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FRESH & EASYfrom the inside

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Solid tactics for A SOFT ECONOMY

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A SOFT ECONOMY

T o o l b o x f o r I n d e p e n d e n t sA SPECIAL SUPPLEMENT TO

SEPTEMBER 2008

BuildingBlocks

Effective merchandising is inthe details—here are some top

tips of the trade.

Page 6

TOOLBOX FOR INDEPENDENTS

Table ofContents

4 Independents Report:Uneasy transitionA decidedly nonscientific poll suggests Tesco still has its work cut out for it in America.

6 Merchandising: Building blocksEffective merchandising is in the details—here are some top tipsof the trade.

8 Sports Marketing:Play to winGiant Eagle shows that successful sportsmarketing starts withhaving the right teammates.

10 CompetitiveStrategies: Service trumps priceYou can compete withdiscount retailers—Wal-Mart included—even if your prices are higher, by devoting your operation to providing great service.

12 Customer Loyalty: Best in slowPlying your top customers with intelligent loyalty programs is a sure way to make the most of this sluggish economy.

14 Economic Challenges: Soften the blowHere are practical tactics retailers are using to help shoppers deflectthe impact of hard times on their eating habits.

www.progressivegrocer.com Progressive Grocer’s Toolbox for Independents • September 2008 • 3

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4 • Progressive Grocer’s Toolbox for Independents • September 2008 www.progressivegrocer.com

Could the self-described “Whole Foodswith Wal-Mart prices” come even close tomeeting the ever-changing demands of time-starved American consumers? What recruit-ing strategies would the company unleashto attract qualified workers to ultimatelystaff more than 55 locations, and, morespecifically, how would organized labor inthe United States react?

Additionally, many observers were quick topredict which existing stores would most likelylose market share to Fresh & Easy.

As the first anniversary of the debut ofTesco’s venture into America approaches, folksare still asking, “How has Fresh & Easy fared?”

The jury’s still out

During a recent business trip to Las Vegas,where the company has opened close to 20 stores,I sought answers to that question from someunconventional sources: my taxi driver, a storeemployee at the location I visited, and a retired,award-winning IGA retailer now residing in LasVegas. (Note: I also attempted to converse with

two customers who were shopping at a Fresh &Easy store, but neither spoke English—and mySpanish was, to say the least, no muy bueño!

Based on the comments I gathered, it’s clearto me that the jury in Las Vegas is still outregarding the impact ofFresh & Easy.

“I’d say that the opin-ions of people who actu-ally live in Vegas aremuch different from thetourists and gamblersthat I drive back andforth from casinos eachday,” says the 50-some-thing taxi driver. “Over-all, my neighbors andothers I’ve talked to saythat Fresh & Easy, at first,seemed reasonably priced. But today they feelit’s expensive, probably because they’re deal-ing with the high price of gasoline.”

He continues:“Then there are the people stay-ing at the casinos who don’t think much of the

[food] prices.They just want to find a grocery storeto buy snack items and drinks, because it’s a lotcheaper than eating in restaurants on the Strip—especially when they’ve taken a hit at the slotmachines.”

Inside perspective

He adds:“There was a lot of talk when theyfirst opened about their employees and hiringpractices. In fact, I recall a bunch of people withsigns picketing one of their stores when it firstopened. It was some kind of union protest. Butthat’s all quieted down right now.”

Meanwhile the perspective from the insideappears to be quite different.

“I left Best Buy to begin my career in thefood industry,” notes a manager trainee, one ofthe few employees in the store during my visit,all of whom were extremely courteous andappeared to enjoy their jobs.

“So far it’s been a fantastic experience, andthe company offers so many opportunities forgrowth,” adds the trainee.“I appreciate how westrive to make things easy for our customers.For example, most items are displayed just above

INDEPENDENTS REPORT

Uneasy transitionA decidedly nonscientific poll suggests Tesco still has its work cut out for it in America.


By Jane Olszeski Tortola

When one of the world’s top threeretailers, U.K.-based Tesco, debutedits much anticipated Fresh & EasyNeighborhood Markets lastNovember in California, the entire

U.S. supermarket industry was abuzz with speculationover whether the grocer would be successful, and whatthe impact of that might be.


eye level, and customers don’t have to strug-gle to reach items from high grocery shelves.

Also, we offer a huge variety of preparedfoods—everything from chicken Alfredo or rose-mary chicken, to Fresh & Easy’s own sushi andhomemade Mediterranean pizza.The items arevery competitively priced, packaged attractively,and they’re made fresh every day in our100,000-square-foot central kitchen facility inRiverside, Calif.”

