CONSUM CASE STUDY
THE CLIENT, BACKGROUND
Consum is a Spanish leading chain of supermarkets created in the 70’s with major presence in the Eastern and Southern Spain. Consum’s sales network is constituted by more than 600 point of sales, a labor force of 10,000 employees and its turnover exceeded 1,700 million euro in 2012. Its loyalty program started back in 2005 with a customer card and some benefits associated. Nowadays, this loyalty program has nearly 2,000,000 customers.
The supermarket chain has considerably grown in the past years, however the current economic situation end 2011 and the competitiveness of the industry brought its Loyalty Department to raise new initiatives to increase sales and build loyalty among shoppers.
There exist 3 trigger factors that made them take this decision. The progressive growth of white label products (more than 40% of sales in 2011) meant a constant reduction in Consum’s profit margins. It was absolutely necessary to find an alternative formula to balance this increasing reduction of margins. For example, boosting the sales of branded products, that obviously provided a higher margin in the income statement.
The growing competition of Mercadona, the leading retailer in Spain with a market share of more than 20% in 2011 and strong geographical presence where Consum is, made compulsory to improve the loyalty program to fight against the low prices policy of Mercadona.
The Loyalty Program of Consum had 2 main promotional axes. The first one, segmented promotions sent by postal service that allowed to receive a monthly check with all the accumulated discounts. The second axe, massive promotions in the point of sale. Nevertheless, redemption figures of the traditional discount coupons and the incremental sales generated could be better. This clearly meant a business opportunity for Consum.
To face the increasing competition, reduction of margins and optimization of loyalty programs, the Loyalty Department of Consum contacted Good Deal in order to find an innovative solution. The purpose was to design a new communication and promotional channel for all their customers able to maximize the use of segmented discount coupons, able to increase shopper sales thanks to the higher use of segmented promotions, and able to involve brand manufacturers to grow sales of their own portfolio, in addition to generate new income to finance this new channel.
The solution we developed to face such a challenge was The Coupons Machine, an interactive kiosk located in the entrance of supermarkets that allows customers to identify themselves with the Consum’s loyalty card and print customized discount coupons according to their shopping habits. The segmentation strategy of promotions was determined between the Loyalty Department of Consum and Good Deal, introducing new criteria to help improving the suitability of discounts.
The solution was constituted either by the hardware components of the kiosk (PC, touch screen, card reader and thermal printer), the software of the kiosk and the software to manage the promotional campaigns and content.
In order to better identify the kiosks in the point of sale, we customized the hardware according to the corporate image of Consum. This new channel also required the involvement of Consum’s employees in the project, from the Loyalty Department and Purchase Department to the supermarket staff, which had to teach customers how to use this new promotional channel. The whole communication effort was led by the Loyalty Department, promoter of the initiative.
On the other hand, a part from training the employees, this new channel required the creation of a communication campaign in the point of sale to explain shoppers the benefits of The Coupons Machine. To do it, an action plan was drawn: the presence of hostess during the firsts Fridays and Saturdays of the launching, sending at home an explanatory leaflet to the customers, delivering explanatory leaflets in the point of sale, creation and communication of a welcome coupon to incentivize the first use of the kiosk to those new loyal customers and incentives to those supermarkets with a higher rate of usage.
In relation to the content of the kiosks (the discount coupons), Good Deal directly managed with the manufacturers the raising of promotions according to the criteria previously specified with Consum: 1) which coupons could be included in the new channel taking into account the Consum’s channel policy 2) the types of discount taking into account their promotional policy and 3) the strategy of segmentation according the possibilities of their CRM system.
Based on these premises, manufacturers could choose the products, discounts and desired segmentation. An active participation of manufacturers that allowed to achieve a return on the channel and generate additional income according to total number of visualized coupons.
Once all the information about all of them was gathered, Good Deal sent it to Consum in order to design the final segmentation with their CRM and create the new software campaign to manage the kiosks content.
KEY SUCCESS FACTORS
From all the aspects involved in the success of the new channel, there were specifically four that would deserve a special mention:
1) Use of Kiosks: the kiosks were placed in the entrance of supermarkets so they could easily be recognized. An aggressive communication campaign was also brought up in the Introduction Stage to make them accessible to the highest quantity of customers.
2) Coupons, variety and quantity: each month were gathered more than 150 promotions from the most important Spanish mass consumption manufacturers. Their coupons were complemented with coupons from the fresh food sections and other coupons specially selected by the Loyalty Department of Consum. The fact of having a high number of category promotions of different products increased the possibility of customers finding the coupons more attractive.
3) Discounts: manufacturers were hardly committed with aggressive discounts between 10% and 20%, even higher in some cases reaching 50%. This fact raised the attractiveness of coupons and the possibility of customers printing and redempting them.
4) Segmentation: the options to draft the segmentation were easy to understand by manufacturers and ensured the assigned product was relevant for the shopper, either because they bought it or because they bought a product belonging to the same category.
At a qualitative status, GFK carried out a survey among shoppers and users of the Consum’s kiosk during the launching of the Project late 2011. This survey showed that 9 out of 10 shoppers preferred to receive the coupons through the kiosk just before the purchase than receiving them in the check-out cashier after paying. Thanks to the kiosk, the coupons did not get lost, forgot or expired at home. Additionally, 9 out of 10 shoppers considered the kiosk a very easy and practical way to obtain the coupons.
The excellent acceptation of this channel among the shoppers was also reflected in the achieved results. On the one hand, redemption of coupons improved considerably if compared to the average redemption of other promotional channels. On the other hand, Consum supermarkets with an implemented Coupons Machine were able to turn a 12% of their loyal customers into monthly users of the kiosks, reaching even 25% in some cases. Taking into consideration that the average traffic of loyal customers was 4,000 customers a month, the loyal users of the kiosk turned to be 480 per month. Excellent figures that would progressively improve as the channel gained popularity.
This new promotional channel was also able to generate an 8% of incremental sales. The behavior of kiosk users compared with the non-kiosk users in the same period of time of the previous year, according to data calculated by the Loyalty Department of Consum, was very positive. Kiosk users raised their purchases by 12€ per month if compared to the non-kiosk users in the same period of time of the previous year.
It should be noted the difference of behavior among the different groups of shoppers, being the group of less loyal the one with better performance and a higher incremental sales rate. In this case, the kiosk turned to be a powerful tool to influence in the decision of purchase of the less loyal shoppers that share their purchases among several supermarkets. The kiosk offered them the possibility to take the most of promotions and buy products they already planned to take in another supermarket.
The average monthly consumption of those 480 shoppers was approximately 150€/month, what meant that total incremental sales raised by a single kiosk in one supermarket was 5,760€/month, an amount that perfectly covered the expenses of such a channel and allowed to payback the investment and reach the settled goals.