[Image of: RetailWire Logo and Tagline (for print)]

BUSINESS TIPS

IRI:
Shopper-Centric Execution
ChannelAdvisor:
Online Selling Strategies
RR Donnelley:
In-Store Marketing
LoyaltyOne:
Enriching Customer Relationships
 
[39 comments]

Safeway's Loyalty Program Makes Print Ads Obsolete

February 26, 2013

Safeway could be ready to stop running print ads as early as the end of this year, according to the company's chairman and CEO Steve Burd.

Speaking last week to a group of analysts on Safeway's fourth quarter 2012 conference call, Mr. Burd said the company had cut millions of dollars on newspaper ads and replaced them with personalized offers delivered digitally as part of its Just 4 U loyalty program.

"As people become more digital, there's an opportunity, which we're working hard at, [to] actually get out of the paper ads and make the ad itself personalized for every household," said Mr. Burd.

Robert Edwards, president of Safeway, said on the same call that the personalized aspect of Just 4 U has helped the chain gain share despite current economic challenges affecting its customers.

Speaking of higher fuel costs and the end of the payroll tax holiday, Mr. Edwards said, "It actually plays to the strength of Just 4 U because we can target specific individuals based on their shopping patterns and what we think is happening with their disposable income because it doesn't affect all of our customers equally."

According to Mr. Burd, Safeway currently has 5.4 million households, representing about 45 percent of its sales, registered for Just 4 U. Safeway is finding that its new loyalty program, which offers savings from 10 to 20 percent off its normal Club Card, is driving increased purchases from already "loyal" consumers while bringing greater numbers into the "loyal" category.

While the largest numbers of consumers are accessing Just 4 U offers through their desktops, Safeway is seeing growing use of smartphones and tablets.

FINANCIALS:     [NYSE:SWY] [ ]

Discussion Questions:

Do you see many other grocery chains in addition to Safeway eliminating print ads in favor of digital marketing offers in the future? Are loyalty programs such as Safeway's Just 4 U going to be the cause of print ads being discontinued?

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:

Where will consumers primarily go to find special offers/coupons from retailers five years from now?

Comments:

It's not as black and white as it might seem. The easy answer would be yes, print ads are becoming obsolete, especially for retailers that have such active loyalty programs for shoppers. However, loyalty card shopping is not yet for everyone, and I think all retailers ought to exercise with caution the elimination of traditional types of promotion and merchandising.

[Image of: View Braintrust Panelist button]
David Biernbaum, Senior Marketing and Business Development Consultant, David Biernbaum Associates LLC

If Safeway proves this out, there will be a tsunami of retailers exiting or cutting way back on print. I have heard through the industry that many different retailers have been experimenting with this: going dark in different markets, testing the balance of personalized offers vs. general market offers.

The challenge here is, of course, how do you talk to and convert people who aren't shopping with you today and aren't in your database? Print will continue to erode as SOLOMO takes over and geofenced offers and communications become the norm. HOWEVER, that's going to vary based on the age and behaviors of each retailers' core target audience.

Critical for marketers to remember: many digital tools are permission-based and your core target can only buy so many groceries/clothes/books in a year. Marketers will still have to find ways to reach the unaware or unconverted and flyers, catalogs and print will likely be part of that mix—just a much smaller part.

Lisa Bradner, Chief Strategy Officer, Geomentum/Shopper Sciences

I do both now, as boomers still bring the print ads into the store. Eliminating print from a savings perspective would be great, but I still need it.

Who wouldn't want to get rid of print if they could? And not everybody owns a computer. It is a balancing act to use both vehicles, so that the gaps are filled in, as everyone needs to stay informed.

[Image of: View Braintrust Panelist button]
Tony Orlando, Owner, Tony O's Supermarket & Catering

This is a bold move by Safeway; one that might backfire. Advertising brings customers into the store and allows a retailer to broaden its customer base. Other grocers will be closely watching Safeway to see if this impacts the number of visitors and sales.

[Image of: View Braintrust Panelist button]
Max Goldberg, President, Max Goldberg & Associates

I do think this is a new trend that will impact the way other grocers do business as well. More consumers are using their smartphones, tablets, and TVs instead of buying a newspaper. Manufacturers are promoting directly to the consumers via the same devices, so yes, we will see a shift in dollars spent on newspapers to dollars spent on social media promotions.

