what shoppers will buy.” At a time when customer loyalty can make or break the future of a company, grocers need to bring value back into the shopping experience, according to industry executives. At the core of this plan are consumer-centric strategies that focus on consumers’ individual preferences. Monitoring patterns By analyzing shopper purchase patterns, retailers are primed to deliver merchandise and services to shoppers on a local level. More specifically, grocers need to continuously monitor the products and categories that are important to shoppers, and “delivering the proper brands, SKUs and services, as well as how to arrange the store,” says Gary Hawkins, CEO of Green Hills Farm, based in Syracuse, N.Y. “It is not just about how to deliver not just a better shopping experience, but more importantly, a relevant one.” The industry has been dabbling in different flavors of customer-centric technology over the past five years, but grocers are far from a tipping point, according to experts. Some blame the fickleness of the “new shopper,” who is driven by good prices, clean stores and ideal assortments, brands, products and services. They also crave recognition of their individual needs, whether it is specific brands, packaging options or placement at store-level. The supermarket segment tends to have an upper hand in this area, as this retail segment pioneered frequent shopper programs and the collection of shopper data. Yet, many grocers still fail to uncover the nuggets that can help them get closer to their shoppers. “Too many chains still rely on manual processes for everything from marketing messages to pricing—these are not the processes that cater to the individual needs of shoppers,” says Wayne Usie, vice president of retail for Scottsdale, Az.-based JDA Solutions. “Chains need to take advantage of market basket analysis to reveal shopper segments and understand how to tailor assortments and customer messages.” That said, chains are becoming frustrated with cherry-pickers, mostly because they are tired of watching money “walk out the front door,” says Jim Bengier, global retail executive for Columbus, Ohio-based Sterling Commerce. “In this economy, they would rather give up revenue and hold product for a shopper who will buy that item along with other merchandise,” he says. “The industry is in survival mode and this is today’s smarter business model.” Savvy companies are dusting off their customer data and learning  how “to stand for something to shoppers,” says John Saccomanno, industry marketing director for Atlanta-based NCR. “Rather than consider this a challenge, smart grocers are turning this into an opportunity to launch more consumer-centric strategies.” Industrywide, three out of four retailers reported that a consumer-centric approach is one of the top three most important factors to business success, according to Winning At Consumer Centricity: 10 Tips For Retailers And Manufacturers, a study released by Toronto-based Precima and DemandTec. Digesting the data Yet, it still baffles industry experts “that grocery lags in this category considering they collect so much data about every shopper and they can do so much more than simply deliver clipless coupons,” says Sterling’s Bengier. For those already armed with clean, accurate shopper data, grocers are turning to customer relationship management systems as their logical next step, especially to pursue one-to-one personal relationships with consumers and shopper segments. CRM has become second nature for Green Hills Farms. Hawkins is so dedicated to CRM that he uses it to fuel his company’s mission to recognize its regular shoppers and provide each one a “relevant shopping experience.” Stemming from information accrued from the Green Hills Card program, Hawkins features the SmartRewards program, which delivers individual shopper with weekly specials based on their specific purchasing habits. “We drive these communications based on what the shopper wants, not what consumer packaged goods manufacturers think they want,” Hawkins says. “If a Coke drinker receives a Pepsi coupon, that is not valuable to them. Now we deliver Coke savings to Coke shoppers, and Pepsi incentives to Pepsi drinkers,” he explains. “This makes the shopper experience more relevant and valuable to every shopper.” Shoppers can log onto www.Greenhills.com, input their loyalty number and click on promotions they want to redeem. Savings are electronically linked to their loyalty program, and electronically applied at the point-of-sale. The same process can be conducted at a store-level kiosk. Green Hills has 12,000 customer households participating in the program, and he reports “several thousand” shoppers activate promotions each week. Green Hills is also leveraging this data to localizing assortments. “We are not only evaluating categories and specific brands, but SKUs within each category,” Hawkins says. “This strategy uncovers growing trends, such as increasing sales across natural and organic categories, as well as specific dietary requirements, like gluten free merchandise,” he says. “This information impacts our category sizes, the space we allocate to different categories, and ultimately, even ongoing revisions we make to different categories. It is all about inventory productivity. We want to turn product. Any merchandise collecting dust on a shelf is costing us money.” Computer assist Automated ordering and forecasting solutions are critical in this task, as