Trying to sum up the customer feedbackhe’s received, the trainee says,“Most of our cus-tomers view Fresh & Easy as a Trader Joe’s withWal-Mart pricing.”

This employee’s obvious enthusiasmnotwithstanding, the feedback from an industryinsider, former Ohio-based independent grocerFred Shaker, is less sunny.

Service is key

“Based on my experience as a storeowner,I feel the Fresh & Easy stores are really strug-

gling here in Vegas,” says the onetime IGAInternational Retailer of the Year. “Unlike thecompetition, including Smith’s, Vons, WholeFoods,Wal-Mart,Albertsons, Costco, and oth-

ers, [Fresh & Easy stores] don’t offer the vari-ety and service that you’d find in traditionalsupermarkets. Plus the people I’ve talked towho’ve shopped at the stores despise havingto use self-checkouts.”

The perishable merchandising is “dispro-portionate,” Shaker also suggests. “In meatand prepared foods, many of the offerings arefor one individual, and perhaps two people.Yet in produce, most items are prepackaged

in larger containers or bags.An individual isn’tgoing to purchase a five-pound bag of applesor oranges, but most of the time that’s theonly size offered.”

Regarding customer service, Shaker saysnot to expect to make contact with manyFresh & Easy employees. “Once in a whileyou’ll run into an associate working in an aisle,and at the front end one cashier is assigned toassist at all nine self-checkout lanes,” he says.“People still expect service. Long term, youcan’t operate a successful business withoutit. People want to talk to other people whenthey’re spending their money.” n

“People still expect service. Long term, you can’t operate a successful business without it.”

—Fred Shaker, retired IGA retailer

Fresh & Easy offers a broad range of perishable items, but retired IGA operator Fred Shaker, a Las Vegas resident, believes the mix to be “disproportionate,”as the meat and prepared foods are for one or two people, while produce offerings are prepackaged in bigger containers and bags.


In today’s competitive retail environment,the most successful storeowners and managersthroughout the country are convinced thatoperating with a more sophisticated and effec-tive merchandising strategy in place is critical todrawing customers into their stores again andagain. This is on top of the givens of location,cleanliness, variety, competitive pricing, andcustomer service.

PG elicited ideas from grocers, wholesalers,and industry consultants on the most importantand practical ways to improve an independentgrocer’s merchandising strategy. We gatheredphotos of merchandising and displays fromleading independents from across the country.

One thing is clear:When it comes to mer-chandising, some grocers believe that “less ismore,” and focus on creating simple displaysin uncluttered spaces. Others seek to be moreadventurous in designing displays that cus-tomers are sure not to miss—nor forget—while

perusing the supermarket.Whether one approach isgoing to be more effectivethan the otherdepends on execu-tion and the level ofcommitment thatthe grocer has tocrafting a cohesiveand coherent mer-chandising image.

Solidly in thatsecond class ofmerchandiser—adventurous—is Jim Bonaminoof Fairfield, Ohio-based, world-famous JungleJim’s International Market. Displayed above hismassive offering of hot sauces, for example, isa life-size fire truck that appears to be sus-pended from the ceiling. Now, that’s a hard-to-miss merchandising display.

Of course, Bonamino’s customers would

expect nothing less from the always “full ofsurprises” Jungle Jim’s, where a monorail cir-cling above the selling floor is just the least ofthe store’s theatrics. Bonamino himself is knownto walk the aisles of his store dressed in color-ful costumes.

Bonamino has quite a few specific ideaswhen it comes to merchandising.“You can havethe most creative facility in the world, but if it

doesn’t match the expectations ofyour customers, it’s worthless,” he says.“At Jun-gle Jim’s we’re constantly on the lookout forwild ways to surprise our customers.”

He adds,“On the other hand, it’s sometimesthe smallest details that can have the biggestimpact when merchandising your store.”

Just what are some of the important details,small or otherwise, to be addressed by inde-


Building blocksEffective merchandising is in the details—here are some top tips of the trade.


“Pile it high and watch it fly!” In yearspast, this simple instruction seemedto be all a grocer would need as a mer-chandising philosophy. But that wasin pre-Wal-Mart times,

before supercenters spread far and wide andbig drug chains started selling grocery-typeitems on at least one corner of the busiestintersections in towns across America.

These are examples of enticing freshfood displays made even better withfoodservice ware from Rancho SantaMargarita, Calif.-based Delfin.


pendents seeking to sharpen their merchan-dising efforts?

Make sense

“First, it’s important to remember that cus-tomers perceive value through their five senses:sight, touch, scent, sound, and taste,” advisesMelanie McIntosh, a retail consultant and ownerof Vancouver, B.C.-based Inspire Retail Solu-tions (www.inspire.bc.ca).The focus of her firmis to help hundreds of independently ownedbusinesses develop merchandising strategies.