[Image of: View Braintrust Panelist button]
Frank Riso, Principal, Frank Riso Associates, LLC

Eventually I see print ads becoming obsolete. It won't be because of loyalty programs. It will be because consumers couldn't care less about 90% of the items in those ads. They will be lured by other incentives such as a compelling shopping experience, not what's on sale. Because soon, everything will be on sale at all stores all the time.

David Livingston, Principal, DJL Research

Currently, the people participating in the Just 4 U program also have access to the print information (at least in many markets). Unless there has been a matched market test to determine how effective the Just 4 U program is by itself, eliminating the whole print program could have a negative effect. In most cases one medium does not replace another medium because each one has more impact with different consumers.

[Image of: View Braintrust Panelist button]
Camille P. Schuster, Ph.D., President, Global Collaborations, Inc.

The short answer is, "Yes." The longer answer is that, in the future, it may be harder and harder to find print vehicles to advertise in.

The reason print ads will be discontinued is the declining popularity of print. If newspapers were strong, the advertisers would be fighting each other for placements.

[Image of: View Braintrust Panelist button]
Ryan Mathews, Founder, ceo, Black Monk Consulting

I believe strongly that today's time-starved customer isn't reading those Sunday inserts anyway. They're just too long and complex, and customers who are familiar with a given store's layout risk a much longer shopping trip when they visit the competition. If Safeway can create truly personalized offers (they're not there yet), they could see some real upside.

[Image of: View Braintrust Panelist button]
Cathy Hotka, Principal, Cathy Hotka & Associates

If I understand this correctly, they want to stop talking to half their shopper base and all of the people who are not Safeway shoppers. I'm guessing they must think they can't make enough money off these shoppers (or potential shoppers) to pay for printing. I'd be surprised.

[Image of: View Braintrust Panelist button]
Dr. Stephen Needel, Managing Partner, Advanced Simulations

What does Safeway plan to do with the 35% of their customers they are not currently targeting? If they have done their homework and the current 65% they are targeting will grow to 80% and do 90% of their sales then all paper will not only be obsolete but very inefficient.

There is a ROI that every retailer needs to do to make the transition. Will it happen? Just ask the newspaper and magazine industry which way their business is trending.

[Image of: View Braintrust Panelist button]
J. Peter Deeb, Managing Partner, Deeb MacDonald & Associates, L.L.C.

The death of the supermarket circular has been prognosticated many times over my time in this business. In fact, I predicted that paper ads would go away back in the 1990s when loyalty card programs came on the scene, full of the promise that targeted direct to consumer offers and content would render the weekly ad obsolete. I have been wrong about a few things over my career, but never as blatantly as putting the RIP sign on paper ads. They live on.

Certainly Safeway and Kroger have gained a level of critical mass with their loyalty programs where they can at least talk about reducing the number of pages they print each week. In fact Kroger has done so, in some markets, going from eight pages to six, and then publishing many of their "qualifier" items, (items that brands pay the retailer to put in the ad), in the Kroger online version of the ad.

So for those retailers that can reach 60% to 70% of their patrons with digital content, paper is already being spared.

But aside from Kroger and now Safeway, it remains to be seen how many other retailers will have the size and clout to drive content digitally and consequently convince brands that they will receive the same reach and impact as the paper circular.

My instincts tell me that there are too many fortunes being made in the FSI and printing business for the paper coupons and weekly circulars to go away anytime soon. My sense is that Safeway will try to eliminate their weekly ads in some markets by year's end, but will likely find the sales will drop when doing so, and will find that reducing pages of the ad in tandem with a robust direct to consumer digital approach will be the optimal formula for several years to come.

[Image of: View Braintrust Panelist button]
Mark Heckman, Principal, Mark Heckman Consulting

As the political election season is to TV ads; grocery ads are to newspapers. Losing them would put a serious hurt on their income stream. It is going to happen eventually. Safeway is a forerunner in this movement. If it even has a sense of success to it, others will follow like a herd of cattle.

[Image of: View Braintrust Panelist button]
Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

In 2010, Los Angeles, CA banned the use of plastic bags. Many people bemoaned the loss of their bags, the expense of buying recyclable ones, purchasing the same bags they got for free now at $.10. Oh, the humanity! But it was a bold move, people adjusted, and I'm sure the environment is better for it. In the same vein, the savings on paper waste outside of monetary savings has got to be a huge impact and factor no one is really addressing. According to the EPA, in 2010, 73% of newspaper was recovered for recycling, but only about 37% of the fiber can be used to make new paper products, with 33% coming from wood chips and remaining 33% from whole trees and other plants. That's too much waste.

