Market Watch
Grocery Shoppers Report
Lack of Loyalty to Stores
By Lynne Cooke
Supermarkets need a wakeup call when it comes to retaining loyal customers.
In a new IBM survey, U.S. consumers revealed widespread dissatisfaction with their primary grocer. In fact, seven of ten (73%) of the 6,000 surveyed feel either antagonistic towards, or have no loyalty to, their local supermarket.
The study analyzes the factors driving customer advocacy and recommends that grocers must focus more on understanding and catering to their most loyal customers.
The findings show that only one of four (27%) shoppers are “advocates” – that is, loyal customers who buy more from their grocer, stay loyal, and recommend the retailer to others. Also, advocates place a high value on quality, selection, employees, product availability and the emerging category of social responsibility.
Nearly half (46%) were identified as “antagonists” – that is, customers who have a poor attitude towards their grocer and may be eroding their profits due to vocal dissatisfaction. This segment values the same store attributes tht advocates do, but feel their primary grocer does not meet them.
The analysis goes on to focus on the strong role specialty stores play in customer service, product selection, and quality – putting them at a clear advantage over other grocers. In stark contrast to only quarter of shoppers in mainstream supermarkets being identified as advocates, the amount of loyal customers who shop at specialty stores (46%) represents almost half of the customer base.
It’s a Gas for Handy Foods
Six months after launching a cross-marketing loyalty program that gives shoppers fuel discounts at a nearby gas station for purchasing certain products at its grocery store, Handy Foods, Ottawa, Ill. reports that the partnership has worked out well for both companies. The one-store independent is partnering with Partridge’s Marathon gas station. The card-based program, branded as “Pump Perks,” is managed by Supervalu’s regional office in Kenosha, Wis. Excentus Corp., Irving, Texas, provides the fuel site marketing program, technology and integration services.
Shoppers can earn fuel discounts by purchasing any of a thousand or so grocery items flagged with special tags on the shelf indicating that they will earn fuel savings. “We are giving out rewards on average for the sale of some 2,000 gallons of fuel per week,” said Mike McGrogan, co-owner of Handy Foods. “Our customer reaction has been very positive because of the fuel prices.”
Dunnhumby Keeps Growing
Dunnhumby USA, the Cincinnati division of U.K.-based loyalty card marketer Dunnhumby, is growing at 40% annually. Sales are projected to be $150 million in 2007 for the company that is half-owned by Kroger, one of the largest grocery chains in the U.S.
The company is also working with The Home Depot and Coca-Cola. Knowledgeable executives attribute the continuing success of Kroger to its well-managed and influential loyalty program managed by Dunnhumby. The parent company has gained international notoriety for its work with the well-regarded Tesco loyalty card program.
NOVEMBER 2007
Take Customer Analysis
To the Household Level
By Todd Walls
Imagine for a moment that you’re a CPG manufacturer launching a hot new product. You’ve spent a large amount of time and money on product research, manufacturing and testing. Now, you need to identify the retail locations that offer the greatest potential for a successful rollout. You have some market research and syndicated data at your disposal, but you’re still uncertain. Millions of dollars are riding on your decision. What do you do?
In today’s new world of customer analytics, it’s no longer necessary to be in this position. Advanced tools for customer analysis can provide all the answers you need for product rollouts – and many other key business decisions, such as:
- Which retailers offer the biggest revenue opportunities for my products?
- What assortment of products will be the most profitable at each store?
- What kind of sales can I expect for my product from this retailer?
- What promotions should I offer at each store?
- How can I optimize the planogram?
With the correct data at your side, you can answer all of these questions and more with a high degree of confidence.
Leveraging Digital Technology
Whether you realize it or not, the world of customer analysis has changed forever. Demographic and block-level analysis of the past gave us massive amounts of information about large groups of people, but told us very little about the individual customers. Now,
it’s possible to go far beyond demographics into the realm of psychographics. We can dig deeper than ever before into customer preferences, including lifestyle choices, hobbies, purchasing behavior and media habits. By taking psychographic analysis to the house- hold level, we’re able to predict the buying behavior of practically any household – and up to seven people within that household.