Says McIntosh:“We must appeal to as manysenses as possible to get customers activelyinvolved in the shopping experience.What wesee, smell, and hear directly affects what weultimately decide to buy.”

“Consider ‘sound’ in a supermarket,” sug-

gests McIntosh.“Music adds to the overall envi-ronment of the store, and should appeal to thecustomers you’re targeting. For example, if yourcustomers are on the younger side, trendymusic may be more appropriate. But it shouldin no way offend older customers.

“In addition, the music must add ambianceto the store, but it shouldn’t be so loud that it’simmediately noticeable,” she cautions.“It should,

however, help to cover upthe sounds of those mov-ing about, including othercustomers, vendors, andemployees, etc.”

McIntosh, who holdsa B.A. in fashion merchan-dising, also cautions retail-ers never to underesti-mate the power of taste.

“Those in the foodindustry certainly knowthe power of free sam-ples,” she says.“On a per-sonal note, while I can be very thrifty when needbe and pass over many unnecessary luxuries,when it comes to food, I’m easily swayed. Mychildren beg me to take them shopping at Costco

just to try all the samples.”“In fact,” she adds, “I know many

people who are now addicted to thoselittle frozen cream puffs that they inno-cently tasted at a sample table.”

Showtime!

While McIntosh’s approach involvesusing many aspects of merchandising toenhance a store’s overall image andattract customers, another respectedresource in the food industry, StructuralConcepts (www.structuralconcepts.com),a case manufacturer based in Muskegon,Mich., focuses specifically on the presen-tation of fresh food.

Whether it’s bakery, deli, or other areas ofthe store, Structural Concepts stresses thateffective merchandising is all about stimulatingthe desire to purchase.

Regarding the merchandising of fresh foodcases, Structural Concepts offers the followingproven tips designed to enhance presentation:

• Black interior color: Black minimizes theappearance of the display’s hardware, and allowsfresh, colorful product to stand out. The eye isdrawn to the food, and the display case disap-pears.

• Glass shelves: The transparency of glass

allows light to filter throughout the display.Food appears as though it’s floating. In addi-tion, glass shelves (vs. wire racks) are more flex-ible for the use of specialty serving ware, mer-chandising props, etc.

• Tiered and angled shelving: Seeing asmuch of the fresh food as possible is the key.Tiered shelving brings the food as close as pos-sible to the front of the display for maximumproduct visibility on all display levels.

• Interior lighting: Lights, camera, action!Without balanced interior lighting, the showcan’t go on.

• Removable shelves: Food products vary insize. An effective display is one that has theflexibility to adjust and/or remove shelves toaccommodate the variety of products your cus-tomers want.

• Mirrored interior ends and rear doors:Mirrors make the display appear larger andfuller, enhancing the customer’s perception offreshness.

• Create a theme: Be creative. Add mer-chandising props like artificial flowers, bottles ofwine, or fabric to create an eye-catching theme.

• Specialty serving ware: Use specialtyplates to upgrade the appearance of the dis-play and to add visually stimulating color. n

IGA stores nationwide work with supplier andmanufacturer members of the group’s Red OvalPartnership.Above is a display designed by an IGA retailer to promote an IGA marketing event.

A simple bottled water display can be turned into a refreshing tropical waterfall with a littleingenuity.


However, developing and executing pro-grams that maximize a retailer’s investment isno easy play to make, according to Rob Borella,senior director of marketing and corporate com-munications at Pittsburgh-based Giant Eagle.

“First, you must make the decision aboutwith whom you want to align your company,”says Borella. “Fan avidity, store locations, andidentifying where an opportunity exists are keycomponents of the decision.”

The independently owned chain of 200-plus stores, withyearly sales inexcess of $8 bil-lion, sponsors anumber of profes-sional, semi-pro,and collegiateo rgan i za t ions ,including theNFL’s ClevelandBrowns and Pitts-

burgh Steelers, butalso teams thatonly a local couldlove. It’s a strategythat many smallerindependents canlearn from.

“We identifyourselves as thehometown grocerin our markets, andlike to identify withthe hometownteams,” says Borella,who has been a part of the Giant Eagle team forseven years. “When there’s not a professional-league team in one of our markets, we look foreither minor-league teams or university partner-ships to extend our reach into the community.”

