HOUSEHOLD PURCHASE DATA CALLED KEY

JOHN KAROLEFSKI

CHICAGO -- Brand marketers and retailers are now working together to increase sales by using household-specific purchase data, said an electronic marketing executive. "There are a few industry leaders who have taken new technology and the spirit of cooperation to a higher level," said Jim Keller, senior vice president of business development at DCI Cardmarketing, Manasquan, N.J. "Retailers are learning how to focus on customer needs, and are making sure they hang on to their valuable customers. Manufacturers are learning that they must deliver greater value to consumers and that certain consumers will be more profitable in the long run. "The bottom line is that progressive retailers find ways to work with manufacturers to reach their respective marketing objectives," said Keller, speaking here at the third annual Electronic Marketing Conference sponsored by Retail Systems Consulting, Naples, Fla. Keller listed Kraft General Foods, A&P and TV Guide, the weekly magazine, as companies that have worked together on projects engineered by DCI, whose business largely consists of servicing over 1,000 stores with card programs. The key for both parties to realize their objectives is customer purchase data, Keller said. This information is available from frequent shopper and other electronic marketing programs. "For years, market level data has been the data of choice for manufacturers and retailers to develop market strategy," he said. "However, in today's fragmented market, better, more accurate data and research is required.

"Experts agree that household-specific purchase data -- especially purchase data provided by frequent shopper and electronic marketing programs -- can give retailers and manufacturers a better understanding of their mutual customers' purchase behavior. Best of all, this data serves as the key resource that retailers and manufacturers can share to reach their marketing objectives." "The benefits of household-specific data are that it can provide a full financial analysis on marketing expenditures. Instead of guessing what the responses are, hard facts are now available. And hard facts are always best when planning strategies, budgets or marketing campaigns," he said. Keller said the new retailing formats such as club stores sent a wake-up call to the supermarket industry to find ways to work together for mutual interest and mutual benefit. The result has been a "growing spirit of cooperation between retailers and manufacturers," according to Keller, to find ways of working together to take costs out and to reach the consumer more efficiently.

"Retailers have the best vehicle to reach customers -- their stores," he said. "But manufacturers have the marketing and research personnel that are needed to analyze results and to develop a marketing strategy. "By working together, each party's strengths can offset each party's limitations. Marketing programs can be developed that are win-win-win opportunities for the consumer, the retailer and the manufacturer." DCI defines electronic marketing as the process of capturing customer data through technology and using that data to modify customer purchase behavior, according to Keller.

Keller outlined several case studies of retailer-manufacturer projects that it coordinated using customer purchase data. One involved A&P and Kraft General Foods. Keller said there were three objectives:

Enhance loyalty among current A&P customers.

Reinforce KGF brand loyalty among brand-loyal customers.

Encourage KGF brand-loyal customers who occasionally shop A&P to shop there more frequently. "To make this promotion work, both A&P's and KGF's data bases were combined and target and control groups were developed," said Keller. "In return for the one-time use of A&P's data, KGF provided the direct mail and the coupon incentives."

He described these results:

Among targeted customers, A&P had a 26% increase in customer activity and a 29% increase in sales.

Among nonloyal customers, A&P had a 26% increase in customer activity and a 69% increase in sales. "KGF's targeted brands sales grew over 5% during the promotional period," said Keller. He added that KGF also benefited by reinforcing purchases with regular brand users, communicating more effectively with consumers, and improving its relationship and image with a key retailer. "In this way, A&P and KGF were truly able to work together to realize their common marketing objectives, and with positive business results for both," he said.

Another project that DCI coordinated involved A&P and TV Guide in an effort to increase magazine purchase frequency.

DCI found that the average weekly A&P shopper bought TV Guide only once a month, Keller explained. Using customer data from A&P's Bonus Savings Club frequent shopper program, DCI tracked customer purchase history for six months before the test. It also set up test and control groups. The promotion had two objectives, he said: increase overall magazine sales, and encourage occasional magazine shoppers to buy TV Guide weekly at A&P. As an incentive, customers were offered a 25% discount each week on the purchase of the magazine for a three-month test period. "Market level data showed an overall increase in magazine sales," said Keller. "While this is encouraging, it was expected. Discounting the magazine 25% was bound to increase market sales. However, to determine if occasional magazine customers were buying the magazine more frequently, household-specific purchase data was required." According to Keller, the results of the test were:

The number of customers buying the magazine increased by 17%.

Overall magazine sales increased by 32% in the promotional period.