SHUFFLING THE DECK

MICHAEL GARRY

Ever since they first appeared in the United States in 1987 at a Ukrop's store in Richmond, Va., loyalty cards have largely been designed to issue "electronic" coupons at the checkout, enabling shoppers who signed up for the card to avoid the tedious task of clipping coupons from their Sunday paper.

That was such a good strategy that in 2001 78% of U.S. households participated in at least one card-based loyalty program, according to ACNielsen Homescan data. Many retailers like collecting market basket data on individual shoppers, the better to offer them targeted offers (though many have not yet fully capitalized on this opportunity). Nearly 11,000 supermarkets offer card programs today, according to Retail Systems Consulting, Naples, Fla.

The problem is that when one in three supermarkets does pretty much the same thing, it becomes less of an enticement to shoppers. But the technology is powerful enough to offer more creative approaches, and many retailers are now venturing beyond just traditional electronic discounts in their card programs.

Take Penn Traffic, Syracuse, N.Y., which operates Big Bear, P&C Food Markets, Bi-Lo Foods, Riverside Markets and Quality Markets. At 68 Big Bear stores in April and at the rest of the 216 stores in June, Penn Traffic launched its baby club program that leverages its Wild Card loyalty program to offer rewards to shoppers who buy baby products.

Penn Traffic stores have set up their POS systems so that when their 2 million Wild Card members buy any of 1,400 baby products (food, diapers and toys), they get a second receipt denoting their "baby bucks" earned -- one per dollar spent. On subsequent trips, the cumulative total is printed in the receipt. When a minimum of $100 is accumulated, shoppers can exchange the receipt for a gift certificate worth 10% of their baby bucks -- applicable to any product in the store.

"We think [the baby club] has been successful" in terms of baby buck redemptions, said Mark Jampole, Penn Traffic spokesman, who declined to give numbers. He pointed out that most people with a $10 gift certificate don't spend just $10. But more than that, he said, the program enables the company to "zero in on one of our target markets -- families with children, an important market for any supermarket."

Penn Traffic is now looking at developing a kids club by the end of the year, said Jampole, who declined to offer details. He said the company plans to build all of its targeted promotions around the Wild Card, which is used in 70% of its sales.

Another strategy linked to card programs is offering shoppers points that can be used to buy products from a catalog or products in the store. This is not a new concept, but it hasn't caught on much in the United States, though it has gained wide application in Europe and Asia, said loyalty consultant and retailer Gary Hawkins, president of Hawkins Strategic, Skaneatales, N.Y., and vice president of Green Hill Farms, Syracuse, N.Y.

Lately, point programs orchestrated by third-party companies have started to take root among U.S. retailers. S&H greenpoints, New York, offers a point program that is the "digital reinvention" of the venerable S&H Green Stamps created by parent company Sperry & Hutchinson, Salem, Mass.

One retailer that reports positive results from S&H greenpoints is a one-store Shop 'n Save operation in Hermitage, Pa., owned by Michael Magnotto and wife Aileen. Magnotto launched the program a year ago, adding a school-donation component in August. He is one of about 85 Pittsburgh-area Supervalu-supported Shop 'n Save stores, corporate and independent, that have agreed to participate in the program. S&H also works with such chains as Lowes Foods, Carter's Food Centers and Tidyman's.

"We're thrilled with it," said Magnotto, who said that the program, with a customer participation rate of around 95%, has generated sales increases that exceed the 1% of sales he pays for the program. "What excites me is that it provides a tool to compete with the 'bad W word.' They won't match anything we're doing. But if you're a conventional operator they just take your ad and undercut you by a dollar to put you out of business."

In Shop 'n Save's greenpoints program, shoppers earn 10 points for every dollar spent. With several thousand points, shoppers can begin selecting premium products, gifts and trips from S&H's catalog or Web site (greenpoints.com); fewer points get them free or deeply discounted, in-store products (400 points for free baby food, for example). Ten items in each ad are free with points. Shoppers can also earn points by shopping at the S&H site or using an S&H Visa card.

S&H handles customer point data but Shop 'n Save has easy online access to it and can fashion its own point-based offers, Magnotto said. The greenpoints card also generates the usual loyalty club discounts as well.

Magnotto stresses that the greenpoints program requires a commitment. "Like any loyalty program, if it doesn't become your religion, your life, it's not going to be successful," he said. The focus, he said, was at the checkout lane. Cashiers need to "continually reinforce it to the consumer," he said. He instructs them to ask shoppers for their card and whether they want to redeem points for special discounts, and to circle the savings and points total on the receipt with a green pen.

Supervalu does "mystery shopper" inspections of greenpoints stores in order to assess employee performance and reward employees of stores who perform best. Stagnotto runs his own contests for employees with point rewards.

Hawkins of Hawkins Direct and Green Hill Farms said that point programs can be "very costly" and have to be offset by gains in sales or profits. It also helps, he said, "to be first in your market."

Other New Approaches

Some retailers are experimenting with completely new approaches to loyalty programs. Many of these approaches are being discussed at GEMCON 2002, the Global Electronic Marketing Conference, being held this week (Oct. 18-20) at the Pointe South Mountain Resort, Phoenix. The conference is sponsored by Food Marketing Institute and Grocery Manufacturers of America, both based in Washington, as well as Retail Systems Consulting.

One speaker, Ed Porter, vice president, customer marketing, Stop & Shop, will discuss a soon-to-be-launched, one-store test program designed in concert with Unipower Solutions, Quincy, Mass., and Symbol Technologies, Holtsville, N.Y. The system combines Unipower's Cart Companion monitor, mounted on a shopping cart, and Symbol's Portable Shopper scanner, attached to the monitor.

In the test, shoppers will swipe their loyalty card through the monitor, thereby identifying themselves. As they walk the aisles, previously purchased items now on special, as well as "favorite items," are transmitted via radio frequency and displayed on the screen in the appropriate aisle. Discounts targeted to individual shoppers are also possible.

Also being discussed at GEMCON is a program rolled out last month at Indianapolis-based Marsh Supermarkets' 69 stores called My Marsh. Kevin Bridgewater, director of marketing for Marsh, and Bret Besecker, president and chief executive officer, Copient Technologies, West Lafayette, Ind., the developer of the system, will speak.

In the My Marsh program, consumers scan their Fresh IDEA loyalty card at the checkout and receive multiple individualized offers, flashed on the monitor for varying lengths of time. Besecker told SN that this approach is less "process intensive" and costly than traditional direct mailing of targeted offers. Indeed, targeted discounts can be presented at no cost by Marsh at the checkout chainwide, he noted. "This is an electronic version of direct mail," he said. Offers can be printed at the checkout and consummated at the next visit.

Besecker said that operators like Marsh can use the system to make discounted offers for any products in a category, like paper products, that a shopper may be purchasing elsewhere. Brand-specific offers can be integrated as well. He added that an additional monitor and scanner can be located in lanes to cross sell shoppers.

Another twist on loyalty cards that is scant in the United States but is being pursued in Europe is the chip-based card. A Dutch-based chain, Edah, is employing such as card. Paul Lafortune, executive vice president, Cyberpro Technologies, Montreal, also speaking at GEMCON, said that Edah is using the card in conjunction with a kiosk that validates and reports the card's stored value as the shopper begins the shopping trip. "They're doing quite well with it," he said.