Such is the case for Giant Eagle in the mar-ket of Altoona, Pa., located in the foothills ofthe Allegheny Mountains. “The Altoona Curve,

a popular minor-league baseball team, offersfamily-friendly and affordable entertainment,and we see a lot of Curve fans in our stores,”says Borella. “They’re families on a budgetwho are looking for a good value. Going to aminor-league baseball game is a great way forthem spend an evening—and for Giant Eagle

to identify with acommunity in whichwe operate.”

Looked at in thisway, each market,large or small, pro-vides unique spon-sorship opportuni-ties. “Take, forinstance, the Colum-bus, Ohio market,where we operate anumber of stores,”continues Borella. “Inaddition to the OhioState Buckeyes, theNHL’s ColumbusBlue Jackets areextremely popular,and have a huge fanbase. As much as

we’d like to be a part of the Buckeyes’ market-ing, it’s not available to us because anotherretailer, Kroger, for whom we have greatrespect, has for years enjoyed that exclusiverelationship. Thus, we allocate the majority ofour spend in Columbus on serving as the offi-cial supermarket of the Blue Jackets.”

That spend in all markets is, by design, less

Play to winGiant Eagle shows that successful sports marketing starts

with having the right teammates.



Sports-related marketing is an effective wayfor grocers of any size to differentiate in themarket—and, just as importantly, it can pro-vide companies with anopportunity to leverage the

intense passion that consumers havefor their favorite teams and pastimes.

Rob Borella


about branding and more about support of thecommunity and driving traffic to Giant Eagle’sstores, according to Borella.

Working the quadrants

Giant Eagle dissects each opportunity intocomponent pieces. “Basically, with sports mar-keting we look at purchasing four areas ofinventory, or ‘quadrants’,” explains Borella.

“That big sign in left field, electronic sig-nage, signage on the facility’s concourse—theseall serve as a branding component. Next, there’sthe team media piece. Securing radio spots,TVspots, team publications, and Internet presenceare imperative to the effort.”

Also included in the inventory mix, saysBorella, are the hospitality component andthe promotion piece as the third and fourthquadrants. “Ticket packages are used for themost part internally and serveas rewards for Giant Eagle asso-ciates, and it’s through the pro-motional piece that all of in-store activation, such as offeringfamily discounts on event tickets,takes place.”

“It’s the activation phase thatcan be most challenging,” addsBorella. “When you put togetherin-store promotions, typicallywhat happens is that a team isinvolved with a CPG companywho’s looking for a traffic-drivingpromotion such as a sweep-stakes event.

“The sweepstakes promotionsare nice, but we’ve found that thebusiness results are less effectivethan promotions that can benefitall of our customers. Therefore,we’d rather develop programssuch as our ‘Steelers Advantage’promotion, which has a numberof national CPG companiesinvolved, all of which manufac-ture high-volume products.”

In the Steelers Advantage

program, when a customer buys one of theparticipating products, he or she is providedwith an instant benefit such as a discount ata team shop.

Borella says thatdeveloping programswhere anyone participat-ing “wins” is more suc-cessful than those that inthe end award just onegrand prize. “[The ‘every-one wins’ programs are]tough and require a lot ofinvestment and coordina-tion,” he suggests. “Butthey benefit all of our cus-tomers—not just one.”

Overall, Borella reportsthat it’s through combin-

ing the fourlevels of sports marketing inven-tory that Giant Eagle wins.

“We have the signage, brand-ing, visibility in team media, andan enormous supply of eventtickets to distribute to associatesand customers.All of these com-ponents allow us to leverage ourbrand equity with the fans of theteam.”

In the final analysis, Borellacomfirms the importance ofluck in the mix as well. “A lot ofstars have to align in order todrive traffic into our stores, tocreate relevancy to fans andcustomers, and to achieve theobjectives of both the retailerand the sports team.”

Scoring runs

Without question, Giant Eagleexpects a significant return on itsannual multimillion-dollar sportsmarketing investment. To calcu-late the ROI, it turns to Niles, Ill.-based Paragon Marketing Group,

which manages a sponsorship portfolio of $100million annually and whose many clientsinclude Gatorade, Continental Airlines, One-a-Day,Totinos, and Kaiser Permanente.

“We’ve developed a great working rela-tionship with Tony Schiller, who oversees cor-porate consulting at Paragon and assists GiantEagle in rationalizing and evaluating eachspend,” notes Borella. “Tony came from thesports world and understands both the retailand team sides of sports marketing. ThroughParagon’s proprietary model that looks at allfour marketing quadrants and assignsweighted scores, and Tony’s expertise, we’reable to calculate actual dollars generated byour investments.

“Paragon is unique in that it provides ourcompany with a clear picture of how much weinvested, the dollar value returned, and howwe’d compare in other markets if we were tohave executed the same sports marketing pro-gram,” says Borella.