It’s all made possible by digital technology. Whenever someone uses a credit card, subscribes to a magazine, writes a check, fills out a survey, registers to vote or changes the channel on cable TV, the information is collected, stored and sold. By cataloging and cross-referencing this data, it’s possible to produce incredibly detailed profiles of specific customers.
What does this mean to CPG manufacturers? It means you can create an in-depth and accurate profile of your most profitable customers, or “best customers.” Once your best customers are profiled and fully understood, you can examine any trade area in the United States to find other people who share the same psychographic attributes – people who will be very likely to respond to your product. When you find large concentrations of these potential customers in a single area, it indicates a very fertile location in which to sell your products. Customer analytics even allows you to predict the dollar amount a particular household – or an individual within it – will spend on your product.
Improved Decision Making
Once you have this information, you’re in a position to improve the quality of your business decisions dramatically. You can identify the retailers and stores where sales should be highest, optimize your product mix and distribution by store, forecast sales by store, and decide where to offer promotions. Since you’ll know exactly which households are most likely to purchase your products, your marketing efforts will be much more effective and efficient.
Let’s return to our example for a moment. Now armed with the power of customer analytics, the CPG manufacturer looking for the best site for his new product rollout examines all of the trade areas under consideration. He finds large numbers of people in Southern California who are likely to respond to the new product, and decides to introduce it at a retail chain with wide coverage across the region. The result is a successful initial product launch and a gradual introduction of the product into other lucrative markets.
For progressive CPG manufacturers, customer analytics is certain to become a key competitive advantage – one that can be used to drive revenue for years to come.
Todd Walls is executive vice president of Buxton, a Fort Worth, Texas-based firm specializing in customer analytics for the CPG and retail industries (www.buxtonco.com).
Market Watch
Tesco Won’t Deploy Loyalty Cards
In New Fresh & Easy Stores – Yet
By Rose Anthony
British grocer, Tesco, will soon open its much anticipated Fresh & Easy Neighborhood Market stores in western U.S. markets. But the world-class retailer “has no plans at present” to offer a loyalty card.
That’s the word from Martin Hayward, director of consumer strategy at Dunnhumby, the Tesco-owned loyalty marketing partner. Tesco’s highly successful loyalty marketing strategy, built around its Clubcard loyalty card, is widely known as the factor which helped boost the chain into its market-leading position in the U.K. The Clubcard is also used in Tesco’s other international markets.
However, Mike Griswold, research director at AMR Research, believes Tesco will deploy the card in the U.S. at some point.
Hayward noted that the partnership between Dunnhumby’s U.S. division – Dunnhumby USA – and Kroger (which owns half of Dunnhumby USA) remains unchanged. This arrangement continues even through Tesco plans a market presence in trading areas served by Kroger. He went on to praise the successful partnership, emphasizing that both sides are pleased with the results achieved.
Kroger is currently enjoying six consecutive quarters of same-store sales growth averaging above 5%, according to a presentation given by the company at the Grocery Manufacturers Association/Food Products Association's Merchandising, Sales and Marketing Conference recently. Its ability to tailor customer-specific store selections and personalized promotional offers was identified as the key to success. Kroger’s customer analytics stems from its work with Dunhumby.
Each quarter, the retailer send out some 7 million mailers with coupons targeted to individual shoppers. Nearly all of the coupon combinations are unique.
CVS Still Testing Loyalty Card
A test of a decoupled, closed-loop rewards PIN debit card by CVS/Pharmacy and HSBC Finance Corp. is going well, according to published reports. The six-month trial of the CVS ExtraCare Plus began Sept. 9 in 141 Indianapolis CVS drugstores. Both companies are looking forward to expanding the test.
Once the CVS and HSBC pilot is complete, the retailer will evaluate the results and determine whether to expand the program to other markets. Daniel Eckert, head of venture acquisitions and development with HSBC card and retail services, is hoping for a national rollout.
Pathmark to Test Debit Card
Pathmark next month will begin testing a branded loyalty and payment combo card that offers debit payment. The idea is to cut credit card interchange fees.
A six-month trial of the Pathmark Advantage Payment card will take place at about 10 New York stores. The card is backed by HSBC finance and the Tempo payment network. The results of the test will help Pathmark decide on a chain-wide rollout.
