Sam's Discounts Have Personal Touch

It would be very interesting to know more about the business model behind Sam's couponless coupon program. On the surface it would appear that they are simply offering a select number of their customers an additional discount. However, if the items are already priced at minimal margin where does the funding come from to support the discount? Does it come from the extra cost of the Plus card, from the larger market basket (assuming that there is one), a combination, or from some other source?

Conceptually, I agree with Mr. Bishop--it is marketing to a specific person that the ability to link purchases to an individual has promised for some time. Is the limited number of items the reason that Sam's is doing this and others are not?

Steve Montgomery, President, b2b Solutions, LLC

This is a terrific program that is already seeing significant results (see my blog posting for an in-depth look at Sam's overall strategy http://is.gd/bE3O5). While unfavorable comparisons to Costco have become a knee-jerk reaction to anything Sam's attempts, I think it's time to take a fresh look at the innovation that they are driving and the cohesive strategy that is anchoring all of it.

Carol Spieckerman, President, newmarketbuilders

Great move in the personalization project; this will be especially successful with the millennials who desire and demand personalization. This will be the "game changer" of the future.

Susan Rider, President, Rider and Associates, LLC

Sam's Club has gotten lots of attention with this and, in terms of a loyalty strategy, at first blush it merits a "C".

The strength is that it apparently uses real transactional data, which as Stuart Aiken from dunnhumby accurate points out, is very rarely if ever (sadly) leveraged by merchants.

Clearly differential marketing is the smart strategy here but, from published reports, there are several elements either missing or wrong:

1. Are personalized offers -- some of which are likely not truly personalized (see #2 below) -- really going to drive incremental trips to Sam's? If the offers are only delivered at an in-store kiosk, that loses one of the fundamental levers of a loyalty program: the ability to reach customers away from the store and give them a reason to make an incremental store visit. Presumably mobile and more traditional (email) relationship marketing is in the plan. How about the online channel?

2. The examples cited in the NY Times article pointed to customers receiving discounts for items they buy every time they visit. This is dilutionary and, unless it's driving more purchases or more frequent ones, it's not profitable in either the short- or long-term.

3. eValues is about as generic a name for this "program" as there could be. It could work for just about any online merchant.

The comment from the customer about not renewing his membership is classic, though arguably it falls under the category of "uncontrollable" churn: he's not renewing his membership as his office has moved away and he apparently doesn't believe the Sam's Club store is worth the trip, even with the eValues program.

Phil Rubin, CEO, rDialogue

I have not seen the program at Sam's but the concept has made sense since the inception of loyalty cards. This is a great way to build and maintain loyalty, however, it will be interesting to see the reaction by the members who do not have the plus card. The next step for Sam's should be to move more members up to this membership level by showing how the added cost is worth the value received.

This could be a game changer in the club store business if it catches on with consumers. Manufacturers and club retailers will be working to add value for consumers and small businesses who are already very savvy at finding bargains.

J. Peter Deeb, Partner, Deeb MacDonald & Associates, L.L.C.

Organizing deals according to personalized shopping history is not a new concept, but doing so within a privacy-protected plus card system is the right way to go for shoppers! And making the deals readily available at the store location without the burden of "clipping" makes it easier for shoppers to stock up and save on a current trip rather than have to wait until the next trip is also super convenient. I expect the redemption rates will climb as shoppers become more aware of and accustomed to using the kiosks. Sam's Club should have a winning formula here.

Anne Howe, Founder, Anne Howe Associates

In a broad sense, this is absolutely the direction retail is heading. dunnhumby (with Kroger and Tesco), CVS (with its ExtraCare program), Amazon (with its "if-you-liked-x-then-you'll-probably-like-y" marketing), and a number of others have proven the value of behaviorally targeted marketing and personalized discounts. It's so valuable, in fact, that Sam's is spinning their service as a premium benefit for higher-paying members.

So, if the benefit is so provably great (just look up Kroger's same-store sales numbers in the years since starting with dunnhumby vs. the industry average), the question is, why don't other chains follow suit in droves? The short answer: resources.

