Analysis & Commentary:

SUPERMARKETS TO WOO CONSUMERS USING DATA STRATEGIES

In today's tight economy, more consumers are driving past restaurants and retreating to their kitchens. To the retail grocery industry, this "cocooning" trend translates into more aisle traffic and higher sales. But to sustain this upswing, supermarkets will need to change their marketing strategies to become more customer-focused and, in turn, more data-driven.

"For years, supermarkets have used price to attract customers. But today, it takes more than 'weekly specials' to win shopper loyalty," said Sean Kellum, director, Retail Data Strategies Group, AccuData America Inc. "Grocers need to connect with consumers by appealing to things they care about -- like their families and their lifestyle."

Maintaining a customer connection was easier 50 years ago than it is today. Supermarkets just don't have the one-on-one contact of "mom-and-pop" stores. In an effort to get closer to their customers, grocers have adopted loyalty clubs, offering discounts and special offers to "frequent shoppers." But the marketing story shouldn't end there, Kellum says.

"It's important for supermarkets to know their customers, but it's also critical to know the preferences of prospective shoppers outside of their frequent shopper database," Kellum said.

The two population segments to watch are mature baby boomers and pre-teens, according to Progressive Grocer's 68th Annual Report of the Grocery Industry. By 2005, people between 50 and 59 years of age will control 25% of household income in America. Pre-teens falling into the under-14 age group also wield powerful purchasing power. Numbered at 75 million, preteens spend somewhere around $35 billion on food annually.

"Because of the aging population, we'll see a rising interest in healthy foods, including natural and organic products. And pre-teen demand will spur innovative snack offerings," Kellum noted.

Ethnic foods -- produce or prepackaged -- are also hot items. "The U.S. population is growing more ethnically diverse each year, so it's not uncommon now to see chilies or starfruit as mainstays," Kellum said.

Consumer population trends are visibly impacting what's on grocery shelves, but what about marketing strategies?

"Supermarkets are a little skittish about consumer-related e-commerce because of the widespread demise of dot-com businesses," Kellum said. "But that doesn't change the fact that many of their best customers and prospects are 'wired' and could be redeeming online coupons."

Email marketing can be a cost-effective, high-response marketing vehicle for many grocers if they have access to credible consumer data, according to Kellum. "We've found that businesses can generate response rates as high as 14 percent by using double or triple opt-in addresses and ensuring that the list hasn't been overused by the compiler," said Kellum, speaking from AccuData's 10-plus years of experience in data marketing strategies for various industries, including retail, energy, transportation, cable/broadband, insurance, telecommunications and wireless.

Kellum expects a growing number of grocers -- both large chains and independent retailers -- to conduct targeted direct marketing campaigns in 2002. "Studies show large retailers have an increasing interest in data mining and are working on better systems for using consumer data," he said. "Independent grocers, on the other hand, are less concerned about e-strategies and more focused on circulars, in-store merchandising and direct mail."

Whatever their "hot buttons," supermarkets and independent retailers will need to get closer to their best customers, which requires detailed consumer profiles. According to Kellum, these profiles can be obtained by creating what he calls a "penetration profile," which involves analyzing a retailer's in-house data files and highlighting trends in geodemographic, psychographic and purchasing characteristics. If a retailer doesn't already have this information in its own database, the data can be attached to each customer or prospect record.

"Imagine being able to go into a prospect database and flag consumers with Mexican food preferences," Kellum said. "Retailers could then design an ethnic foods marketing campaign to get those prospects into their stores. This might involve coupons, a weekly meal planner -- complete with recipes -- or a Mexican food discount night."

While some grocers may not be equipped to target particular marketing segments today, many will eventually adopt innovative technologies that will enhance their target marketing efforts.

"Supermarkets will move into extranet solutions, which manipulate customer and prospect databases in ways that make customized marketing campaigns possible," said Kellum, referencing the online ListKey capabilities of AccuData's sister company, Alvion Technologies, www.alvion.com. "These systems allow marketers to Web-enable database querying and fulfillment from a mainframe to a PC environment.

"Instead of relying on someone from an information technology department or an outside service bureau, marketers can access data from their laptops easily and quickly, shortening their campaign schedules," Kellum said.

Whatever strategy grocers adopt -- technically savvy, traditional or a combination of both -- the marketing goal is the same as it has been for decades: get consumers into the store to purchase more and enhance their loyalty to your retail brand. "The best way to accomplish that is to listen to what your data tells you," Kellum said.

AccuData America, www.accudata.com, based in Cape Coral, Fla., is a national data solutions company that supplies marketing data and database analysis services for industries involved in new client acquisition, customer retention, market analysis and data quality maintenance. AccuData is the largest independent data strategies provider in the United States.