Food Lion Uses Segmentation to Ring Up Happy Customers

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ORLANDO--Using household-based lifestage segmentation has helped Food Lion LLC understand its customers' needs better, an executive said at yesterday's NCDM Winter 2005 conference.


The Southeastern grocery chain has 1,200 retail locations in 11 states under three banners: Food Lion, Bloom and Bottom Dollar. Its annual sales top $10 billion.


Last year, the company started working with Little Rock, AR-based Acxiom to create a household-based lifestage segmentation application. This is based on consumers' different stages of life -- such as getting married, having a baby or retiring -- as well as demographic and economic characteristics.


The company used Acxiom's Personicx, a household-level segmentation system that puts each U.S. household into one of 70 segments based on specific consumer behavior and demographics. Acxiom's InfoBase, which contains household-level demographic and consumer purchase behavior data on 110 million households, drives Personicx.


Acxiom appended the Personicx codes to names in Food Lion's loyalty database earlier this year. The database contains more than 12 million households, but the codes were appended to 9 million active households in a 12-week period. Personicx was able to match 6.8 million households.


After doing the analysis, Food Lion saw immediate results, Davis said. For example, before the segmentation, the grocer had created a sales program called "Rural Meat" that promoted meat products to consumers in a test group of rural stores. Then, the program was rolled out to a similar set of stores based on trade area demographics and field operator perceptions. However, half of the stores watched sales decline, and half experienced significant growth.


"The primary customers shopping in the stores were from a segment that would never have been the target of the program," Davis said.


For example, while primary customers were rural, they were seniors, which means they were less likely to buy meat and more likely to be concerned about health issues.


"These seniors were not interested in meat, especially meat that was not lean," Davis said.


The program was discontinued in those stores, and sales quickly returned to normal levels.


The segmentation analysis also helps the company create shopping environments tailored to segment needs and target specific segments using relevant media and messages, among other applications.


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