Targeted marketing is hard. Until now, chains have had to invest huge amounts (sometimes in the tens of millions of dollars) in powerful databases, complex BI packages, and rooms full of highly-paid statisticians, analysts, and marketing experts to make a targeted marketing program tick. Meanwhile, brands (who control the bulk of marketing funds in the Fast-Moving Consumer Goods space) are forced to devote resources to working with each new retailer's program, thus diluting their value.

As a result, only the largest chains and largest brands participate, and at a great cost. It's a testimony to the value of targeted marketing that these programs are as popular as they are.

We believe the industry is ready for a new, unified targeted marketing platform that serves the needs of chains without requiring massive up-front investment, and the needs of the brands without creating huge amounts of additional work for each new chain in the network. The technology to enable this platform is difficult to build and costly to run, but the demand clearly exists. Once such a platform is in place, we believe it will finally push programs like CVS' and Sam's into the mainstream.

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

I applaud Sam's for linking pricing to one's shopping history. This type of personalization is certainly a good beginning. However, why limit personalization to price only?

What other non-price offerings could Sam's and other retailers offer to their customers to insure that they maintain continuity of purchase? How about special orders or offerings exclusively for Plus Club members? Or how about a dedicated check out line for these members?

The challenge always has been to find out real customer problems that a retailer could have permission to solve besides simply giving a lower price or a frozen turkey at Thanksgiving. If it is going to be personalized then let's really personalize the process and options.

Richard J. George, Ph.D., Professor of Food Marketing, Haub School of Business, Saint Joseph's University

Great idea! But, as with all revelations, there are usually two sides to every opportunity. Some people don't enjoy the feeling that they are--or can be--intimately exposed to a retailer and shun the chance to capitalize on a special situation. Wherever the greatest majority of emotions lie in that equation is where a retailer has the most potent opportunity.

Gene Hoffman, President/CEO, Corporate Strategies International

Stuart Aitkin of dunnhumbyUSA accurately points out that only a fraction of U.S. retailers leverage their databases in a tight enough fashion to target their messages to their 'best customers'. However, the industry is getting better each season.

In the next phase, the leading practitioners of mining databases of customers will capture a better understanding of what consumer 'behavior' is away from their stores.

Sam's Club is being proactive with this move. They are addressing the concern of having 'cherry pickers' in the store in a head-on fashion. It should serve to hold those consumers in the store for a longer period of time, AND, solidify loyalty objectives.

Roger Saunders, Managing Director, PROSPER BUSINESS DEVELOPMENT / BIGinsight

The overall premise of personalized pricing is a step forward, however, is the fact that "There's no clipping coupons," "All they have to do is purchase the product, and the savings are automatically applied at checkout" a problem? This flies in the face of rule #1 of promotions: Never give unwarranted discounts. Will the consumer be aware of and appreciate all the discounts they are getting when they are automatically applied to their bill? This is a great program, I'm just looking at the way the consumer sees the discounts.

Ralph Jacobson, Global Consumer Products Industry Marketing Executive, IBM

When we consider that Sam's has had a membership card in place for all shoppers since its inception more than 25 years ago, it's a bit ironic that this program of personalized discounts is earning such fanfare now.

From this news we may infer that Sam's has been effectively discarding the informational value locked within its shoppers' behavior for two and a half decades. This would be shameful, except for the fact that its competitor Costco and hundreds of supermarket frequent shopper programs have suffered the same persistent failure to mine the transaction log.

Why is personalized pricing a big deal now? Because it is notoriously hard to do and do well. The data management tools were too costly; the potential backlash from privacy advocates too scary; and the thought-work too difficult to justify the effort.

Today, the costs of BI and database tools seem within reach; the myth of privacy is losing its relevancy; and the combined impacts of promotion optimization and one-to-one marketing experience have provided applicable know-how.

Unfortunately, the rise of hand-held devices and social sharing of deals and pricing online may threaten to shine a harsh light on personalized pricing practices. Sam's had best closely monitor the impact of personalized deals on its price image. There is a risk that it will train its best shoppers that no shelf price is trustworthy.

James Tenser, Principal, VSN Strategies

This is what loyalty programs are all about...usage. Sam's has done this correctly. Individual or not, they are getting their customers to purchase focused products from the incentive program. These are usually vendor supported, but the real essence of this program is that Sam's is using their information. This is the reason that most programs fail. There is no mining of the data, or drilling of the information that retailers have at their disposal and this severely hampers their efforts to have a discount or customer loyalty program that works.

