TARGETING AT THE FRONT END 2004-02-09 (2)

Michael Garry

Starting tomorrow at Gerrity's stores in the Scranton, Pa., area, nobody at the checkout line has to know if you're 60 years of age or older.

That's because the independent food retailer, whose own roots date back to 1895, will launch a new point-of-sale program that automatically recognizes those who have signed up for a new 60 loyalty card club to receive special discounts. Nobody has to announce "I am 60 " to qualify; the system knows that by scanning the card and looking up the customer. The process is completely seamless to shoppers.

This is one of the electronic loyalty marketing applications being tried by Joe Fasula, vice president and co-owner (with his mother, Joyce) of the nine-store chain, which is a member of Associated Wholesalers Inc. (AWI), a cooperative based in Robesonia, Pa. Fasula has invested in, and been one of the more progressive users of, a loyalty database and marketing application hosted by AWI that is bringing the power of target marketing to the front-end register.

The system, consisting of MarketExpert (the loyalty card database engine) and TargetExpert (the targeting engine), is the brainchild of Valassis Relationship Marketing Systems (VRMS), Shelton, Conn., which said AWI and retailers like Gerrity's are among the most advanced users of the system for targeting at the POS. Most users of the application have employed direct mail alone to target individual shoppers or groups of shoppers.

"The possibilities with the system are very exciting," Fasula told SN. "It's very leading-edge. We've had a few bumps, but we've ironed them out."

In this age of Wal-Mart, when holding onto shoppers is the key to survival for independents, programs that cost-effectively target and reward loyal customers at the POS may be worth their weight in gold. So it's perhaps no coincidence that Gerrity's loyalty card is known as the Gold Card.

Loyalty marketing expert Carlene Thissen, president of Retail Systems Consulting, Naples, Fla., said the technology to market at the POS is available, but "it's unusual for retailers to take advantage of it" as Gerrity's is doing. "What they're doing is smart and sensitive to their customers." Most retailers use the same marketing techniques over and over, she added, "so it will be interesting to see if they can continue to reach out to different segments of customers."

So far, that has been Fasula's strategy. Last month, he decided to target the top 1,500 customers at his store in Moosic, Pa., which was temporarily closed just before Christmas due to an electrical fire on its facade. For the week of the grand reopening, beginning Jan. 25, Gerrity's surprised those customers with a free instant lottery ticket and a message on their receipt saying, "We missed you -- thanks for coming back."

Fasula said this kind of reward program "was not possible before." His customers, he added, "loved the gesture -- even if they didn't win." As of last week, he had not determined the number of customers given lottery tickets.

Though Gerrity's has used VRMS applications for more than three years, Fasula started delivering targeted messages at his registers a year ago. That was when he began replacing NCR 2127 POS checkout systems with a PC-based POS system designed by Retailer Owned Research Co., Arlington, Texas, an application developer co-owned by AWI and three other cooperative wholesalers (URM, Associated Food Stores and Affiliated Foods, Southwest).

The POS system, called vi(vendor independent)POS, is built on a Dell PC, to which peripherals deemed best-of-breed -- an Epson printer, APG cash drawer, Preh keyboard and NCR scanner/scale -- have been connected.

Fasula, who installed viPOS in his final store last week, said the system's functionality allows him to do target marketing, printing out messages on receipts and flashing messages on a flat-panel screen facing customers. The back-office system supporting viPOS is able to track movement by weight of perishables -- something the prior system could not do.

Gerrity's loyalty card program is unusually advanced, too. By requiring shoppers to present their Gold Card to get discounts and other rewards, Gerrity's has boosted the percentage of revenues generated through the card to 91.9% (over a recent two-month period) and to 77.4% of all transactions, said Fasula. A more common industry ratio of revenues to transactions is 80%/60%, he noted, so his is above average. He said Gerrity's has over 100,000 card users.

AWI wrote the software that links Gerrity's POS terminals with the VRMS applications residing on servers back at AWI's headquarters. Those applications include the loyalty transaction database (MarketExpert) and the targeting application (TargetExpert), though Fasula said the latter can run on an in-store server if the store's frame-relay connection to AWI goes down. "If we're counting points for customers, we can go to our back-up server and still communicate a customer's balance," he said.

Fasula marveled at the real-time capacity of TargetExpert. "If you scan your Gold Card and buy $10 of product in one store, and a second later your wife uses the same card to buy $10 of product in a store 30 miles away, she will see the first $10 purchase already accounted for," he said.

Gerrity's has always offered special breaks to seniors -- lower purchase thresholds for turkey promotions, across-the-board 5% discounts on Tuesday -- but the new 60 loyalty card club allows the program to be further refined. Seniors sign up in advance; then the system recognizes their age automatically when they present their card, which also has a special sticker on it. In addition to facilitating targeted promotions, the system will allow Gerrity's to data mine for patterns in senior purchases.

The old process for seniors "had lots of problems," said Fasula. "Cashiers might give the discount to someone who wasn't 60, or forget to give it to someone who was, or maybe offend someone who wasn't." In addition, the new program eliminates the need for a 5% discount key, which cashiers could misuse.

