GEMCON 2005 2005-10-31

Michael Garry

LAS VEGAS -- Facing competition from Wal-Mart Stores at virtually every location it operates in Kentucky, Virginia and Tennessee, K-VA-T Food Stores has undertaken a sweeping new targeted marketing program in the last three months that includes the use of color-coded coupons to identify top shoppers.

The program was described last week at the GEMCON 2005 conference here by Ron Bonacci, director of loyalty marketing, K-VA-T, Abingdon, Va., which operates 92 stores. The conference was sponsored by Ogden Associates, Morristown, N.J.

Though it had accumulated eight years of history on customers enrolled in its Valu Card program, K-VA-T had not previously "taken advantage of the card in ways that we should have," Bonacci said.

Bonacci, who has orchestrated the new marketing campaign since joining K-VA-T three months ago, said that it has increased spending among shoppers in the upper four deciles of purchasing activity by 12% while expanding the number of those shoppers by 5%. The chain has especially focused on reclaiming shoppers who may have shifted some or all their purchasing to Wal-Mart.

One of the more unusual aspects of K-VA-T's targeted direct-mail campaign was the use of color-coded coupons representing different categories of customers. Customers who redeemed those coupons at the checkout would in effect identify which category they belonged to based on the color of the coupon.

A customer who presented a red coupon, for example, fell into the category of "lost shoppers" who had stopped shopping at K-VA-T in favor of another chain, most likely Wal-Mart. "So it meant that we got a lost shopper back, and the store manager and cashier would know what to say to that shopper," Bonacci said. K-VA-T also calls every lost shopper who had been in the top 30% of spending to find out the reason they stopped shopping at K-VA-T.

A yellow coupon represents shoppers whose spending at K-VA-T has declined. "We try to harvest a dialogue with those shoppers," Bonacci said. Green coupons are sent to shoppers K-VA-T is trying to draw away from other retailers. When those new shoppers present their coupons at the checkout, "the store manager should greet them," he said.

Other color-coded coupons are used as well so that "the store knows what kind of customer is in front of them," Bonacci said.

In addition to mailing monthly targeted coupons, K-VA-T also sends e-mail, distributes targeted coupons at the checkout via Catalina Marketing printers, changed displays in certain categories, and added signature items in deli and bakery. "We target and differentiate our customers. This is how we're marketing against Wal-Mart," Bonacci said. "So even if a customer went to Wal-Mart, she would come back to K-VA-T for basic groceries."

K-VA-T is also able to identify shoppers who have stopped buying certain categories -- presumably because they are getting them now at Wal-Mart -- and send them free samples and coupons for private-label items. As part of this analysis, K-VA-T uses Catalina's "loyalty quotient" system to determine the chain's "share of wallet" for every loyalty card shopper in its database. "It tells us how much of a customer's spending we've got and how much more we have to go," he said. K-VA-T is also studying the demographic make-up of its shoppers using data from ACNielsen.