Safeway's Bold Bid to Capitalize on Sales Data

Data, data everywhere. But it's not truly leveraged, so why should we care?

That's not a verse from Frost, Poe or Whitman, but rather yours truly seeking a fresh way to state an old problem: how to effectively use the flood of customer sales data at retail. So many loyalty programs today are really just glorified discount initiatives without personalization.

That's why Safeway's “Just for U” digital marketing platform is probably the most important entry since Kroger teamed up with Dunnhumby. Safeway recently cited impressive gains from its initiative (now in certain markets), and expects to roll it out chainwide by the second quarter of 2012, so this is a good time to take a closer look.

Just for U works from a website that offers a wide array of digital coupons (sortable by purchase history) and showcases loyalty club specials. Most interesting, however, are personalized deals on items specific to a customer's buying pattern.

These deals and coupons can be downloaded to a club card in preparation for a store visit.

From the consumer's perspective, the advantage is value, but also the convenience of not having to clip coupons. Kelly Hlavinka, partner, Colloquy, who signed up for the program, said the offers appear very relevant and the registration/opt-in process is transparent. Colloquy research has found that lack of relevancy is a huge problem for many loyalty efforts.

One of Safeway's biggest opportunities from this effort won't be apparent to customers. The platform brings a “stealth” advantage because personalized offers are “invisible to other retailers,” said Steve Burd, chairman, president and CEO.

While Safeway is reporting success so far, the jury's still out. Will the gains be sustainable and enough to move the needle on overall performance? Execution will be the key. “These types of programs involve complex algorithms and pattern recognition,” said Andrew Wolf, Richmond, Va.-based managing director at BB&T Capital Markets. “Safeway will be continuing to test, and that will provide more proof of concept.”

Paul Weitzel, managing partner, Willard Bishop, was impressed with the program, which he called “a work in progress.” He said Safeway's challenges will include building the number of offers and extending this to a mobile platform.

These are all good points. The next few quarters will be crucial to the outcome. It would be nice if this brings some innovative lessons about loyalty marketing. That would be poetry to the industry's ears.