“For us, it’s not all about visibility and eye-balls and how many minutes we were on TV. It’sabout achieving real business results.” n

Giant Eagle’s successful sports marketing gambitsinclude tying its fuelperks! gas discount programin with its sponsorship of the Pittsbugh Pirates(far left). Other examples are its “SteelersAdvantage” program (left) and its support of the NHL’s Columbus Blue Jackets (above).


I was curious to find out how aggressiveWal-Mart’s Every Day Low Price Strategy reallywas. I learned it was indeed aggressive, but alsothat you can beat it.

I compared 50 of the most commonly pur-chased branded items, the staples that most gro-cers do everything in their power to price compet-itively. Consumers are known for leaving onestore for another if they determine that thesestaple items at the first store are priced too high.

The typical rule of thumb is to strive to equalthe market on all of these items. Obviously thisrequires that grocers do their own frequent shop-ping cart comparisons.Wal-Mart is infamous forperforming such aggressive price comparisonsfor each of its stores. Each week its departmentmanagers shop the competition’s stores, notingprices; then they adjust pricing accordingly.

In this way Wal-Mart’s pricing is establishedon a very local level. Indeed, two Wal-MartStores in the same geographic area are likely

to have different prices, based on the specificcompetition each faces.And contrary to popu-lar belief,Wal-Mart’s goal isn’t to be the loweston every item in such a shopping cart compar-ison—but you can bet the bottom total on theWal-Mart register tape will be.

In my comparison, I was careful to make cer-tain I matched products exactly. What I foundwas astounding: On those 50 staples in my com-parison,Wal-Mart’s prices were fully 20 percentlower than the prices at the grocery store.

But despite this obvious price advantage, theparking lots of both stores were full of cars, and theaisles were much the same. I began to question thetheory that a grocer’s staples needed to be pricedthe same as its discount competitor’s. On closerobservation I determined this grocer was thriv-ing because the store provided great service.

Without great service, grocers must matchdiscounters’ prices on staples.With great serv-ice, pricing becomes less critical, though still

important. (In a market where a grocer isin direct competition with a discounter,it’s recommended that the grocer’s pric-ing stay within 15 percent to 20 percentof the discounter’s prices.)

A grocer providing great service caneffectively neutralize the discounter’s priceadvantage and level the competitive play-ing field.The key is to capitalize on the factthat shopping at a discount behemoth isn’tconvenient, and service there is almostnonexistent. Not every customer is inter-ested in the trade-off for a discounter’soffering of low-quality products.This opensthe door for grocers to use their own stores’

stellar service and tailored product assortmentsto gain competitive advantage.

Here are 10 lessons about service for allgrocers to embrace, regardless of whetherthey’re in direct competition with a discounter:

1. If you’re not a discounter, don’ttry to act like one.

When it comes to competing against super-stores, discounters, or category killers, grocers needto avoid being pulled into price wars. It’s a battleprice operators must win, and will at any cost.Once you’re sucked in, your business will spiraldownward as expenses rise and sales volume falls.And there’s no turning back: By sending the mes-sage to customers that you, too, are a discounter,you’ll have changed their expectations—forever.Control your own destiny by designing your nichestrategy with products targeting local tastes andpreferences, as well as great service.

Service trumps priceYou can compete with discount retailers—Wal-Mart included—even if your prices are higher,

by devoting your operation to providing great service.


By Michael Bergdahl

This past year, I delivered a keynote speech atthe Montana Food Distributors Association’sannual conference in Butte. As part of mypreparation, I decided to perform a shoppingcart comparison of grocery prices at a super-

market with those at a Wal-Mart Supercenter. I madecertain that the two stores I chose were a stone’s throwfrom each other, and vying for the same customers.


2. It’s the little things that count.

Are your floors, windows, and bathroomsclean? Customers either overtly or subliminallymay assume dirty facilities equal substandardfood quality. Are your shelves always wellstocked? Simply being able to find the prod-ucts they want can persuade customers thatthere’s no reason to shop anywhere else. Isthere staff in place to ensure enough cash reg-isters are open? Customers hate to wait.

3. Customer loyalty card programs are a way to show you’re loyal to yourcustomers, not the other way around.

The strategy behind loyalty cards is brilliant:Youreward customers for returning, by providing dis-counts that are only available to cardholders.Manygrocers with loyalty programs have found them to behighly effective not only in retaining customers,butalso in gaining new ones. It creates value for cus-tomers while earning a lifetime of loyalty to yourstore. It’s one of the most effective tools you canuse to counteract the pressure from discounters.

4. Wal-Mart’s founder, Sam Walton,taught employees to ask unhappycustomers this question: “What

would you like us to do?” Then heempowered them to fix the problem.

