FREQUENT SHOPPER PLAN A BIG PLUS FOR DELHAIZE 1994-09-12

DENISE ZIMMERMAN

CHICAGO -- Belgium's Delhaize le Lion credits a recent rise in same-store sales, in part, to a $15 million frequent shopper program launched in 110 of its stores.

Called Delhaize Plus, the card-based electronic frequent shopper program is designed to reward shoppers with special incentives while collecting data on their purchase behavior from the point of sale.

The program is the "cornerstone" of a new pricing strategy introduced last year, explained Michel Eeckhout, information director at Delhaize le Lion. The chain shifted its Belgian stores from high-low pricing to an "everyday fair price" strategy, suspended its weekly promotional flier and introduced the frequent shopper program.

As a result, Delhaize le Lion's same-store sales in Belgium climbed 3% earlier this year "and the latest months are even higher," said Eeckhout. By comparison, 1993 same-store sales in Belgium grew by a more moderate 1% in a kinder economic climate than that country is seeing today.

The rise in store sales was among the successes of the Delhaize Plus frequent shopper program, he said. Less successful results of the marketing program were also revealed in a presentation Eeckhout gave at the Electronic Marketing conference held here last month and sponsored by Retail Systems Consulting, based here.

The frequent shopper program developed by Delhaize le Lion, which owns Food Lion, Salisbury, N.C., awards instant discounts at the checkstand and

entitles shoppers to accumulate promotional points that can be redeemed for gifts or applied to future purchases.

At the same time, point-of-sale terminals collect and transmit to corporate headquarters detailed data on the shopping patterns of 1 million active cardholders, representing one in every four Belgian households, Eeckhout said.

The data base of shopper activity -- which includes frequency of visits and transaction size and is categorized by store department -- provides an invaluable tool for targeted marketing efforts, some of which have been "less than successful," he said.

For example, Delhaize le Lion used the data to identify and target a group of 12,000 shoppers who were "medium" spenders in terms of total sales and "low" spenders on wine purchases. A direct mail effort, though expensive, proved unsuccessful in influencing their purchase of wine.

"This revealed something much more important: that by giving advantages to your 'not frequent' shopper, you hurt your frequent shopper," Eeckhout said.

"We even had phone calls from [frequent shoppers] who had noticed their neighbor had received the special mailing and that the neighbor was always shopping at a competitor," he said.

The experience, he said, made it clear that Delhaize le Lion had some learning to do about using the data and understanding its shopper base.

The data base shed light on other important areas as well, such as a shopper defection rate of 24%.

"We saw that we had a high rate of customer defection," Eeckhout said. "Before that [shopper activity] report, we thought we had little defection. What a disappointment."

Other statistics that emerged from customer activity reports indicate Delhaize le Lion's average shopper visits less frequently than had been thought and that the "split shopper" and "cherry picker" customer represents a sizable portion of total sales.

"According to the average amount spent per visit, we see that 30% of our customers are split shoppers doing 33% of our sales," he explained. "And if we go a little bit deeper with the analysis, we see that in that group, there are big spenders."

For example, "In the category of spending more than $56 per visit, you see that we have 12% of our customers doing 21% of our sales. Again, we have a lot of split shoppers and before we thought our customers really were very frequent," he continued. While Delhaize le Lion had estimated its average shopper visited 1.5 times weekly, new data indicated the average frequency was less than once weekly, or 0.85%.

However, "Our best customers are visiting our stores 1.96 times a week," Eeckhout added. "And they are also the biggest spenders, so that is very interesting to use to direct your marketing policy."

Equipped with such shopper data, which is managed and merged with address lists by a service bureau for direct marketing, Delhaize le Lion sought to "reactivate" frequent shopper cardholders who had strayed, he said.

One "reactivation" effort involved a special mailing that successfully drew back into its stores 16% of those targeted, and those customers continued to shop regularly for a 15-week period. "So that's a good result," Eeckhout said.

A less successful mailing was intended to recruit new shoppers, using a lot of 250,000 addresses the chain purchased. "We saw that only 1.3% responded -- very low. And we conducted a frequency analysis of that 1.3%," he added. "Of those 3,000 [new] customers, only 20% remained loyal."

Eeckhout said despite the disappointment of some individual marketing efforts, the Delhaize Plus frequent shopper program is considered very successful: "Now that key customer information is available, we are not obliged to speak [only] on averages anymore."

He said the $15 million program draws its financial support from several quarters: reallocation of promotional funds, primarily the discontinuation of weekly sales fliers sent to 2.8 million households; reliance on the existing information technology architecture and some supplier participation.

On a per-shopper basis, Eeckhout said, the program's startup is estimated at 48 cents per cardholder; data maintenance, 92 cents; discounts and incentives, $8.40; and special mailings, $5.25, for a total cost of $15.05 per card holder per year.