WHAT'S IN-STORE

DEENA AMATO-McCOY

Though still a fairly new tool in marketing programs, interactive kiosks are attracting attention for their ability to both influence customer purchase decisions and lessen marketing costs.

But while these units offer advantages in cost-effective customer contacts, several hurdles stand in the way of their mainstream acceptance. One issue is compatibility: ensuring that the kiosks communicate with other store systems, such as frequent-shopper databases and point-of-sale equipment.

Another concern is simply the space such units require. Many retailers are reluctant to give prime in-store real estate to kiosks until they prove their worth.

So far, kiosk usage has been fairly limited. Only 11.1% of retailers responding to the 1997 SN Electronic Marketing Survey offered electronic kiosks tied to their point-of-sale systems. The survey, released this spring, was conducted by SN and Brand Marketing, in conjunction with Retail Systems Consulting, Naples, Fla., and the Grocery Manufacturers of America, Washington.

Another indication that kiosks are still in their introductory stages is that a majority of retailers -- 56% -- said it was "too early to tell" how effective kiosks tied to their POS systems were. Twelve percent of respondents rated such kiosks "very effective," and 16% rated them "effective."

Retailers told SN that a major concern is that once the units are installed, the kiosks need to talk to other store systems to be effective. '

''From a technology standpoint, you need to tie together all the elements of your relationship marketing program in order to offer incentives and keep track of customer balances in real time," said Mark Dietel, president of Mr. D's Food Markets, Indianapolis. Martin's Super Markets, South Bend, Ind., a retailer that is currently exploring kiosk use, also expressed concern on this issue.

"You need to match the technology you have in place for your point-of-sale system, your target marketing software and now the addition of a kiosk," said Doug Murphy, store operations specialist for Martin's.

"This is one of the largest obstacles because not every piece can talk to each other and each has its own intricacies," he added. "To me the greatest challenge, which goes one step further, is finding the right vendor to help you overcome this obstacle and make it all work out."

Another issue that retailers continue to tackle is how to justify the space kiosks occupy on the retail floor.

"The primary obstacle is that kiosks take up a position in the store," said Bill Shainer, president and chief executive officer for Laneco. "If that area were not being used for a kiosk, then it would be used for another kind of vehicle to generate a customer impact."

Once these issues are addressed, the first step to a kiosk's success is to make customers aware that this tool is available to them.

"Promotions need to be presented in-store in order to lure customers to use the kiosks," said Martin's Murphy.

G&R Felpausch Co., Hastings, Mich., mailed its customers an advertisement announcing the addition of its kiosks, as well as an incentive for a $5 coupon.

"The ad asked shoppers to bring their frequent-shopper cards, and customers who tested the kiosk received a coupon from the unit for $5 off their orders," explained Bill Feldpausch, vice president of sales and marketing for Felpausch.

"Our customers adapted to the kiosks quickly, and now they know to visit the unit upon each shopping trip to earn additional savings," he added.

According to Mr. D's Dietel, promoting the units helps customers view the kiosk as an extension of a retailer's frequent-shopper program.

"As customers see that their cards entitle them to rewards and incentives only available through the kiosk, they will become accustomed to using the unit and the frequent-shopper program gains value and credibility," he explained.

According to Laneco's Shainer, the location of kiosks within the store is a crucial element for building customer awareness and use of the units.

"Customers need to see the kiosks in order to learn how to use them," he said. "We've had excellent success by placing the kiosks in prime positions, having our associates show customers how to use the units and how they add value to their shopping experience."

Industry observer Bindelglass agrees with Shainer. "Location is a strong way to build customer awareness and usage [of the unit]," he said. "Featuring the unit prominently in the store makes the tool and its value much more compelling to customers."

Once retailers can address issues of compatibility and space, executives told SN, implementing kiosks can strengthen marketing plans by affecting customer purchase decisions.

"They are delivering value through a more cost-effective means while simultaneously influencing customer buying decisions at [or before] the time of their purchase," said Martin's Murphy.

Murphy illustrated the marketing power of kiosks by comparing the value of receiving rewards via mail as opposed to through an interactive kiosk.

"Think about how many pieces of mail you receive each day and how many hit the trash," he explained. "If consumers view your expensive direct mailers as just another piece of mail, then kiosks are necessary for all retailers if they want to instantly target and tantalize their customers."

Mr. D's is one retailer investigating kiosks as a means of eliminating costs accrued through mailings to customers."

"Currently we are targeting our frequent shoppers through direct mail, which can be a costly way of getting those rewards out," said Dietel. "If retailers can train customers to visit kiosks for specific rewards, the units can become a positive initiative and asset in the industry."

When Felpausch started rolling out kiosks to its 19 stores, the retailer put this theory to the test and received positive results.

"Prior to using kiosks we sent monthly mailers containing six offers to our best customers, and our redemption rates showed that we were only reaching 50% of our card base," said Feldpausch. According to Feldpausch, the kiosk can connect with 100% of the company's card base.

"Money originally being spent on monthly mailers was invested in the kiosks instead," he added. "Since the technology has been in place [in the first couple of stores] for almost a year, future savings will be used to do additional promotions."