It will be interesting how this plays out for Safeway, and if it's remotely successful, other grocers will absolutely jump on the bandwagon. Targeting data down to the household is a marketers dream, and is absolutely the driving force behind the strategy shift. It's a smart business.

[Image of: View Braintrust Panelist button]
Zel Bianco, President, founder and CEO, Interactive Edge

Wow ... such negative response for a forward-thinking retailer acting in a 21st century fashion. While a total elimination of paper might be a bridge too far, a major switch to digital isn't radical at all; it's sensible. Shoppers are evaluating purchases before buying (particularly in tight economic times) and many (most?) are doing so online and through mobile devices. That's not to mention the cost savings of going digital or even the robust analytic capabilities of digital advertising and promotion.

No one leads by continuing to do what everyone else is doing and assumes is conventional wisdom ... leadership requires bold action and a willingness to enjoy the benefits of what few are willing to jump in and do.

Matthew Tilley, Director, Marketing Communications, MaxPoint

To the first half of the question, of course! As we see fewer and fewer print opportunities, and fewer and fewer people actually reading print, it goes without saying. As for loyalty programs, they will not be the demise of print ads. But retailers will need to know how and where to find their customers to make sure they are staying front of mind. Loyalty programs are, of course, one way to do that.

Lee Kent, Let's meet share and succeed in Retail, YourRetailAuthority

I'm reminded of Pepsi's vaunted leap into social media combined with cancelling TV. This effort survived only about 3 months before Pepsi figured out how much they were losing.

Safeway's desire to do this is understandable. However, I don't think they'll find it as productive as they claim. There is tremendous, well researched documentation of the limitations of loyalty programs. This shows that today's loyal is next months brand abandoner. This means Safeway will need a substantial incoming group of new adopters—where will that come from?

The smartest media strategies evolve at this point. Retailers should leverage online coupons without destroying the offline media strengths they've built over the decades.

Doug Garnett, Founder & CEO, Atomic Direct

As someone who cut his eye teeth on print advertising at the country's two largest newspapers in Chicago and Philadelphia (back then), I cast a nostalgic tear for the inevitable from print to squint.

Today the future of print ads struggles against being mastered ... but the dye is cast and print is already in the past. Grocers will modify to what's occurring and embrace more and more digital marketing offers.

The cause lies not so much in loyalty programs as in the winds of change.

[Image of: View Braintrust Panelist button]
Gene Hoffman, President/CEO, Corporate Strategies International

I know that retailers want to do this, but while I am certainly an online shopper, I even look at ads for stores I am not going to shop. I have two Millennial daughters who are highly digital as well, and they still want to see the ads.

I can see reducing the number of pages in the ads, etc, but not eliminating completely. That is just ignoring your occasional or lapsed shopper. How do you gain new shoppers with only online advertising?

'TP1012'

Two of the primary functions of advertising: To attract new customers and to promote to existing customers. With online trumping print in some areas, it makes sense to spend more time advertising online. This isn't limited to just the grocery industry.

That said, the retailer still needs to maintain a presence to attract new customers. The challenge of using a loyalty program as the sole focus of an advertising budget leaves out the "attracting new business" part of advertising and promotion.

There are other forms of advertising, outside of print, that can focus on the new business. The bottom line is that there needs to be a balance of direct advertising/marketing to existing customers and advertising/marketing to new ones.

[Image of: View Braintrust Panelist button]
Shep Hyken, Chief Amazement Officer, Shepard Presentations, LLC

Safeway is correctly interpreting the long-term trend in my opinion. Personalized deals are on the rise while circulars are losing relevance. FSIs will die a harder, more lingering death, I think, as brands struggle to alter the marketing mix.

The big wildcard in all this is the evolution of first-generation frequent shopper programs. We are moving toward a post-loyalty reality, dominated by SoLoMoMe, not cards.

[Image of: View Braintrust Panelist button]
James Tenser, Principal, VSN Strategies

I might be wrong, but I think the majority of coupons are still clipped from newspapers. Also, the circulation of newspapers is declining, but it is still a mass medium with shopper reach way beyond coupons.com or even Facebook (who goes there for grocery trip planning?).

[Image of: View Braintrust Panelist button]
Joel Rubinson, President, Rubinson Partners, Inc.

Looks to me as if Ryan and Jamie got it about right. It is not really about how long grocers use newspapers to distribute circulars, its about how long newspapers continue to offer the service. Some magazines have gone 100% digital already.

Then the issue becomes "what vehicle" will offer the ability to effectively attract new customers.

