One of Metro Inc.'s prototypical customers is the "super-health-conscious" woman but the grocer recently found it wasn't serving her well enough. She likes to eat yogurt, but its stores carried only a limited array of the dairy product.
So in a recent test, Metro added another three metres of space in its dairy coolers for yogurt, while reducing slow-growth products such as margarine. The changes got customers buying more yogurt, but didn't hurt sales of margarine and the other scaled-back items.
"It's about giving customers what they want, based on what they're actually buying," Eric La Fleche, chief executive officer at Metro, said in an interview.
Now Metro is looking for more yogurt opportunities by hiring the British-based consulting firm that helped with its dairy pilot - and also helped grocery powerhouses such as Britain's Tesco PLC and U.S.-based Kroger Co. take on discounter Wal-Mart Stores Inc.
Metro is among a growing array of retailers racing to play Big Brother to its customers by keeping better tabs on their buying patterns to stock what they want - and keep them coming back. From supermarket titan Loblaw Cos. Ltd. to Canadian Tire Corp., they're developing more precise profiles of their most lucrative customers to reward them with redesigned loyalty programs.
Their goal is to gain an edge amid cutthroat competition for cost-conscious customers who, in tough economic times, are more apt to switch stores for a better deal unless they have a compelling reason not to.
The efforts can pay off. North American retailers with effective loyalty programs have enjoyed annual sales lifts of from 15 to 25 per cent among members, compared with non-members, according to loyalty researcher Colloquy, which is owned by the company that owns the Air Miles loyalty program. Retailers that participate in Air Miles, for example, have seen sales gains of as much as 42 per cent.
"All retailers are having to fight harder," said Martin Hayward, director of strategy at consultancy Dunnhumby in London, which formed a joint venture with Metro. Merchants are taking a cue from marketing tactics of the uber-aggressive British supermarkets by trying to make better use of the information provided by loyalty plans. Dunnhumby, a data company owned by Tesco, helps retailers keep track of exactly what shoppers are buying in order to figure out what they might want, and what discounts will capture their attention.
Dunnhumby is "a retailer's secret weapon," Citigroup analyst James Anstead said in a report last year. "It seems that Tesco's once-secret weapon is now becoming less of a secret," he wrote.
British market leader Tesco helped pioneer the loyalty trend with its Clubcard, giving customers rewards for spending at the chain and then tailoring merchandise to each customer's shopping habits. Most of Tesco's rivals have followed suit with card or voucher programs of their own.
In Canada, retailers need to tap into customer data to dramatically alter their product offerings in multicultural neighbourhoods, said Jim Danahy, managing principal at consultancy CustomerLAB. "For a retailer, especially a grocer, who must decide between tens of thousand of different products to put on each shelf in each and every location, it represents incredible power to fine tune for maximum sales and profit."
Loblaw is now putting a push on "customer relationship management," said spokeswoman Inge van den Berg. "We believe we have further opportunity to leverage our customer data to improve our connection with our customers." To help it bolster its work in the customer loyalty field, it recently hired Uwe Stueckmann, who helped develop Shoppers Drug Mart's high-profile Optimum plan.
Now Metro is counting on Dunnhumby to give it a loyalty lift. In its dairy-product test over the past nine months, it found that the super-health-conscious customer prefers low fat and other healthier-for-you milk. So Metro rearranged its dairy displays to stock milk by fat content and other attributes, rather than by supplier, Mr. La Fleche said. As a result, its sales of fine-filtered milk exceeded others.
The work will build on Metro's efforts to generate stronger results, which helped drive the retailer's same-store sales at outlets open a year or more by 2 per cent in its fourth quarter.
Q4 / 2009 / 2008
Profit / $84.4-million / $72.5-million
EPS / 77 cents / 65 cents
Revenue / $2.53-billion / $2.48-billion
Source: Company reports