Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, March 9, 1994 TAG: 9403090092
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
SOURCE: Daily Press
DATELINE: HAMPTON LENGTH: Long
Farm Fresh's new Gold Card program is a computerized version of the amateur detective game you've probably played while waiting in the supermarket checkout line.
A shopper buying Lean Cuisine and carrots? Obviously a dieter. Dog food and cat food? An animal lover. A jumbo-size box of laundry detergent and 10 pounds of hamburger? Clearly a large family.
The difference is that Norfolk-based Farm Fresh Inc., the largest Virginia-based supermarket chain with stores in Tidewater and the Richmond area, eliminates the guesswork from the game.
Each time a customer uses the card to shop, the company adds information to compile a data base on its customers: Where they live, where and how often they shop, and whether they prefer bran flakes or corn flakes.
Farm Fresh uses the information to zero in on its prime customers, stocking products that each store's shoppers prefer. It also could allow Farm Fresh to use its advertising budget more efficiently, targeting customers at home through direct mailing and coupons.
It's information Farm Fresh can pass on to suppliers, who can use it for their own marketing efforts.
But first, the chain has to build a large enough data base.
The chain's Gold Card now generates paper coupons and is used to authorize checks and rent videos.
But by the end of April, said Douglas R. Voris, the vice president in charge of the program, a shopper will be able to use the Gold Card to get automatic discounts at the cash register without clipping coupons.
The shopper also will be able to use it as an electronic debit card to deduct automatically the amount of the purchase from his or her checking account. Once enough customers have signed onto the program, Farm Fresh will be able to track sales - by store - of the 36,000 products in its normal inventory.
"It would tell us something about the demographics of the stores," Voris said.
That information will be stored in a data base that ultimately could be used to target consumers with promotions through direct mail.
But the data base offers many other advantages.
Information about sales also will be integrated into Farm Fresh's computerized distribution system, which automatically replenishes shelves. "We'll no longer have to have a clerk physically walking the aisles scanning and making human judgments," Voris said. "It will save on labor costs."
Ultimately, the computer system will connect the distribution system to manufacturers, automatically placing purchase orders for goods. The system will cut down on empty shelves in stores and on time spent meeting with sales people, Voris said.
Every step of the process that cuts down on labor - whether processing coupons or taking inventory - helps save money, important in a business that on average makes a profit of only one penny on the sales dollar.
"We're in a penny business," Voris said.
Programs such as the Gold Card also "create loyalty," said Kenneth M. Gassman, retail analyst at Davenport & Co. of Virginia. "Customers know they don't have to shop around for the best value."
Loyalty - to stores and the brands they carry - is generally at an all-time low, said Jeff Metzger, publisher of Food World, a trade magazine for the grocery business. For that reason, he said, consumers will see more and more retailers offering programs like the Gold Card.
"In theory, it's win-win" for retailer and vendors, Metzger said.
Manufacturers spend a lot of money offering coupon inserts in Sunday newspapers, which aren't necessarily read by grocery shoppers, Metzger said. On average, 4 percent of the coupons manufacturers offer are redeemed, Metzger said.
"They would love to find a program where they could target their market."
Offering discounts directly through a grocery store's customer-card program means manufacturers pay less per redeemed coupon. That means they can offer higher discounts per coupon, which in turn increases sales, Metzger said.
Despite the potential advantages, programs like the Gold Card aren't widespread. "It's an idea that's got a lot of potential, but it's still in the test stage," Metzger said.
Farm Fresh began the program on a limited basis in January 1993, when it offered cards to customers of one Virginia Beach store that was closing temporarily for remodeling. If they used the cards at other Farm fresh stores, customers received 10 percent discounts.
Shoppers liked the program, so the chain decided to expand the concept to all its stores, Voris said.
Last April, Farm Fresh contracted with Dallas-based Retail Service Group, a company that develops proprietary software used by retailers to track sales. Computers in each store collect information on shoppers and transmit it to a mainframe at Farm Fresh headquarters.
In August, Farm Fresh introduced the Gold Card in all its stores.
Gold Card members put the card through a machine at a kiosk at the front of the store that spits out coupons for specific products each time they come in. When the customer pays by check and produces the Gold Card as identification, the sales clerk scans the number into the laser scanner at the checkout.
That produces information on what products the customer bought that day.
by CNB