“The customer is always right.” Those of uswho work in grocery retailing know this isn’t lit-erally true, but when it comes to customers, wemust act as if it were. Your employees mustalways project a positive attitude, and showrespect for the customer’s point of view. If youtreat customers right, you can likely count onfuture business, and even good word-of-mouthadvertising.Argue with a customer—even if youultimately prove that customer wrong—andyou can likely count on the opposite effect.

5. Out of stock is out of business.

Walk through your store as if you were a cus-tomer.What do you see? Are there unmerchandisedproducts in boxes on the floor? Do you have difficultynavigating the aisles easily with a shopping cart?

Are there holes in your inventory where productsare missing? Great execution of store operationsrequires a commitment to training your staff toaggressively remerchandise shelves throughout theday.Being in stock is the whole ballgame in retailing.Shop the discounters,and you’ll see how they’re fail-ing to keep products in stock throughout the day.The grocers who keep their shelves consistently instock have a sustainable competitive advantage.

6. Stack it high and let it fly.

When you advertise promotional products,make certain your buyers are empowered totake the risk of buying deep enough to ensure theproducts are available for the life of the promo-tion. Few things are more annoying to a cus-tomer than to shop at a specific store for a spe-cific product advertised at a great price, only tofind it’s out of stock.

7. Use an “outside-in” approach toselecting products and services.

Choosing the right products for his stores andhis customers was one of the great secrets to SamWalton’s success.He used an “outside-in”approach:He visited his stores and asked customers everyday what they liked and disliked in the productmix, and what products were missing.Wal-Mart’sbuyers still use this approach each week.

8. The customers are in charge, and can “fire” you by simply

spending their money elsewhere.

Who pays the bills at your business? I’m talkingabout the rent, lights,gas,electric,and even your payand benefits. The answer, of course, is your cus-tomers, by choosing to spend their hard-earnedmoney in your stores. Every day you should thinkabout what you’re doing to make your customerswant to come back.Explain to your employees theconcept that the customer is the boss, and theimportance of providing great service.

9. Plunder your competitors’ stores for ideas.

Grocers need to make a practice of studying

the local competition’s pricing structure, prod-ucts, and promotional activity. Don’t limit your-self to grocery stores, either.Visit specialty storesfor ideas on merchandising, graphics, and sig-nage. Sam Walton always said that there are noextra points for original thinking, and if you cancopy an idea already in use by another retailer, it’smuch cheaper than designing a solution fromscratch. Require each member of your manage-ment team to go out to others’ stores periodically,and have them report what they find.

10. Sam Walton positioned thereturns desk at the front of his

stores so customers in the checkoutline could see how other customers’

problems were being handled.

It’s easy to smile and thank customers whenthey make a purchase, but how do youremployees react when that same customertries to return a purchase? Your customers willlearn more about your company from the wayyou deal with a product the customer wantsto return to you. If you appear to mistrust yourcustomers and make them feel like naughtychildren when they try to return a product,they’ll leave you.

Wherever Wal-Mart has opened storesaround the world, there are grocers who aren’tjust surviving in its shadow, but are also thriving.Customer service is one of the most importantcommon denominators of these operators.They’ve discovered that great customer servicerequires staffing with great people, training themproperly, empowering them to serve, and retrain-ing them periodically. It also helps to have acompany culture that values service above allelse. You can compete with discounters—justremember to avoid the temptation to competeon price, and never forget that great servicetrumps low-price competition.

Michael Bergdahl is an international businessspeaker, author, and turnaround specialist whoworked for Sam Walton in Bentonville, Ark.as Wal-Mart’s director of “people” for theheadquarters office. Reach him [email protected] or visit his Web site,www.michaelbergdahl.net.


nesses, bolstering margins, and maintaining orgrowing customer shopping visits and reten-tion.What’s the secret ingredient?

It’s a loyalty program—or more specifically,the intelligent use of data gathered through aloyalty program.

You’ve heard the numbers:The top 30 percentof customers generate approximately 80 percentof annual sales and even more of profits.They shopmore often and spend more per trip than the oth-ers.These are your best customers,and the time hasnever been better to treat them accordingly.

Here’s a crucial lesson: It’s more cost-effec-tive to gain more business from your exist-ing top shoppers than it is to chase less reg-ular shoppers. Your best customers arefavorably predisposed toward you, because theyobviously already like your store.

Another lesson: Market to your customers,not yourself. Wide appeal and high perceivedvalue are the watchwords for successful loy-alty rewards.

