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[20 comments]

Dominick's Offers Discounts 'Just for U'

September 29, 2010

By George Anderson

Dominick's Finer Foods is hoping that its new digital discount program, which offers shoppers savings on items they already purchase, will enable it to gain share in the highly competitive Chicagoland grocery market even if it means giving up some profits in the process.

The new Just for U program, according to Crain's Chicago Business, allows Dominick's to analyze a shopper's purchases and identify potential sales opportunities. The publication gives an example of someone who buys baby food or formula, but not diapers. Just for U can flag that and offer the customer a diaper deal.

"The (product) categories people would include in a typical supermarket stop or trip have shrunk, and there are categories that people don't consider supermarkets to be competitive (in)," Tim Nelson, managing director of Tris3ct LLC, told Crain's.

"Chicago is a highly competitive market where customers tend to shop in more than one place," Don Keprta, president of Dominick's, said in an interview. "The crux is to get you what you want and make sure you get it from us."

The Crain's piece pointed out that Dominick's is investing its own money to gain share versus going the usual practice of asking consumer product manufacturers to pick up the tab.

"We'll sacrifice a bit of gross margin on certain items to bring those people in our stores, but the additional sales will more than offset that," Mr. Keprta said.

"This is how the supermarkets can get back into the game after years of having no response to this channel-switching," Mr. Nelson told Crain's. "This could be a powerful tool to win shoppers back to some of these high-value, high-growth categories."

Discussion Question: Is Dominick's on the right track with its Just for U program? In offering deals based on past purchases, is the chain missing other sales opportunities?

FINANCIALS:     [NYSE:SWY]

Discussion Questions:

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How much market share do you think Dominick's will gain or lose as a result of the Just for U program?

Comments:

This is an old idea--at least 10 years old--that is being recycled. I think every chain with a loyalty card had dabbled in this. It probably won't work. Dominick's issues have more to do with being owned by Safeway and losing their local identity. If this is their big idea on how to combat former CEO Bob Mariano and his new stores, it's a very soft punch.

David Livingston, Principal, DJL Research

Dominick's 'Just for U' discounts will help recover some of its Chicago market share that was lost after Safeway nationalized this once proud regional supermarket chain. However, still lost in translation will be the sins of SKU rationalization where shoppers can no longer find certain destination items, specialty, niche, and variety. This is why discounting is the only remaining variable to make any type of difference.

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David Biernbaum, Senior Marketing and Business Development Consultant, David Biernbaum Associates LLC

Dominick's has the issue correct regarding channel switching, but there may be more efficient and cost effective way to counter this challenge. If Dominick's is planning to pay for the savings, why not make the complementary item a Private Label item? If you can attract customers to your Private Label, the channel switching ends for that item and most likely the related items since you are the only retailer with that brand (Private Label).

Several retailers are testing this approach in market today and getting the National Brands to pay for the program.

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John Boccuzzi, Jr., Managing Partner, Boccuzzi, LLC

This program has the potential to achieve its objectives of generating a larger basket and minimizing the need to shop alternative formats. The key to this or any similar program is to solve the shopper's problem and not provide the opportunity for the shopper to leave Dominick's in search of items that Dominick's doesn't carry.

This is a much better use of data from customer cards than simply offering a frozen turkey after spending a designated amount of money over some period of time. This solves a real customer problem, avoids the compromise of going to several formats for additional products, and provides an opportunity to promote "center of store" merchandise that supermarkets have been losing to supercenters and club stores.

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

Sorry, yet another coupon is not the answer but their focus is right. What if shoppers' smart phones were linked to their customer information and sent a text while they were in the aisle to not forget the diapers? I would see that being more helpful and driving loyalty.

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Bob Phibbs, President/CEO, The Retail Doctor

I think the concept is great--use scan data to determine what is logically missing from a customer's market basket and then incentivize them to buy those items.

The process involves linking your current Dominick's card to an online account. Unfortunately, when I tried to register it would not accept a Dominick's Fresh Values card so I am not sure what card you are to link to. My assumption is that the consumer will then get an email with a coupon attached or embedded.