they allow grocers to create precise orders based on consumer demand, which in turn enhances revenue and customer loyalty. “This demand-chain approach, which is based on current and future buying patterns, provides retailers with the knowledge and capability to adapt to different factors impacting demand, and still maintain optimum inventory levels,” says Kevin Stadler, general manager for SAF Simulation, Analysis and Forecasting U.S.A., based in Grapevine, Texas. Phoenix-based Sprouts Farmers Market is working with Aldata Solution’s analytics to better manage SKUs on the shelf, and carry items and brands “based on customer shopping patterns,” says Doug Sanders, the chain’s president and COO. “We sifted through eight years’ worth of customer information to redesign shelves. Patterns differ across all 48 stores we operate across four states.” The chain is using the technology to manage two categories so far, one is juice, which is “big for us considering the increasing interest in natural foods,” he says. “The solution pulls customer data and helps us create shelf schematics that we pass along to our stores. We also can electronically keep abreast of store-level execution and easily make changes if needed.” After streamlining assortments, many grocers often evaluate price elasticity and tailor pricing across specific regions or individual stores. Pricing optimization solutions use analytics to understand shopper demand and “know in advance how a pricing decision could impact business before deploying a new pricing strategy,” says Susan Boyme, vice president of marketing for Revionics, a Roseville, Calif.-based price optimization, inventory replenishment and consumer demand management software provider. The provider takes this process one step further by helping retailers localize pricing at different levels for specific locations, geographies, even for specific customer demographics. “If a grocer has technology that enables them to look at unique behavior at each store or a group of stores, they can establish prices for promotions, as well as increase margin dollars and drive profits, while still protecting their brand image and staying competitive,” she says. Leveraging labor A tighter focus on workforce management can play a huge role in shopper-specific strategies. Retailers are tapping technology partners, such as Kronos, based in Chelmsford, Mass., and ClickSoftware, based in Burlington, Mass., to create optimal shift plans that can accommodate specific service levels and customer experience requirements. “Companies can decide on flexible shifts and take a holistic approach toward assigning employees with the most critical tasks during a shift,” says Hannan Carmeli, COO of ClickSoftware. The software takes into account all skill sets and certifications, if any, as well as individual preferences. Retailers can break up shifts or job functions between employees to ensure they can provide the best customer experience, and “have just the right staffing at the right place and in the right time,” he says. It is also critical to maximize the efficiency of this workforce. “Labor forecasts are based on all the work that must be done in the stores,” says Prashanth Palakurthi, founder and CEO of workforce/task management software provider Reflexis Systems, based in Dedham, Mass. These tasks range from selling, re-stocking, even requests from corporate, such as promotional  display set-ups. “When sales of promotional merchandise can account for 60% of a store’s sales, it’s imperative that stores execute these initiatives  to maximize revenue,” he says. An integrated task management/labor scheduling solution enables grocery retailers to accurately forecast and schedule employees so they can meet customer service expectations and consistently execute projects. “Successful grocers monitor key sales and operations metrics in real time,” Palakurthi says. “So when a KPI falls out of tolerance, the company ensures the system assigns corrective action.” Next steps Clearly, when it comes to new customer-specific ideas, the sky is the limit. That’s why it is not surprising that many industry experts believe that mobile will spur the next evolution of these programs—especially as grocers yearn for true one-to-one relationships. “Grocers need to continue evaluating what to do to continue the shopping experience, and by using the mobile phone companies are in strong position to personalize the shopping trip with electronic dialogue, and daily targeted promotions,” says NCR’s Saccomanno. The easiest way to achieve this goal is through SMS (short message service) text messages. By allowing shoppers to opt in either online or in-store, grocers can use text messages to deliver everything from their online shopping lists to electronic coupons, or a simple message from the manager thanking them for shopping at their store. The integration of QR codes takes this concept one step even further, he says, QR codes are two-dimensional bar codes that are designed to have their electronic contents read at a high speed—the perfect configuration for smart phones. “If a retailer adds a QR code below a box of corn flakes, it can feature different information at each store location,” explains Vestcom’s Weidauer. “As shoppers scan the code with their smart phone, retailers can analyze what information they are accessing, and use that data to further connect with shoppers and provide more information to continue the relationship and drive sales.”