At Green Hills, our family-owned supermarket,located near Syracuse, N.Y., we launched a conti-nuity program late last fall that ran through theholidays, and for me drove home anew the powerof loyalty.This was a classic best-customer mar-

keting ploy, based on rewards with high perceivedvalue and wide appeal; in this instance we usedhigh-quality Arzberg porcelain dinnerware fromGermany.Shoppers could earn points by spendingand other specific activities with us, and redeemthose points for free dinnerware.

The results of the continuity program atGreen Hills were mind-blowing, including:

• A sales increase of nearly 5 percent attrib-utable to the program,

•A gain for gross profit margins,• A reduction in total marketing and adver-

tising costs, and• ROI greater than 150 percent.I can hear the comments now: “Sure, but

Green Hills is a single store—what works thereisn’t scalable to larger retailers.”Wrong: Theseprograms are regularly run by some of thelargest retailers in Europe and Asia, with nearlyidentical results.

You might also reason:“The Syracuse marketis an aberration; this program wouldn’t work inmy area.” The Syracuse market is different—ithas a declining population, a stagnant economy,and world-class competitors such as Wegmans,Price Chopper, Wal-Mart, Target, and Aldi. Butthose circumstances only indicate that if it works

in Syracuse, it’ll work elsewhere.Programs like this work because it’s more

cost-effective to grow business from your bestcustomers. For example, before our continuityprogram, a Green Hills best customer needingmilk and bread would have more likely stoppedat the convenience store across the street,where it’s easier to get in and out. However,the program draws her to us instead, becauseeven those few dollars gain her more points.

The evidence is in the gross margin. GreenHills collects extensive data and can drill downinto what changes in shopping behavior causesales lifts and margin gains.We discovered thatduring the program, sales of center store itemsto participating customers grew significantly.

For example, customers in the programspent greater than 20 percent more on laundrydetergent than they had previously. (Even ourbest customers regularly purchase these sortsof commodities from our larger competitors.)Nonparticipating customers, on the other hand,spent over 15 percent less on detergent, a trendmany supermarkets are seeing as shoppersscrounge around for better value.

Of the top 10 percent of shoppers ranked byspending, over 80 percent participated in the pro-gram.These customers generated 40 percent oftotal sales over its duration. Of the top 30 percentof shoppers, nearly 60 percent participated.

These results,along with the resulting customerengagement and excitement, reaffirmed for methe enduring power of best-customer marketing.

Gary Hawkins is the c.e.o. of Green Hills, andalso of Hawkins Strategic, a consultancy thatdevelops strategies for employing customerdata throughout the supply chain. He can bereached at [email protected].

Best in slowPlying your top customers with intelligent loyalty programs is a sure way

to make the most of this sluggish economy.


By Gary Hawkins

The economic climate has put the retailindustry on a harrowing roller coaster ride,complete with soaring costs and plungingmargins. But despite this, hundreds of retail-ers operating thousands of stores across the

country could be cost-effectively stabilizing their busi-

10 • Progressive Grocer’s Frozen & Refrigerated Trends • March 2008 www.progressivegrocer.com

HBC


These economic challenges provide foodretailers golden opportunities to offer prac-tical solutions to assist those consumerswho are electing to, or are being forced to,adjust their lifestyles, especially when itcomes to how they shop for food and whatthey buy.

Recently released studies from marketdata analysts Nielsen and IRI reflect someof these lifestyle changes. The results fromthe research indicate, among other trends,that:

• Shoppers are buying less expensive storebrands.

• Consumers are taking fewer trips to thestore, but making more purchases during eachstore visit.

• They’re spending more on home enter-tainment, instead of outings such as restau-rant visits.

All of these trends suggest prime areasfor which grocers ought to be pulling

together some new strategies. Here aresome ideas.

Private brands and more

Price has always been important to the gro-cery shopper, as past annual surveys from PRO-GRESSIVE GROCER have indicated. Yet now thereseems to be more interest in low pricing thanany time in the past 30 years, and independentgrocers with the right store-brand strategiescan capitalize.What’s more, operators that alsoclaim price positioning in their markets canreally clean up.

One such grocer is Dick Casey, operator oftwo Food 4 Less Stores in Joplin and Spring-field, Mo. Casey is claiming significant salesincreases over the rate of food inflation.

He reports that even though his is a price-impact format, many of his customers nonethe-less are showing much more interest in buy-ing his store brands. In response, Casey ispromoting store-brand items not only at his

“Wall of Values,” but also throughoutthe store.

The kind of traction in private labelsales that Dick Casey is seeing in hisstores supports a larger trend in the mar-ket.A recent study from Nielsen reportedthat 35 percent of shoppers said they’rebuying less expensive brands. Just aboutany grocer can develop effective strate-gies and tactics to meet savings-mindedcustomers’ needs.

