LET'S MAKE A DEAL 2001

Carol Angrisani

Industry consolidation, increased retail cooperation and a greater emphasis on consumer-specific marketing are creating more opportunities for marketers looking to connect with retail loyalty programs.

Frequent-shopper data generally enables consumer packaged goods manufacturers to target their top shoppers, ensure that more account-specific money is passed through to consumers, and provide better retail compliance with account-specific programs. Because of this, CPG firms increasingly want to get involved. More than half of the manufacturers who responded to a Brand Marketing survey on consumer promotions (see September 2001 issue of Brand Marketing) said they participated in frequent-shopper club tie-ins last year.

"It's a main directive for us as we go into 2002," Scott Kososki, director of category management, Keebler Co., Battle Creek, Mich., told Brand Marketing.

Other studies have highlighted the importance of account-specific marketing as it relates to frequent-shopper programs. Seventy-one percent of manufacturers believe there will be increases in their account-specific marketing budgets over the next five years, according to the 2001 Trade Promotion Industry Study by Cannondale Associates, a sales and marketing consulting firm with offices in Wilton, Conn., and Evanston, Ill. And some say frequent-shopper programs will have the most support.

"Frequent-shopper cards have been the main avenue of our account-specific marketing," an unidentified manufacturer said in the study.

The time is right for such programs for several reasons. One is the growing presence of data aggregators, or companies like Catalina Marketing, that manufacturers can work with to get access to a number of retailer frequent-shopper databases, according to Glenn Hausfater, managing partner, Partners in Loyalty Marketing, Chicago, a consumer relationship marketing consultancy.

At the same time, marketers are expanding their marketing budgets to include not only advertising, consumer promotion and trade marketing, but also relationship marketing. Some are even creating account-specific research teams whose goal is to analyze the wants and needs of top shoppers at specific retail chains, said Hausfater.

Consolidation in the food industry has opened more doors as well, Hausfater said. Whereas before, if a marketer wanted to run a national frequent-shopper program, it would need to involve, say, 10 or 15 retailers. Consolidation has reduced that number to just four or five.

Procter & Gamble Co., Cincinnati, is gearing up for a loyalty test program at a supermarket retailer in the Northwest. It declined to name the retailer. Under the program, P&G will send copies of its "S" magazine, an e-mail newsletter, to 10,000 of the retailer's loyalty club members.

But some industry observers said manufacturers have only scratched the surface of the marketing tool. The majority, or about 80%, of frequent-shopper dollars are spent on broadscale incentives, such as discounts for all of a retailer's frequent-shopper club members, according to Don Stuart, partner at Cannondale Associates. In contrast, just 18% use that data to target their most valuable customers, while perhaps just 2% use the data to run joint programs that benefit both the manufacturer and retailer.

"[Frequent-shopper data] is extremely underleveraged," said Stuart.

Retailers, too, need to become more involved. While almost half of supermarket retailers have frequent-shopper programs, just 26% are willing to share the data, Stuart said.

The data that is being shared is being put to good use, often helping marketers target their promotion efforts at key consumers.

"You're actually able to pinpoint consumers to where you can send two people who live next door to each other two different sets of coupons and promotional materials," Kososki said.

As they start to harness the power of their frequent-shopper data, retailers are the ones who are cultivating the partnership, often reaching out to manufacturers. For instance, executives from Kroger Co., the Cincinnati-based supermarket retailer, attended one of Keebler's marketing meetings to demonstrate how it could analyze Keebler data internally.

Using one of Keebler's new products, Kroger showed the company: the number of new buyers Keebler brought into category through the launch; the number of repeat purchasers; and the percent of incremental volume it brought into the category. Kroger then explained how Keebler could pinpoint which key consumers.

"[Kroger] had an amazing amount of robust analytical data," said Kososki.

Keebler, which also uses a presentation/automation software program from Proscape Technologies to enhance its account-specific marketing functions, has had meetings with other retailers as well.

General Mills has been involved in retail frequent-shopper programs for years on a variety of levels, said Steve Greer, manager of the company's customer promotion group. Whereas it once offered only price discounts, it now ties in multiple offers. Most of its efforts are focused on its largest product categories, like cereal.

"Frequent shopper is a unique opportunity to understand the differences that exist and understand new ways to better serve consumers through a partner retailer," Greer said. The Minneapolis-based firm has already used a variety of tools in its frequent-shopper program, including direct mail, cents-off coupons, checkout coupons, and retail-specific programs, including scanner and scan-down options.

It got involved in the practice to grow its business by better understanding its consumers. It wants to know everything from what they buy to how they buy. Doing so not only helps its brands, but also its product categories.

One of its biggest learnings from frequent-shopper data is that there's no "average" consumer.