Rebecca Kane from Ahold spoke on this last year. They were trying to figure that out...and the experiment was ongoing.

Mike Spindler, Managing Partner, Panther Mountain Companies, LLC

In the long run, yes. But the long run could be a very long time. In the meantime, the right answer is likely reductions in print: reduced market coverage, reduced page counts, and reduced frequency.

But which reductions are the right ones? It is a complicated balance of measuring print impact (hard but critical to do right) and understanding true marginal costs. Those who get this right will make tens of millions in profits beyond those who take a much broader brush approach (e.g., kill print, continue print, or the ever-popular swerve from guardrail to guardrail between cutting and bringing back print).

[Image of: View Braintrust Panelist button]
Jonathan Marek, Senior Vice President, Applied Predictive Technologies

Across the clients we have worked with, the weekend circular consistently does not drive incremental revenue. However, the practice of maintaining the circular remains, because retailers are able to charge exorbitant marketing fees to suppliers to participate, which drop to the bottom line in most part.

The movement to all digital makes perfect customer sense. However, the impact to the bottom line means that grocery retailers will be slow to make the change.

[Image of: View Braintrust Panelist button]
Mark Price, Managing Partner, LiftPoint Consulting, Inc.

I recently took a supermarket circular to Walmart and noticed they simply had lowered prices below the competitor's advertised prices. No loyalty card needed, no limits. Really, what does all this loyalty program stuff really mean? Walmart had rendered the competitor's loyalty program and advertisement worthless.

David Livingston, Principal, DJL Research

Are current print ads more expensive than electronic? Yes. Are they often not targeted to the shopper receiving them? Yes. Do many of them get discarded, unused, unseen, etc.? Yes.

However, the answer is not to throw the baby out with the bathwater. IMPROVE the messaging contained in print over what is currently passing for "content." Help me (shopper) to accomplish and to PLAN my shopping trip. Electronic media will serve to interrupt me WHILE I am shopping, it is less effective as a planning tool WHILE the shopper is at home considering where to shop, what to buy, how to meet the household jobs (cleaning, feeding, celebrating, delighting, entertaining, etc.).

Print allows for that (ever try to read something on a smartphone that was more than 3 lines long???) and contributes to the "planfulness" (I made that word up) of the shopper. What electronic media have taught of us is to be more/better targeted with our messaging (or not!), but each has a place at the table.

I think the Safeway decision is premature and is being penny-wise and pound foolish. Perhaps as the technology evolves (or somehow my aging eyes improve)—this will/should be revisited. For now, I am giving this a thumbs-down.

[Image of: View Braintrust Panelist button]
David Zahn, Owner, ZAHN Consulting, LLC

It's not so much loyalty programs, but technology advancements that are making circulars obsolete. Loyalty is designed to better target offer to the right consumer at the right time. They can do this through direct mailings (custom) or through electronic media outlets including web, Facebook, and Twitter. For example, Ahold and A&P have similar programs. Both groups still send out targeted mailings to consumers (custom selection of coupons).

Circulars have served their purpose and over the next few years, we will see more and more retailers pulling away from this cost intensive approach of advertising in favor of electronic versions and custom mailings. The circular is not dead, it is just evolving.

[Image of: View Braintrust Panelist button]
John Boccuzzi, Jr., Managing Partner, Boccuzzi, LLC

Yes. Printing and reading print is both a dying art and a dying marketing avenue. As time progresses, the future is with digital, personalized marketing. Soon, with implementation of 'smart appliances' the network will detect your current inventory in your refrigerator and market directly to you via a screen display, product suggestions, sales ads, product info, etc. You will then click to order and the total price will be deducted from your bank account. You will go to the store with this info and retrieve your items.

'secondopinion'

Okay, help me out here; less than satisfied with the 4U program, but this article might get me to give it a more thorough look. In our market, Wegmans is a new player and I NEVER have seen an FSI from them. We get a great magazine as loyalty perk. Is this how they operate in all markets?

'Stanaggie'

Based on customer focus groups and research from supermarket venues that I have viewed, the results showed approximately 70% were retrieving their ad or circular via some form of electronic media whether that be desktop, laptop, tablet or smart phone.

The current survey, as I write shows about 66% to 35%. Close enough. The numbers shifting to electronic distribution have doubled in two years alone. There is no indication that the pace will change.

As more and more local papers reduce their distribution days or eliminate it completely, this will increase the pace. Direct mail is only a interim temporary shift as newspapers decline. That shift is temporary and will reduce as well as the USPS itself nears its obsolescence.

