Generalizations Don’t Work Because
Shopper Behavior Varies: Dunnhumby
By James Tenser
Can the spectrum of purchase behaviors within a category mean that average measurements mask what’s really going on?
“A category may appear mature with no growth. But among households that are engaged, they are significantly more engaged, buying 60% more of some categories. We focus on those specific households to understand why they are acting the way they are,” said Haluk Nurai of Dunnhumby USA.
“The idea is to identify behavior you want to see more of, understand why it’s happening,
and use the marketing spend to increase those,” said the vice president of manufacturer practice at the consultancy best known for its work on loyalty marketing with Kroger, the supermarket chain.
Dunnhumby doesn’t rely on generalizations and averages because consumers behave differently around different categories. For example some shoppers may respond to a lower price in a certain category, but then use the savings to trade up in a category that is important to them.
Nural observed that more retailers – not only Dunnhumby marquee client Kroger – are making those kinds of data available to manufacturers to support improved merchandising and marketing decisions. A crucial consideration for retailers, he added, is to maintain the right balance between efforts to promote shopper loyalty versus shopper acquisition.
“In the old days we were primarily after acquisition because we had no ability to identify loyal users or quantify their value to us. Now we can identify loyal users and identify the right set of shoppers to try to acquire,” he said in a presentation at the recent Merchandising, Sales & Marketing Conference hosted in Phoenix by the Grocery Manufacturers Association (GMA).
He cited an example regarding a brand in the confectionary business where his group identified Kroger shoppers who fell into four loyalty groups – Champions, Valuables, Potentials, and Uncommitted.
The Champions were highest in value, representing 1% of shoppers, but 10% of dollars spent on the brand. Potentials and Uncommitteds were significantly lower. Review of historical data revealed that many previous promotions had motivated Potentials and Uncommiteds to buy at very low prices, but not come back.
Kroger loyalty data also revealed that year-over-year, 60% of Champions in the category were buying less of the brand and 10% had left the brand, although they stayed in the category
in Kroger.
“As you can see, a focus on acquisitions over loyalty can be an expensive choice,” Nural said.
The brand determined that a better alternative would be to redirect some of the marketing spending to pinpoint the Champions, motivate them to buy incremental items, and remain loyal.
“There is still a lot of headroom to increase volume among the best customers,” he said. “You can see how much the brand had lost. Better to make sure you put a portion of funds to keep Champions and Valuables with you and persuade them to make incremental purchases.”
Nural told the GMA audience that Dunnhumby considers itself to be “an activation company,” more than a database marketer.
“Even though you hear a lot about Dunnhumby as the database for Kroger,” he said, “we basically see those data and the insights that come out of that almost like a given or foundation. What we do with that data, working with our manufacturer partners and also with Kroger in the U.S., is really where the value add is.”
Nural added, “What we try to do is utilize the granularity of that data so we have specific actions against the consumers and be able to then read and see how they behave against those stimuli. Then basically we modify that plan for the retailer in collaboration with the manufacturer so we will be able to have both of those entities win.
“Our end goal, really, is to increase the enterprise value of the organizations we work with.”
Can Trading Partners Collaborate
To Benefit Brand and Store?
By Lynne Cooke
Can manufacturers and retailers align their objectives for brands and stores so both benefit with the same program?
Partners in Loyalty Marketing (PILM), a Chicago-based consultancy, works with manufacturers and retailers individually and collaboratively. For the latter, the goal is alignment so the right programs can be chosen and optimized.
According to Michael Schiff, managing director of PILM, trading partners can put together programs that will speak to top shoppers to keep them in the store and with the brand. He lists four keys to a successful loyalty strategy: right target, right message, right relationship, and right vehicle.
Right Target
“No matter whether you are a manufacturer or a retailer, you are either trying to retain consumers, sell them more, up sell, cross sell, or acquire them,” said Schiff in a recent presentation at the LEAD Marketing Conference in Chicago.
Here is a closer look:
- Retain Customers Keep heavy buyers from leaving the brand and keep top shoppers in the store and get them to come back
- More Sell Get buyers to increase purchase frequency and size, as well as make repeat visits to the store
- Up Sell Get buyers to purchase a higher volume count, and get customers to buy more per trip
- Cross Sell Get detergent buyers to purchase soap, or get shoppers to go from the greeting card department to the bakery
- Acquire Customers Get new or lapsed buyers.
“If a manufacturer goes to a retailer and is thinking acquisition and the retailer is thinking retention, this is where the collaboration starts to break down,” said Schiff. “They are contrary objectives. So the first thing to do is to align the objectives. Once you are aligned on the objectives, you can start picking the right target.”
Right Message
“Top shoppers and heavy buyers are a breed apart,” he explained. “They don’t need a message to buy a certain product that they buy all the time. If you send them a message to do that, they are going to ignore it.”
So what kind of communication is appropriate for top shoppers?
“Heavy buyers are familiar with the brand’s equity, performance and benefits,” he said. “Top customers know the store and believe its people are important. So it’s more about reinforcing the belief system the shopper already has; that is, they are loyal to a brand or store.”
Right Relationship
Schiff lists three types of relationship: short term vs. the long term, quick hellos vs. deep conversations, and reward vs. recognition.
