At least one supermarket retailer said it is saving a couple million dollars from its direct mail and best-food-day newspaper ad programs through a frequent-shopper loyalty card program developed by Inter-Act Systems Inc., Norwalk, CT.
Other chains have found that they can significantly increase customer traffic when they promote Inter-Act kiosks in their direct mail pieces, thus adding significant value to their loyalty marketing programs.
The Great Atlantic & Pacific Tea Co. (A&P) saw redemptions and store visits jump to an average of more than 1,000 per store per day when, as advertised in its circular, the Inter-Act kiosk offered three 2-liter bottles of Coca-Cola for 99 cents. One store in the A&P chain reported 3,000 redemptions in one day.
Results of this kind can be achieved when supermarket retailers begin to mine their frequent-shopper databases for information that can be turned into customer-specific, loyalty marketing programs.
It's in the retailer's best long-term interests that “the retailer begins to recognize the individual consumer's importance to his store,” said Barry Kotek, managing partner of Retail Systems Consulting, Naples, FL. “It's a major change in the way retailers are used to doing business … but it's absolutely essential.”
According to Kim du Toit, director of card marketing for Grand Union, Wayne, NJ, the use of the Inter-Act system in its 237 stores in the Northeast has proved so effective that the chain has cut back on millions of dollars of conventional media advertising — primarily newspaper best-food-day ads and inserts — while continuing to drive sales upward.
Du Toit would not reveal specific store sales, but he noted that a supermarket company using an in-store coupon-dispensing system and loyalty-card program could save “as much as $1 million” in advertising expenditures per 12 stores every year.
“The savings we realize from using the Inter-Act system, we can pass along to the shoppers who account for most of those sales,” du Toit said. “It [helps] give us a low-price image with the people who matter most to us — our frequent shoppers.”
Inter-Act executives said the system is a remedy for the erosion of brand-specific and store-specific loyalties.
“Now that retailers can identify the 20 percent of their customers that produce 80 percent of their sales volume and profit through frequent-shopper cards and point-of-sale [POS] data, the question is how do they establish a quality dialogue with that customer on an ongoing basis?” asked James F. Brandhorst Jr., senior vice president and chief marketing officer at Inter-Act Systems.
American Stores Co., parent company of chains including Jewel, Acme and Lucky's; A&P; and Grand Union are among several large supermarket retail chains that have hooked into the Inter-Act Loyalty Network, which places ATM-style kiosks at the entrances of stores to entice consumers to access manufacturer coupons, store coupons and promotional offers tied directly to their purchase behavior in the past year.
Inter-Act data show that, on average, 35 percent of kiosk coupons are redeemed and that kiosk users generally spend about $71 per store visit. According to POS data gathered from three Philadelphia-area stores that participated in an Inter-Act test last year, a typical shopper with a store loyalty card spends an average of $48 per visit, compared with a noncardholder, who generally spends $33 during a shopping trip.
According to the 1997 Worldwide Coupon Distribution and Redemption Trends Report from NCH NuWorld Marketing Ltd, Lincolnshire, IL, couponing remains one of the most widely used promotional tools.
The share of coupons distributed through Sunday freestanding inserts remains the largest, but it declined from 83.5 percent in 1995 to 81.5 percent in 1996. Newspaper coupons continued to decline in share, falling to 1.2 percent of total distribution from 1.6 percent. Meanwhile, handout coupons — those distributed at the point of sale — increased to 7.6 percent in 1996, from 6 percent in 1995. Magazine and direct mail coupons maintained constant shares at 3.1 percent and 2.7 percent respectively.
Redemption rates for many of the most popular distribution methods declined in 1996 from 1995, although NCH NuWorld attributed that to the greater number of healthcare and beauty products distributed in 1996.These products traditionally have had lower redemption rates, the company said.
Inter-Act executives said their system is more effective than other methods because the electronic coupons are distributed immediately before the shopping trip begins.
Inter-Act's touch-screens present shoppers with about three-dozen promotional opportunities, including product discounts, out of a promotions deck that holds 80 to 90 offers. The unit prints out shoppers' selections as a highlighted list. Shoppers also can select recipes, with the ingredients printed out as a shopping list.
When the card is swiped through checkout registers at the end of the shopping trip, the selected discounts are automatically registered.
Among the manufacturers involved with Inter-Act's Loyalty Network are Heinz, Keebler, Kraft General Foods, Pepsico Inc. and Procter & Gamble Co.
“Our system works because we're putting promotions into customer hands immediately before the buying decisions begin,” Brandhorst said.
Among the chains that have contracted with Inter-Act are seven of A&P's operating subsidiaries, including Food Emporium and SuperFresh; and American Stores' 185-store Acme Markets chain, based in Philadelphia.