Kai Clarke, President, Miraclebeam Products, Inc.

Sam's innovation and execution of this program deserves much credit. The model creates excitement and the extra trips that the club channel cherishes (averaging only about 1.5 per month) by delivering offers on products that are relevant to each member based on their shopping history. They are delivered via 3 channels ("green" email & online (including smart mobile) or in-store dispenser) and conveniently executed through their membership card.

Right now eValues are available only to the Sam's Plus members who pay $100 a year (regular membership is $40) as part of a host of additional Plus benefits. If insuring the members were aware of the promotion, Sam's could add a requirement like our client Green Hills Farms does...that the member "activate" their offers at the whichever touch point they view them--easily done prior to checkout.

Personalized promotions like this bring excitement to the EDLP channel and most customers enjoy the benefit of relevance marketing. These are steps towards personalized pricing which can truly change behavior while remaining profitable. Retailers and customers win by growing awareness and sales while delivering an enhanced shopping experience.

Brian Hart, Director, Retail Strategy and Solutions Marketing, Oracle

So few retailers seem to leverage shopping data to create individual relationships with their customers because they don't have the resources to do it. Those resources are physical and financial and also intellectual.

Personalized programming is the future. Personalized everything is the future. Technology has provided a one-on-one access between individuals and the outside world. It will only grow. And, the growth will not only come from those generating the information, but those demanding the connection.

This is a great program. It almost sets up a lottery mentally for the shopping trip. "What will I win this time?" Remember, the most profitable customers are the loyal customers. It will keep them coming back.

Gene Detroyer, Professor, Entrepreneur, Adviser, Consultant, Independent

Sam's (Walmart) is directing this to a select group of customers. I do not know if the selection process is directed at only the top customers based on sales, or if other criteria is considered. Hopefully, it is more than sales volume or the program will die a quick death.

While I agree and like the idea of retailers focusing attention on ways to draw more customers to the store; somehow it has to have a method of notification other than when you walk in the store. What we are experiencing is the beginning of new marketing designed to influence more customers to visit the stores on a more frequent basis. How far it will go is yet to be determined.

What this has done has convinced me to look into this when I next visit our local Sam's Club. Sitting here at the keyboard, I will have to say it is going to take a lot of convincing for me to upgrade my buying level.

Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

Good idea? Yes. Enough to get me to switch from Costco to Sam's? Not even close.

'erkel'

Retaining shopper loyalty is key to continued growth--that percentage of shoppers who buy frequently and with bigger baskets. As discussed, this is the first step in recognition of their loyalty, but does have a way to go in becoming more personalized and effective in terms of reach. "Keep them coming back" is fundamental; but in this version, you have to be in the store to know what might be on offer. Will be interesting to watch!

Anne Bieler, Sr. Associate, Packaging and Technology Integrated Solutions

Hmmmm...this doesn't seem all that different to me, more like a reporter with limited familiarity with innovations in the retail channel.

Didn't SuperValu and a couple of East Coast grocery chains try this a couple of years ago? The kiosks didn't last long, and a number of grocery chains have moved to programs that use online or mobile to automatically load discounts onto loyalty cards.

Without even getting into the flawed approach of giving discounts to people for things they already buy, how much past history does it take to give $50 off an HDTV purchase, especially if four pages of coupons print out? I would guess almost everyone got that offer!

John Keenan, Managing Partner, Anthem Marketing Solutions

Applause for Sam's Club using its transactional data to connect customers with relevant offers. CVS is using a similar in-store approach delivering via kiosk but offer something closer to "daily specials" rather than personalized offers.

Also in contrast to Sam's Club, CVS (based on reading their lengthy receipts for the past 2 years) has very rarely shown evidence that they know what I buy or am interested in.

Based on the contrasts, Sam's Club using data is laudable, however big caveats remain as noted by Phil Rubin and others. The offers should be delivered to create additional store visits and to not only reward existing basket items but some incremental ones as well.

There is plenty of technology on the market today which can support the use of data without huge up-front costs and it is not the technology that is the barrier, it is changing the mindset of marketers steeped in the merchandising model.

Bill Hanifin, Managing Director, Hanifin Loyalty LLC