Last summer, Fasula used the system to run a "free companion air fare" program. Gold Card shoppers who achieved a specified level of spending could earn a voucher for a free companion ticket. Points earned -- and still needed -- were printed on register receipts. He said sales during the July-August promotion "were significantly higher than the previous year during the same time period." He declined to say how many vouchers were issued.

Another past promotion combined direct mail with POS marketing. In this program, special discounts for 20 items, unavailable elsewhere, were sent to shoppers who spent at least $10 per week -- about 60% of the customer base. Discounts were electronically handled at the POS.

Gerrity's has invested about $750,000 in the VRMS applications for all nine stores (paying AWI), according to Fasula. Based on savings in direct mail and revenue enhancement, he expects the investment will be recovered in a few years. "Every time we did direct mail, it cost us $7,000 to $10, 000," he said.

The biggest challenge to running the VRMS system has been training employees so they can answer customers' questions, said Fasula. Cashiers are urged to point out receipt messages to shoppers, though not all do this consistently, he acknowledged. The store hands out fliers explaining each promotion to employees and customers.

Though it has reduced its use of direct mail, Gerrity's hasn't given it up, noted Fasula. "When we want to advertise, we mail fliers. You can't do everything on a receipt."

Besides VRMS, another vendor marketing electronic targeting systems for the POS and kiosks is Copient Technologies, West Lafayette, Ind., which was acquired by NCR last year. Copient's systems are being used by Marsh Supermarkets, Indianapolis, and Giant Eagle, Pittsburgh. (SN, Dec. 15, 2003, Page 43.)

Other Ventures at Gerrity's

Gerrity's does not live by target marketing alone. The nine-store independent based in Scranton, Pa., is pioneering other technology applications as well.

Take online shopping. For the past year and a half, Gerrity's has offered its customers the ability to shop its stores via www.gerritys.com, and get orders delivered; store pickup is also available. The retailer uses three of its nine stores, spaced out across its market area, as picking stations. Joe Fasula, co-owner and vice president, said the business is profitable and growing, and now generates more than 50 orders per month. "We've kept our overhead low," he said. The online shopping capability was designed, and is hosted, by a local firm.

Back at the stores, Gerrity's is about to launch a POS-based, shrink management system from Trax Retail Solutions, Scottsdale, Ariz. Running at Associated Wholesalers Inc., Robesonia, Pa., Gerrity's cooperative wholesaler, the system receives POS data from Gerrity's stores, and generates weekly reports for the stores identifying suspect cashier activity.

In addition to addressing theft, the system will be used in an incentive program, said Fasula. Gerrity's will give out prizes like movie tickets to the most productive cashiers, as measured by items handled per minute or customers per hour. A large cash prize will be given as well.

Gerrity's, like other co-op members of AWI, used to send orders to the wholesaler by paper. Over the past few years, however, electronic communications has come into vogue for AWI-supported independents.

Fasula said he uses a private online network to fill store orders via AWI's two warehouses. In addition, he goes to www.awiweb.com and logs onto the four-year-old members only part, AWI Interactive, to access invoices, the product catalog, new and discontinued items, ad plans, and upcoming sale items, and to place orders for certain items like Christmas candies.

"We now require members to access the site for this information," said Glenn Kriczky, director of retail systems, AWI.

More POS Marketing Via AWI

Gerrity's is not the only independent member of Associated Wholesalers Inc. that practices targeted marketing at the point of sale. For the past year and a half, other retailers in the Robesonia, Pa.-based co-op's three ad groups -- Surefine, SureSave and Larg -- have been leveraging the VRMS MarketExpert and TargetExpert systems hosted by AWI to reward loyalty card shoppers as they check out.

To use the electronic marketing system, stores need to operate AWI's viPOS checkout system, built on a Dell PC. About 550 AWI stores use viPOS, according to Glenn Kriczky, director of retail systems, AWI, which runs nine corporate stores.

Kriczky said that on a basic level, AWI retailers are using the system to report to shoppers -- via register receipts and/or on a display screen -- how far along they are in accumulating points toward discounts, for example. "Historically, we've mailed out certificates," he said. "But this tells you that you reached 5% off, and asks if you want to take that now or spend another $200 and get 10% off." Some stores offer coffee clubs: Buy nine cups, and the 10th is free.

AWI retailers are also using the system to give out "mystery rewards" -- free products based on a shopper's shopping patterns. If someone is a big buyer of Kraft mayonnaise, for example, AWI, working with Kraft, will know the frequency at which the person purchases the product. If they come in to buy it then, the store will give it away for free. "The screen says congratulations, and the customers get excited," said Kriczky. "Then they start looking for them." Stores can predict that their maximum exposure will be 150 or so free items, though "it never hits that," he said. "We're getting vendor support, so it costs the retailer very little."

Other stores are offering free fruit baskets or flowers to their best customers, he said. "We get questions on why one customer got something, and one right behind didn't."

Kriczky said AWI has a new program that began last December at 20 stores in its Surefine (York, Pa.) ad group. The program, dubbed Super Saver, awards discounts to loyalty shoppers who buy "like items" together, such as cake mix and frosting, or dog food and biscuits, determined by AWI's marketing department. Items are featured on in-store signs and in ads. AWI plans to expand the program, he said -- though it's found that at some stores, shoppers are "not into it."