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Steve Montgomery, President, b2b Solutions, LLC

Counter-intuitively, we often find that giving shoppers targeted discounts on products they already buy generates remarkable lift, both for the basket as a whole and for the promoted items. As a result, we encourage retailers and manufacturers to include "reward-style" coupons and "win-back" coupons as part of any targeted promotion campaign.

For Dominick's, then, I see this as a smart move. Shoppers who feel that they are being rewarded in a targeted way will spend more in the store and more on the promoted items. This can benefit both in terms of expandable-consumption categories (people eat more snacks when they are in the house), and in terms of reclaimed trips vs. competing channels (drug, warehouse, dollar stores, etc.) and grocery chains.

For me, the real question will be: how well does Dominick's execute on this program? One or two middling offers every other week will rapidly disenchant the consumer, and will therefore have no appreciable impact on sales. On the other hand, a steady stream of easily-accessible, targeted, high-value offers (chain-funded, brand-funded, or both) will keep shoppers engaged and coming back for more.

A quick glance at Dominick's website already raises a red flag. When you log in, there are 3 different places to get coupons. If you log into the Coupon Center, you have to navigate through 9 pages of offers to find the ones that you care about. Add to that the 'Just for U' offers and the 'Your Club Specials' sections (as well as the digital circular for non-coupon deals), and you can see why a shopper would get exhausted trying to find the offers they want. Dominick's should integrate these different coupon and discount sources into a single, consolidated, personalized, relevance-sorted list--this would give shoppers a huge win, and would be a major competitive differentiator.

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Ben Sprecher, Business Development, Google

I signed up Monday and got my free dozen eggs. This does a few things, cleans up their online coupon offers (as Kroger did recently) makes the offers relevant, and is paperless. The offers I select are loaded onto my card (tested it and it works). I can also print a shopping list of my offers. A good step in the right direction.

'MrQScan'

This idea works very well for Amazon. Netflix spent over $1,000,000 on a contest to find the best software to predict which movies individual members would like. There is value in analyzing purchase behavior and converting it into easy future sales.

Yes, the idea has been around for a while, but now the technology is making the execution a whole lot better. It is all about incremental sales for the retailer. Tight execution will make this a very successful program.

The cost will be considerably lower than any other price oriented promotional tool, because it is limited to specific shoppers. No wasted price reduction here.

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Gene Detroyer, Professor, Independent

Targeted aka RELEVANT discounts that are meant to be generative, rather than dilutive, are significantly smarter than mass-distributed (i.e., online, ROP, etc.) coupons. Equally impressive for Dominick's is that they are controlling the strategy and execution of this program, rather than simply selling out to the manufacturers, who still--for the most part--don't get consumer loyalty and relationship marketing.

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Phil Rubin, CEO, rDialogue

This is not something new. It appears to be a variation of other promotions attempted, some of them were winners and some not. I can't tell why but this does not excite me. It has to do more than become a "one and done" shot to be successful.

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

It's clearly a good start. But let's not forget, there is more to building a solid and loyal customer relationship than price-off incentives. Focus on the customer, drive relevant and timely communications that will stimulate the customer to shop and shop often. Provide great service and offer the customer the product selection and depth that will keep them coming back.

Unfortunately, all too often, retailers think one dimensionally...price incentives. That alone doesn't create customer loyalty and retention.

Gary Ostrager, Retail Industry Strategist, Acxiom

As a Chicagoan I can't resist weighing in here. While Dominick's may capture the adjacencies to what I buy price isn't the fundamental reason I shop multiple stores--quality and selection is. I buy meat at Costco and Whole Foods--Dominick's meat is (in my estimation) awful so no amount of discounting will get me there. I shop Trader Joe's for the different items, the small store format and the fact that I never have to wait in line more than five minutes (contrast that to Dominick's on a Saturday).

Blindly trying to cross sell without addressing the customer experience issues will only get them so far (and potentially into downwardly spiraling margins). This is one data stream but without market research, shopper marketing understanding and a decent understanding of who they're going after, why and what it will mean to their business they'll continue to grab people like me who shop them as a last resort and cherry pick the sales items.

Lisa Bradner, Chief Strategy Officer, Geomentum/Shopper Sciences

Just For U sounds like a good move. Personalized savings are more likely to gain the desired customer response (i.e., buy the product) vs. simply taking the buckshot approach to discounts.