“What you have to determine is the right balance,” he said. “It is really a balancing act between all three of them.”
There’s nothing wrong with a short-term approach, according to Schiff. But the trading partners need to agree that it is a short-term program. A manufacturer may want to insulate the brand from competitors, and the retailer may want to get customers to cross over to another department. But you both just want to reach out to consumers briefly and give them a reason to come back.
For the long term, he explained, the objective is to engage top shoppers in a continuing dialogue with the goal of increasing sales and retaining them longer.
“The manufacturer can probably speak to the consumer better at home, and the retailer can speak better in the store,” he said. “Why not put together a campaign that starts in the home and is supported in the store?”
Schiff said it isn’t necessary choose between a quick hello and a deep conversations. He recommends engaging with a hello and ending with a deep conversation. Continuous dialogue can anticipate and address consumer needs.
Balancing reward and recognition is the trickiest strategy, according to Schiff. Most brands and retailers want to reward their customers, but how can they do something that doesn’t make customers feel that everyone is getting the same thing?
Schiff suggests explaining that the reward is for being a most valued shopper. “But you want to blend some of the low-cost, high-impact recognition with selective monetary rewards. You want to keep your costs in line. There is a difference between just giving somebody a reward and recognizing their status with regards to the brand or the store.”
Right Vehicle
Every week there is going to be a new tactic and a new program vendor. Schiff recommends ranking them on three things: what is their ability to isolate the target, adapt a method, and track and measure the program?
“There are vendors for the manufacturer and tactics for the retailer,” he said. “How do you put them together and align? Consider the following: What are the objectives? Are all of the tactics connected?”
NOVEMBER 2009
Giant Eagle Drives Store Traffic
With Innovative Fuel/Food Promotions
By Dan Alaimo
Giant Eagle, the Pittsburgh-based operator of several hundred supermarkets, is driving
traffic between its supermarkets and GetGo convenience store/gas stations with a pair of customer relationship management programs giving customers discounts based on
cumulative purchases.
With fuelperks!, shoppers in the supermarkets get 10 cents off per gallon for every $50 purchased on most items in the store, said Linda Wakim, senior director, customer relationship marketing. A companion program now being tested in Pittsburgh and Columbus is called foodperks!, which offers a 1% discount in the supermarket for every 10 gallons of fuel pumped at a GetGo station.
After the foodperks! program is fine-tuned, it will be rolled out to the rest of the chain, Wakim said, speaking at the LEAD Marketing Conference (LEAD stands for loyalty, engagement, analytics and digital). For example, the name was recently changed from “Giant Eagle foodperks!” to “GetGo foodperks!” and this received a better consumer response.
At the LEAD Marketing Conference, Giant Eagle received an IBM LEADER award for excellence in loyalty marketing and the chain’s fuel/fuel promotions.
“When we get the messaging right, you will see {foodperks!} outside of Pittsburgh and Columbus,” she said.
The discount in the program is cumulative, as in the fuelperks! program, although customers are limited to redeeming 20% in one purchase, and on purchases that do not exceed $300.
“It’s a loyalty program really tied to our current customers to drive traffic back and forth between grocery and fuel,” Wakim said. The fuelperks! program, which is chainwide, has driven traffic and sales in the grocery stores, she said. “We have created a lot of excitement around fuelperks!”
Although the program already has high awareness among Giant Eagle customers, targeted promotions keep adding to that, while leveraging the program to build business in other parts of the store. For instance, the chain will seasonally offer double fuelperks! rewards on gift cards, and add a $1 fuel credit to a customer’s account for a new or transferred promotion in a new store. This helps create pharmacy traffic where it is needed, like new stores, or ones where a pharmacy has been added.
Giant Eagle faces the same challenges that other regional supermarket chains grapple with; namely, maintaining loyal customers while attracting new shoppers into its stores. What makes the task more daunting for everyone nowdays is more competition for food sales from other grocers, warehouse clubs, drug chains, and supercenters.
To maintain the top position in its competitive trading area, Giant Eagle several years ago began promoting the sale of gasoline, eventually linking fuel marketing to its successful Advantage loyalty program with some 5 million card holders. That decision – perhaps more than any other in recent years -- solidified Giant Eagle’s position in the marketplace as a retailer to be reckoned with. Today, the fuel marketing program is considered the most successful one in the country.
“Fuel impacts movement,” said Scott Wetzel, vice president of marketing and partner development at Excentus Corp., the Irving, Texas-based firm that delivers fuel site marketing programs, technology and integration services for Giant Eagle and many other food retailers. “With a fuel promotion, companies will see increased product movement. It’s a great way to move cases of product.”
Inside the supermarket, the fuel marketing program includes easily identifiable shelf talkers that inform customers of products eligible for discounts. Shoppers see their discounts accumulate during checkout and then redeem them at a fuel dispenser.
The entire fuel marketing process is fully integrated with Giant Eagle’s existing POS and enterprise technology, creating an immediately redeemable reward and eliminating manually intensive processes.
For Giant Eagle, it’s estimated that the program has resulted in a 5 to 20% overall lift in sales, as well as placing the retailer head and shoulders above the competition in terms of cutting-edge technology and marketing savvy.
--Additional reporting by John Karolefski
