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Chain’s Outreach to Core Customers Pays Off

It is a marketing truth that it requires a higher level of investment, as well as more effort, to attract a new customer than to keep one you already have.

A direct marketing test run by South Carolina’s BI-LO supermarket chain earlier this year again proves that investing money to engage, excite and show you appreciate your existing customers is a great, and fruitful, thing to do.

Working in partnership with its shopper marketing firm Spire LLC, BI-LO mailed 50,000 of its most loyal customers 60 different coupon offers that were most relevant to them based on their shopping history.

After the direct mail pieces went out, BI-LO saw increases in three areas—total product sales, items purchased per trip and overall customer trips. The test yielded a 50 percent increase in sales for those who redeemed coupons; about a 35 percent increase across all recipients.

“This is a key success metric that tells us the offers were relevant and we are on the right track,” noted John Conroy, BI-LO’s director of marketing. “We targeted individuals who are already spending at high levels and shop with BI-LO a lot, so to see these types of increases is exciting and will help us to continue providing our customers with the best offers on the products they use the most.”

During the test period, customers increased their spending by $84 and added a full extra trip compared to a control group. A full 45 percent of the targeted customers used four or more of the coupon offers they received.

Knowing that they’re on to something, BI-LO says it will conduct several more direct mail campaigns this year, planning to expand the offers to 250,000 of its most loyal shoppers.

BI-LO, which has 207 stores in North Carolina, South Carolina, Georgia and Tennessee, also launched a web-based portal in March through which it is sharing its consumer insights with vendors so that working together they can drive higher sales and satisfy customers’ needs.

Speaking of customers and what they need, their need to keep within their food budget in the face of rising food costs is driving 95 percent of American grocery shoppers to employ at least one savings strategy at the grocery store.

A study from Harris Interactive that was commissioned by Coupons.com showed that 99 percent of us are aware of rising food prices and the vast majority are trying to offset them one way or another.

Incorporating coupons was the most popular planned activity to minimize the impact of rising food prices, cited by nearly three-quarters (72 percent) of the 1,010 U.S. adults surveyed in early March by telephone. This strategy was followed by other budget-stretching actions, including comparing unit prices of package sizes (71 percent) and shopping at discount grocery stores (66 percent). The study also identified other planned behaviors, including stocking up when items reach rock-bottom prices (64 percent) and buying in bulk (57 percent), among others.

“Food prices are expected to continue to rise this year to potentially all-time highs. Couple that with flat incomes and increases in pricing of basic items, such as food, is like taking a pay cut,” said Steven Boal, CEO of Coupons.com.

The survey found that better educated adults are particularly aggressive in their cost-saving strategies, including using coupons, comparing unit prices and buying in bulk. Women also are more likely than men to use these strategies.

According to Valassis, known in part for its coupon inserts in newspapers, consumer packaged goods manufacturers are trying to do their part in keeping us well supplied with coupons. In 2010, they offered consumers $485 billion in savings—a 13.9 percent increase over the prior year and a 47.4 percent increase vs. five years ago. (Only about $3.7 billion worth of coupons were actually redeemed.) The number of coupons that went out in 2010 totaled 332 billion—the largest single-year distribution quantity ever recorded in the U.S., exceeding the prior record set in 2009 by 21 billion. Nearly two-thirds of these were for grocery products; the average face value was $1.46 (an increase of 6.6 percent vs. the previous average).

Whether consumers will keep up their price vigilance when the economy does turn around is a mystery, of course. But it seems that this downturn has been sufficiently long and slowly rebounding that we might be slow to give up our savings.

About the author

Lorrie Griffith

An observer of the grocery industry since 1988. Away from her editor job, she's a wife and mother of two grown sons and thinks cooking is (usually) relaxing.

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