A&P Opts For 2-Way CRM Strategy With Digital Coupons

Written by Evan Schuman
November 19th, 2009

As the $9.5 billion A&P grocery chain eyes the future of coupons and CRM, its top CRM executive likes what he sees in two-way CRM dataflow but is much less enamored of most mobile approaches. In particular, he points to unacceptably inaccurate barcode scans from phone displays.

The chain is officially known as The Great Atlantic & Pacific Tea Company and operates in the U.S. in 435 stores in 8 states and the District of Columbia as A&P, Waldbaum’s, Pathmark, Best Cellars, The Food Emporium, Super Foodmart, Super Fresh and Food Basics. The grocery legend trades on the New York Stock Exchange as GAP, given that it was founded in 1859—110 years before the clothing chain bearing that name opened its first store.

But these days, the grocery chain is trying to plot its tech future and has recently moved to one version of online coupons. Its initial foray into paperless discounts is simple: Consumers hit a store Web site, identify themselves with their loyalty card numbers and select various discounts, all financed by various consumer goods manufacturers.

The choices are saved and then can be accessed again when customers use their CRM cards to identify themselves at checkout. If consumers don’t have their cards, they can instead identify themselves by keying in their phone numbers.

For A&P, though, one of the key benefits is a sort of two-way CRM gain, said Don Yee, A&P’s VP of CRM, online sales and customer care. The vendor the retailer is working with, Zavers, benefits because it learns about the consumer via a slice of the chain’s CRM database that A&P is sharing with them, ostensibly to help Zavers deliver more targeted coupons, which is a plus to both the vendor and its manufacture clients.

In return, though, Zavers delivers back to A&P extensive information about the coupon-selection choices that A&P’s customers make. There’s a catch: A&P may know what each customer ends up buying, but Zavers will know first—and, until it shares, know exclusively—what options that consumer was shown before the final choice was made.

Although all is far in love and war, the rules are different in marketing. Yee stressed that the A&P contract with Zavers prohibits the free-agent vendor from using any of the chain’s data “to enhance a competitor. They’re not allowed to use our customer data” for a rival.

Zavers starts off the process looking for customers in key ZIP codes that its consumer goods clients want to target.

Like every other retail chain, A&P is seriously examining Mobile Commerce options, Yee said, but the grocery has made more decisions about what it doesn’t want than what it does. “We do not want a means for having the barcode on the cell phone” because Yee has found such efforts to be “not too accurate.”

Yee is not alone among retailers having concerns about direct phone barcode scans; others are complaining about glare or even excessive dirt impacting read rates. But the A&P exec said his concerns are more generic, as in “the imaging of the mobile device itself and the readability of the barcode on the mobile.”

Another factor is that chains need to deal with a staggeringly large number of different phones, with very different screens, and they must interface with all of them with the same barcode scanning wand.

That’s pushing Yee to focus on true back-end server services, where the phone—just like the digital coupons that the chains are just now starting to accept—acts solely as an authenticator, an identification device. The real data communications happen on the backend, server to server. In a sense, it’s treating both the phone and the POS station as dumb terminals, with the real magic happening elsewhere in a more controlled environment.

This approach would also advance Yee’s goal of simplifying matters for consumers, who sometimes—with other chains, Yee said—have had to register multiple times to get access to all possible coupons. It required “customers to register each and every time in order to receive the offerings,” he said. Instead, A&P wants a server (possibly cloud) system “feeding into one pipeline directly into our POS system. Customers could then receive an alert on their mobile device, telling them of new offerings. They could open the app, see the offer and select the offer. We want one gateway and for the digital coupon to be agnostic.”


2 Comments | Read A&P Opts For 2-Way CRM Strategy With Digital Coupons

  1. bill bittner Says:

    The A&P and Zavers approach to POS discounts makes all the sense in the world. Even though it is still a long way off, retailers must begin preparing for the long term separation of their marketing and distribution roles. The Internet will become the key marketing vehicle and the store will continue to focus on its distribution role. An interim approach might be to order online and pick-up at store, but ultimately home delivery will prevail. This will be especially true in A&P’s northeast market area where trips are planned not by their distance but by the number of traffic lights along the route. This concentrated population area makes it even more viable to separate the retailer roles.

    Assuming my outlook is correct, retailers need to be focusing much more on their Internet presence. The website needs to be much more than just an online store. It must focus on a “concierge role” with consumers and a “broker role” with manufacturers. This means that for consumers it needs to offer reasons to shop the retailer and expand the assortment of items. The unique position supermarkets hold is that many of their products have short shelf lives and drive frequent visits to the store. This means that supermarkets have frequent opportunity to deliver products to their customers. If they can use the Internet to expand their product offerings, support consumer menu planning, develop charity affiliations, link to online banking, etc. they will build a consumer relationship that goes beyond being a source of products.

    The retailer’s broker role can help manufacturers reach particular customers who would use their products. By building their relationship with consumers and using the website to leverage that relationship with manufacturers, retailers should be able to elicit special allowance and other marketing discounts from their suppliers that allow them to pass on even greater savings to their customers. This is a win/win as manufacturers are able to reach targeted customers and customers receive better prices.

    I have tried the A&P system. Their website is a great start and is full of potential. As a consumer, the biggest weakness I saw was that the discounts appear as a single total on the receipt. From an operating perspective this also creates an opportunity for arbitrage as consumers buying on discount could return for full credit. I don’t think this is important at supermarket price points but other retailers might find it an issue.

  2. andy Says:

    I agree. Great A&P and its Lower Price Project is a start, but everything, zavers,,good deals, Easy Solutions, the weeky flyer, all must somehow be integrated to maximize customer convenience.

    All of these are tools in the customer’s arsenal to make his/her scarce grocery dollars increase in purchasing power. Those who do not take full advantage of these tools are not maximizing their potential savings.


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