The toolbox of strategies shouldinclude:

Displays: Dick Casey’s emphasis ondisplays—his Wall of Values, plus other spotsin the store—is an effective plan. It puts a qual-ity product in front of his customers, at a valueprice. Because of the size of Casey’s stores(around 50,000 square feet), he can build mas-sive displays, but for smaller stores, designatedend caps can work equally well.

Basket checks: Some retailers have begunto use basket checks of their private brandedproducts against national brands in their ownstores. Signs graphically highlight the savingstheir alternative products can offer to cus-tomers.

Second-tier private brands: These itemsprovide even more savings, and when wellsigned, they can help to satisfy those in need ofstretching their food dollars even more.

TPRs: Here, it’s back to basics, but maybewith a twist. Grocers might need to re-evaluatetheir existing Temporary Price Reduction guide-lines, asking questions such as:Are there enoughitems showing price reductions, even of a few

Soften the blowHere are practical tactics retailers are using to help shoppers deflect the

impact of hard times on their eating habits.


By Paul Adams

Consumers at just about every income levelare feeling stressed by the squeeze on theirwallets and pocketbooks, imposed by highprices for energy, food, and other commodi-ties of daily life. In particular, for many of us,

those extra dollars we once were able to spend on dis-cretionary goods are now being spent on basic expenses.


cents? Is there a clearly defined over-all strategy for TPRs? Does the signageprogram have appropriate impact? Thisis an “old” program, but one that stillcan effectively demonstrate to cus-tomers that a store is trying harder tohelp them save.

For those of us who can remem-ber the inflationary years of the late1970s and early 1980s, we may findourselves returning this and some pasttactics to draw attention to price pro-grams. For others, however, the TPRmay be a whole new game.

The few, the pleased

With 78 percent of shoppers indi-cating that they’re combining shop-ping trips as a way to limit some oftheir driving, this presents an interest-ing opportunity to make the fewer tripsthey make to your stores more of apleasure.

Grocers Jimmy Wright of Opelika,Ala. and John Zagara from ClevelandHeights, Ohio serve entirely differentcustomer segments. However, they’reboth famous in their markets for their“Pick 5” meat programs.

The Pick 5 program enables shop-pers to mix and match various (andusually higher-priced) selected freshand processed meat products in unitsof five for a set lower combined price,usually $19.99. Not only does this offernoteworthy savings, but the programencourages shoppers to stock up, mak-ing their shopping trip more productivefor the travel time and fuel spent.

Wright says that the program continues togain in popularity, and is greatly appreciatedby his customers who are acutely affected bythe tough economic conditions. Plus it’s helpedto drive his store’s meat sales to record levels.

One other program that’s gaining renewedpopularity is the “bundle” or club pack program.A growing number of conventional stores are

again promoting large packs of consumableproducts, such as paper, as a way to “help” theirshoppers get more done while driving less.

Coming home again

According to research from a Cooking andIntelligence Phone Survey conducted in April2008, 43 percent of consumers said that they’re

eating more meals at home comparedwith a year ago.What an opportunity!

This is an outstanding chance forgrocers to step in as solution providers,rather than as mere replenishment mer-chants. Happily, some smart retailershave already understood what’s hap-pening, and have designed some attrac-tive programs.

Hen House Markets in Kansas City,Kan., for example, has two programs thatenable its customers to save money andtake home nutritious meals at the sametime.

One is called “What’s for Dinner.”Monday through Friday, Hen Housestores’ deli departments offer a presetfamily-sized meal each day, at a pricein the $10-to-$15 range. The rotatingmenu includes such offerings as potroast, baked chicken, and meat loaf, withall the trimmings. It’s quite a nice alter-native to fast-food fare, and a much bet-ter value as well.

The company also offers a “MealDeal” program. If a customer buys thecenter-plate meat item in the deal, aselection of other items, including a bev-erage, comes with it free.Typically, $10to $12 will buy a family meal in thisprogram.

What Hen House is doing showsus that, with good planning and someinnovation, grocers can provideattractive meal solutions that meetthe needs of those who are changingtheir lifestyles to save a few bucks—and these days the numbers of suchcustomers are growing.

Paul Adams is president of Paul Adams & Asso-ciates, a training/development and retail con-sulting company working primarily with inde-pendent retailers in the United States andabroad, as well as with food distributors andservice companies in other industries. He can bereached at [email protected].

Hen House Markets in Kansas City, Kan. runs a “What’s for Dinner” program offering a preset family-sized meal daily, at a price ranging from $10 to $15.

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