FSIs Need More Localized Approaches

Getting more localized, more account specific, digging deeper into store clusters and shopper segments, ABSOLUTELY. On the other hand, FSIs? Not so much. Not when the industry is moving to electronic communication via web, cell phones (see other story today), and shelf technologies.

David Zahn, Owner, ZAHN Consulting, LLC

Before starting the presses, I would include the answer to the question, "Does this group of people use coupons?" Transaction analysis brings us to a certain point and in this case shows opportunity for brand growth. But the strategy to bridge the gap must still be dependent on consumer shopping behavior.

Many years ago I visited a manufacturer coming out with a new product. I was shown the packaging for my opinion about its in-store effectiveness. And in turn I asked about the rest of the marketing plan. They were going ahead with their standard operating procedure... to introduce all new products with coupons and use FSIs. "Funny," I said, "I never would have thought that your target market (young men)...would be using coupons." The product manager looked like a deer caught in the headlights. He never thought about coupon usage within his unique target, before investing in the strategy.

Joan Treistman, President, The Treistman Group LLC

This is where Internet advertising pays off. Why spend money on national FSIs when you can spend significantly less and target your store's advertising message to your best customers? Yes, national ads can alert all consumers to goings on within the store, but they lack the ability to appeal to specific consumers. In an age of pull rather than push advertising, using email and social networks to deliver custom offers to consumers just makes sense.

Max Goldberg, Founding Partner, The Radical Clarity Group

I have always harped on how important your local market is and the successful merchant will know the pulse of the community. FSIs can be tailored for zones and even communities within that zone. If your selling area is mostly Hispanic, it would make sense to offer products in your FSI that cater to that group. Incomes and gender play an extremely important role as well and they should be tailored for the specific regional makeup.

I just commented in my blog on the decline of direct mail therefore it is important for all merchants to have an alternate strategy to paper coupons and FSIs. I believe you can get more creative (and localized) by using the digital medium.

Doron Levy, President, TheMortgageMachine.ca

I have to agree with David, Joan, and Max: FSIs don't seem like the right medium. This type of localized thinking is a great start, but it can lead to a geometric increase in complexity. The number of analyses being run = the number of geographies * the number of manufacturers (with further analysis for each retailer and store). Also, without the proper tools, the work is highly technical and involved, and it will be done slightly differently by each company.

The solution has to be a hub-and-spoke arrangement. One set of simple, consistent tools used by all manufacturers and retailers to target ads across the entire retail network. And for offer distribution, why limit yourself to printed coupons? Internet, in-store, email, mobile, etc, should all be on the table.

Ben Sprecher, Founder and VP, Marketing, Incentive Targeting, Inc.

I think the whole discussion here misses a very critical point. It is as much the product category as it is the customer that should determine the FSI strategy. The key question here is "What is it that will cause a consumer who would not otherwise have bought this item to instead purchase it." If we're talking about a commodity, for which we can be reasonably certain the consumer has already made a brand choice, then it may take a fairly deep discount with wide reach to appreciably affect the purchase decision. On the other hand, if we are talking about a truly discretionary item which the consumer may not have bought before or for which there are few alternatives, then targeting specific consumers to create additional demand makes sense.

Distributing the message is becoming cheaper and cheaper. The challenge is becoming "Consumer Overload." With messages coming from all different directions, I think it is more important that the retailer develop a consistent and clear channel to the consumer psyche so they avoid hitting the consumer with too many messages. This is the reason consumers will be willing to give their identity information in order to be part of a targeted promotion program.

I don't know what this means for the future of FSIs. I think manufacturers will continue to use them in order to affect the brand switch. I think retailers may be better off with more targeted approaches. The challenge for retailers then becomes how do they get the consumer to switch banners?

Bill Bittner, Principal, BWH Consulting

FSIs work. No matter how many times we try to rid them from the marketing mix. Through local versioning they are made more effective. There is promise of digital media replacing FSIs. But before one follows that out the window, keep in mind that there is a tactile and cultural event that occurs with FSI review and use. At this time, there is no digital equivalent. There are alternatives, but none replicate FSIs. Don't you love it when digital seems to be the easy answer to any issue. But upon closer inspection, it isn't. Dig deeper. That's why we say,: "retail ain't for sissies."

'IMRetail'

Generally agree with much said so far. Digital is better for customization and FSIs still work. But before we get too exercised about localizing FSIs, I think we need to look at the strategy behind the FSI vehicle to start with and what it can do for the brand. Generally speaking, the purpose of the FSI is to deliver a coupon. And, again generally speaking, couponing is really a pretty blunt marketing instrument. About the best most do in "customization" is to tweak the coupon amount. I'm not sure customization of this particular vehicle is worth the effort.

Ben Ball, Senior Vice President, Dechert-Hampe

Thanks for the quick set of insightful comments. I actually agree with them in most respects. Digital media--organic and paid search, online advertising, ecoupons, mobile, etc--are clearly channels that lend themselves to greater targeting (even down to the end-consumer level) and self-selection. Moreover, these are rapidly growing marketing channels for merchants, following the overall trend of dollars moving from traditional media to digital.

However, spending on "old" media, such as FSIs, still dwarfs the marketing spend of retailers on digital. And FSIs still reach important segments at a low cost and produce a positive return. Much of my company's retail practice involves helping clients allocate their spending across both traditional, direct, and digital channels in order to maximize sales.

In our experience, as much as we like the addressability of digital, FSIs and paper coupons are still the 800-lb marketing gorilla for many retailers.

So the basis of the article is: how can we take this big-budget medium and generate higher value from it? As we suggest, one avenue is to tailor these promotions more tightly to markets, something that information, production technology, and falling advertising rates enable. As many of you suggest, this needs to be done in the context of the larger marketing strategy, which surely must take into account other, newer marketing channels.

Mr. Bittner's line of thinking, too, is insightful. Marketing's challenge increasingly is to offer relevant choices and to deliver incremental sales. Even with greater tailoring, FSIs will remain a fairly blunt instrument in achieving these aims, but even within their limitations, there are opportunities to make FSIs more relevant to customers in local markets. Thanks again for the spirited discussion.

David King, CEO, FULCRUM