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Kevin Moloney for The New York Times

A Safeway worker in Denver signingup a shopper for custom offers.

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Shopper Alert: Price May Drop for You Alone

Kevin Moloney for The New York Times

Jennie Sanford shopped with customized coupons at a Safeway store in Denver last month.

By STEPHANIE CLIFFORDPublished: August 9, 2012 107 Comments

It used to be that with dedication and a good pair of scissors, onegrocery shopper could get the same coupons — and cheap prices —as another.

Now going to the grocery store isbecoming a lot less egalitarian.

At a Safeway in Denver, a 24pack ofRefreshe bottled water costs $2.71 forJennie Sanford, a project manager.For Emily Vanek, a blogger, the priceis $3.69.

The difference? The vast shopping data Safeway maintainson both women through its loyalty card program. Ms.Sanford has a history of buying Refreshe brand products,but not its bottled water, while Ms. Vanek, a Smartwaterpartisan, said she was unlikely to try Refreshe.

So Ms. Sanford gets the nudge to put another Refresheproduct into her grocery cart, with the hope that she willkeep buying it, and increase the company’s sales of bottledwater. A Safeway Web site shows her the lower price, whichis applied when she swipes her loyalty card at checkout.

Safeway added the personalization program to its storesthis summer. For now, it is creating personalized offers, but it says it has the capability toadjust prices based on shoppers’ habits and may add that feature.

Airlines, hotels and rental cars have offered variable prices for years. Those prices,

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however, are almost always based on capacity and timing, or are given to groups — seniorsget one discount, frequent users another.

Now grocers like Safeway and Kroger are going one step further, each offering differingmethods to determine individualized prices. Hoping to improve razorthin profit margins,they are creating specific offers and prices, based on shoppers’ behaviors, that couldencourage them to spend more: a bigger box of Tide and bologna if the retailer’s datasuggests a shopper has a large family, for example (and expensive bologna if the dataindicates the shopper is not greatly priceconscious).

The pricing model is expected to extend to other grocery chains — and over time coulddisplace standardized price tags. Even though the use of personal shopping data mightraise privacy concerns among some consumers, retailers are counting on most peopleaccepting the tradeoff if it means they get a better price for a product they want.

“If our consumer information is right, personalization is really a consumer desire rightnow, not so much a consumer fear,” said Michael R. Minasi, president for marketing atSafeway.

There are skeptics. Joseph Turow, a professor at the Annenberg School forCommunication at the University of Pennsylvania, said shoppers should be cautious. Thepricing at grocery stores and other retailers is not transparent enough to give consumersany real power or choice, he said, and “there’s a sense of fairness that’s derailed here.”

In a 2005 survey conducted by Professor Turow, most adult respondents did not knowthat retailers could legally charge different prices, and more than 90 percent said theywould dislike it if their supermarket charged different prices to different people within thesame hour.

Retailers say the groundwork has been laid with individualized coupons, which areresoundingly popular. Sites like Amazon have also made consumers comfortable withcustom offers and varying pricing, they say.

Kroger, the Cincinnatibased grocer, has long been sending its frequent customersspecialized coupons with the help of dunnhumbyUSA, a consumer research firm. A Krogerspokesman, Keith Dailey, said that 70 percent of customers who received the couponmailings redeemed at least one of the offers, a high response rate. Kroger has had 34consecutive quarters of samestore sales growth, which both it and analysts attribute inlarge part to the coupon offers.

Kroger calibrates prices by studying when someone redeems an offer for, say, ketchup at$1.70 but not for ketchup at $1.80.

“It comes down to understanding elasticity at a household level,” said Stuart Aitken, thechief executive of dunnhumbyUSA. The companies also track how frequently someonebuys a product, at what times of the year and when the last purchase was made.

Kroger has been sending customers mailings with “multiple price points,” Mr. Aitken said.Now it is testing personalized prices via “other devices, or other ways of reaching out to theconsumer,” he said, which could include things like smartphone apps or loyalty cardswipes.

Catalina, a marketing company that tracks billions of purchases each year, is using ashopper’s location in store aisles to refine offers. Last year, Stop & Shop’s Ahold divisionintroduced a mobile app, now run by Catalina, that allows shoppers to scan products.When they do, Catalina identifies them through their frequent shopper number or phonenumber, and knows where in the store they are. Special ecoupons are created on the spot.

“If someone is in the baby aisle and they just purchased diapers,” said Todd Morris, anexecutive vice president at Catalina, “we might present to them at that point a babyformula or baby food that might be based on the age of their baby and what food the babymight be ready for.”

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A version of this article appeared in print on August 10, 2012, on page A1 of the New York edition with the headline: ShopperAlert: Price May Drop For You Alone.

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Catalina studied purchase data from 54 million Americans over a year, and found that asignificant portion of the sales of individual products came from a small percentage ofshoppers.

At Safeway, the digital customization program allows the company to respond to currentevents. After a recent power failure in Washington, for example, it sent city residentscoupons for freezer items to encourage restocking once power was back.

Ms. Sanford and Ms. Vanek, both of whom live in the Denver area, were among bloggersthat Safeway asked to test its pricing program in return for a $50 gift card. Like any goodshopper, Ms. Vanek is already starting to game the system: she noticed that she receivedcheaper prices on ground coffee when she alternated between Starbucks and Dunkin’Donuts brands rather than buying just Starbucks.

She said it would not bother her if another customer were offered a lower price. “No twopeople are ever going to buy the same things, so I don’t think it matters, at least not tome,” she said.

So far, consumers say, the programs seem to reflect their buying habits. Ms. Sanford, whosays she tries to buy healthconscious items, says offers for Kashi cereal and bagged lettucereflect her preferences.

Ainy Kazmi, 35, a mother of four in Ellicott City, Md., said Safeway’s program encouragedher to change what she bought. She tried to use the offers for a large bottle of cranberryjuice, rather than the smaller bottle of cranberry apple juice she usually buys, and a box ofCocoa Puffs that was not on her shopping list — but she said the discounts for somereason were not loaded onto her card at checkout. She bought the items anyway.

She has used the program again since then, getting discounts on bananas and otherproducts, and says she is happier with it since Safeway worked out the kinks. “It’s a littlebit creepy, but I figure they’re checking everything anyway,” she said. “I might as well get agood deal out of it.”

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