The announcement that Asda, which pioneered the use of the Catalina marketing systems in the UK, has been joined by Somerfield, is significant. It shows that swipe cards are not the only way for retailers to win customer loyalty. It also puts electronic marketing (EM) very much back in the spotlight.
EM is the term for in-store marketing tools which employ computer technology to monitor consumer purchase behaviour and reward shoppers as a means of influencing that behaviour. Although a young and growing field, three pioneering EM programme categories dominate the market today:
Purchase-activated incentives information – electronically generated paper coupons, advertising messages, product information, recipes or other incentives dispensed at the checkout, based on scanner-read actual purchases.
Frequent-shopper programmes – campaigns where consumers receive added value based on product and/or retailer loyalty. These schemes typically use membership card programmes and usually involve the accumulation of points or historical record of product purchases for redemption at a later date.
Electronic discounts – credits that are earned and automatically deducted from consumers’ shopping transactions.
EM emerged in the mid-Eighties in response to a convergence of many diverse factors. Significantly, both consumer demographics and media delivery systems had changed radically since the Sixties. Consumers had become less homogeneous and media options had been transformed. In addition, scanner technology was developed in the early Seventies and has now been installed in a majority of supermarket retailers nationwide. Once viewed exclusively as an inventory and sales tracking device, retailers and marketers began to realise the wealth of consumer information continuously accessed by scanners.
In response to such trends, EM programmes sought to cut through the confusion of a burgeoning media market and use available technology to target consumers using incentives based on demonstrated need or predisposition for specific products.
In doing so, they eliminate waste associated with mass-marketing techniques and greatly improve efficiencies and the effectiveness of marketing spend. Retailers and product manufacturers employ electronic marketing to increase sales and profits by providing consumer benefits that stimulate trial or increase their loyalty and purchase motivation. Experience has shown that customer behaviour can be changed by the store, and at the checkout – independent research bears this out.
Ties to computer and scanner technology provide several benefits for EM. Compared with most traditional methods, EM programmes can be monitored and revised almost continuously. In addition, the lead-time for execution is very short compared with TV, radio, print advertising and direct mail. Finally, by contrast with the clutter, misredemption and waste of traditional techniques such as direct mail, EM is a more efficient way of serving a fragmented, retailer-oriented market.
On this premise – that the growing field of scanner technology could deliver more effective, cost-efficient promotions than the traditional promotion media, the Catalina EM marketing system was born.
Its method is simple and the results have been demonstrably effective. The Catalina system monitors product barcodes and basket contents as they are scanned at the checkout. The retailer or manufacturer has already identified specific products, pack sizes or customer groups in advance, to trigger an immediate response. Whenever these triggers appear, the Catalina printer produces a coupon with a message to the purchaser, on the spot. The cashier then hands the coupon to the shopper, along with a till receipt.
Because the coupon will aim to be directly relevant to that consumer, it has a high probability of influencing their purchasing behaviour next time he or she visits the store. This is Catalina’s core product, although it also offers other consumer-targeted products.
The independent data from market research company IRI Infoscan provides an example in which this system was able to prevent share erosion by a competitor’s new line extensions. Brand A’s competitor was introducing new flavours, which threatened to erode Brand A’s share. A battle plan was launched with the Catalina programme targeting competitive users, and a continuity programme maintaining Brand A’s existing franchise.
Users were given coupons for money off Brand A and four medium-value incentives were activated with the redemption of each previous coupon. There was also a retailer-linked offer run by the same system: buy two Brand A products and get a voucher for money off the next shopping trip. The results (see chart opposite) showed Brand A increased its market share from 18 per cent at programme start to 19.2 per cent at programme conclusion in participating stores. Brand A fell from 14 per cent to 12.3 per cent in non-participating chains.
The Catalina system could also be a way of adding value to an existing loyalty card scheme. The system, which can interact with a store’s existing database, can read a loyalty card, recognise all the information on it, and produce the appropriate coupon or incentive.
The loyalty card playing field has been all but levelled by so many retailers adopting card schemes, and consumers are now less excited about the loyalty message. A system which can shake up this field means the future could still be anyone’s game.
Can customer behaviour be changed at the till? Unlike mass marketing and direct mail, this approach is able to bypass completely the “irrelevant” customers who don’t buy a particular type of item, no matter what the brand, and concentrate instead on instantly recognising and rewarding the customers that matter.