As one whom has been slow to make the shift myself, I can't imagine going backwards. The speed, as well as, the access is too much to even consider not expanding to all forms of retail interaction.

We're in a sort of a second phase of the revolution, that being the smartphone and tablet phase. My first step in that was the tablet, then followed by the smartphone. What will be the next phase of the revolution? Exciting thought, isn't it?

'Scanner'

This is a natural evolution, and it is great to see this happening in the grocery biz, after decades of print ads. Let's see if this helps move the entire industry!

[Image of: View Braintrust Panelist button]
Ralph Jacobson, Global Consumer Products Industry Marketing Executive, IBM

Yes, Safeway is a clear leader with this program and as it continues to succeed, others will follow. This is the same meta trend that killed classifieds.

What will be interesting to see and what I don't think we know the answer to yet, is how grocers and other heavy circular advertisers will do acquisition marketing once they've reduced print as a part of their mix. I'm sure they will find a way, the cost savings are just too compelling.

[Image of: View Braintrust Panelist button]
Martin Mehalchin, Partner, Lenati, LLC

Not any time soon. Print ads are a well-established advertising medium for the retail grocer and both they and their customers use this medium on a regular basis to find/promote deals. Breaking this mindset will take time and education.

[Image of: View Braintrust Panelist button]
Kai Clarke, President, Kowa Optimed, Inc.

Since the mid '90s, I have been hearing, "death to the circular." In the years since, technology has lead to improvements in data mining and digital tools that have led to new ways in which people connect with other people and enabled more targeted ways in which businesses can connect with consumers and shoppers. This includes fueling that targeting process with insight derived from loyalty and other shopper data. But, just as it was in the days when businesses only had print, outdoor, radio and broadcast TV, it is still to me a game of balance.

How will Safeway bring in new shoppers or attract those who are less-engaged than Safeway's current best shoppers? Strictly through digital means? Perhaps, but I would suggest that the probability of that in the near term is quite slim. Clearly there are opportunities to create a better circular, one that works harder to increase loyalty and attract more people who have the propensity to become a "best shopper"—a circular that perhaps "breaks through" by being less predictable or one that isn't cluttered with hundreds upon hundreds of ad cuts, that often times do not contribute positively to sales but only to the revenue stream against which merchants are often measured. Or better still, a circular that is created by using some of the same insights generated from the loyalty data that is used to inform some of the more targeted communications.

Mr. Burd talked about how just 5.4M of these more-loyal Just 4U customers account for about 45% of sales. That still leaves 55% of sales that still come from those that walk into one of his stores, not driven in by that week's targeted offerings that were "Just 4 Them." Something got them there. Perhaps the circular played a key role.

A game of balance. And also one of continuous improvement.

RON ORGIEFSKY, VP, EYC

Other chains will surely follow if Safeway is successful after eliminating all print ads. But my hunch is that it will be later rather than sooner.

[Image of: View Braintrust Panelist button]
John Karolefski, Editor in Chief, CPGmatters.com

I would hope to see other grocers join in this new manner of delivering coupons. While there is always room for paper as a delivery vehicle and I would not eliminate it entirely, there are a growing number of consumers who prefer to have their coupons with them in a portable and flexible style.

Those who live by the smartphone will shop by the smartphone. Having coupons on board makes it more likely that consumers will take advantage of offers. Linking these coupons and offers to loyalty program or club membership gives a data advantage to the grocer.

[Image of: View Braintrust Panelist button]
Bill Hanifin, Managing Director, Hanifin Loyalty LLC

Before we get all warm and fuzzy about this sales and profit bump for Safeway, remember this is another discount program that costs money. Once they stop the intense start up marketing investment and get down the the "real" world and it continues to pay off then we might have something...but there will always be the customer that wants the "flyer."

True loyalty begins when the shopper doesn't leave you for a better price because of all the additional value you provide them.

'rrevins'

The bigger issue is building a consistent model that works for supplier and retailer and sharing the efficiencies. Short term, as buyers and Cat Mgrs are introduced to digital, there usually are punitive damages for not incrementally supporting shopper-facing advertising.

T FUQUA, brand manager, Tyson

Search RetailWire
Follow Us...
[Image of:  Twitter Icon] [Image of:  Facebook Icon] [Image of:  LinkedIn Icon] [Image of:  RSS Icon]

RetailWire's
Getting Started video!

View this quick tutorial and learn all the essentials...

RetailWire Newsletters