That said, I have reservations about whether Just For U is just enough to increase shopper loyalty to Dominick's vs. shopping multiple stores. Dominick's is likely to realize some success by growing basket size, but today's recession-hardened consumers are still scouting for the best deal wherever it's found, and especially when purchasing non-discretionary pantry product. A single Just For U discount is good for just one purchase, so the next time a competitor has the same item on sale for a lower price, then this savvy shopper may buy elsewhere.

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Tim Henderson, Editor/Writer, Independent

Retail loyalty is a complex equation. One element is retail-to-customer relevance.

Dominick's new program is a potentially game changing opportunity for retailing simply because it provides a pathway for retail-to-customer relevance. However, the basics of retailing are still the critical foundation of the customer loyalty experience.

My team at Price Chopper, years ago, is often credited as the first to introduce the card based frequent shopper program that proved to be a customer and retailer success. We knew, however, that the ability to interface with customers in near real time, on a targeted or one-to-one basis, about products and services that are of or might be of interest and then track the response to either messages, incentives or a combination of both ... would probably be the next major step in grocery retail marketing. Technology advances have now moved theory to reality.

This is one of the bundle of related concepts and technologies that will re-write our understanding of marketing and trade promotion. It has the potential, perhaps more than any other approach, for significant top-line and margin growth.

I do believe that this type of program is a profound opportunity for retailer and brand collaboration ... a collaboration that will benefit the retailer, the brand, but most importantly the consumer. Unfortunately current reporting does not indicate a collaborative program approach by Dominick's.

However, congratulations to Dominick's for a major step forward.

Ronald Lunde, Principal, The Lunde Co.

Intuitive offers are effective. Giving customers what they want when they want it shouldn't be controversial. It should be particularly successful in grocery due to the high number of additional products that consumers purchase while in the store.

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Christopher P. Ramey, President, Affluent Insights

Tesco and Kroger, both enabled by dunnhumby, have been using analysis of historical purchase transaction data to create offers and each has been highly successful in the pursuit.

Alliance Data created a product "Precima" on the same premise though I am not clear on what level of adoption has taken place.

Dominick's is on the right path; even though it might have been tried in the past, not enough grocers have maintained the discipline of data analysis over an extended period to get measurable results.

Although it is good they have taken initiative, I'm not sure why they should be proud to ignore the CPGs. If funding for tired merchandising schemes could be allocated to support delivery of relevant offers which have measurable impact on an individual consumer level, why would they not want to include this in the value proposition?

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Bill Hanifin, Managing Director, Hanifin Loyalty LLC

Retailers have been doing this using programs like Catalina Marketing for years. Convenience stores especially are starting to master this type of loyalty program with one crucial difference they are beginning to do this all electronically where "coupons" are sent via email and text messaging and can be scanned right off of a smart phone or PDA.

Dominick's may be able to attract customers for planned purchases, but what busy consumer is going to want to deal with the hassle of carrying around a coupon for their next trip to Dominick's? There must be something more to this program because what they are talking about is a little behind the times.

John Lofstock, Editor-in-Chief, Convenience Store Decisions

Nothing new here! I guess some consultant found a different shade of lipstick to put on this pig. Maybe if Dominick's did a better job of knowing the competitive structure of the marketplace they could do a better job of buying and make sure that they were offering all items at competitive pricing. Well, you say this can't be done! It's very simple--you ask your employees to report better pricing. Most chains have thousands of employees and they will report pricing if asked.

The problem is that management isn't intelligent enough to utilize this information. Rather than actually work, they will pay someone to install and manage a program like 'Just for U' that won't begin to address their real problem.

And why should I have to have a card to shop with anyone to receive fair pricing?!

Ed Dennis, president, Dennis Enterprises

It seems to me that consumers want discounts on the products they currently buy. If a retailer offers discounts on items consumers do not currently buy, the prices better be competitive with other stores nearby.

My experience is that these types of discount programs are often complicated, time consuming and turn out to be "generic" in nature so that consumers don't feel they are getting anything special.

Time will tell if Just for U provides the same experience for Dominick's customers. Simpler is always preferred by consumers.

Odonna Mathews, President, Odonna Mathews Consulting

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