Cards bring Kroger valuable information

CINCINNATI --- Lisa Williams has never liked sorting through coupons, and she no longer has to at Kroger grocery stores.


Every few weeks, coupons arrive in Ms. Williams' Elizabethtown, Ky., mailbox for items she usually loads into her cart: Capri Sun drinks for her two children, Reynolds Wrap foil, Hellmann's mayonnaise. While Kroger is building loyalty, Ms. Williams is saving money without searching through dozens of pages of coupons.

"I'm not that big a coupon-clipper," she said. "It seems like a lot of coupons you see are (for) things that you never use."

Though the recession has revived penny-pinching, Americans are still redeeming only 1 percent to 3 percent of paper coupons. In contrast, Kroger, the nation's largest traditional grocery chain, says as many as half the coupons it sends regular customers do get used.

Kroger's part ownership of a data-mining firm allows it to use the reams of information its shopper cards collect in many ways.

Simon Hay, the chief executive of dunnhumbyUSA, the data-mining and marketing operation Kroger co-owns with a London-based company, said targeting promotions becomes even more important in a recession.

Many retailers have loyalty cards, and some offer "instant coupons" at checkout based on buyers' habits. But dunnhumby, named for founders Clive Humby and Edwina Dunn, who are married, is about more than coupons. Kroger also uses dunnhumby's analyses -- which the firm augments with customer interviews -- to guide strategies for promotions, pricing, placement and even stocking variations from store to store.

"You know you're going to sell milk, but not all stores sell milk in the same ratio," said Kroger President Don McGeorge. "Tide detergent sells everywhere, but not evenly everywhere. In some areas, Gain sells more."

DunnhumbyUSA has signed up such other big clients as beverage maker Coca-Cola Co., home improvement chain The Home Depot Corp., consumer products maker Procter & Gamble Co., department store chain Macy's Inc. and food makers General Mills Inc. and Kraft Foods Inc.

John Verdi, the staff counsel for the Washington-based Electronic Privacy Information Center, said retailers should accumulate as little data as they need to provide discounts -- and ensure it won't be stolen or misused.

Mr. Hay said it is crucial for his company to protect customers' privacy by using the information dunnhumby gathers only to help retailers understand buying habits.


MINING CUSTOMER DATA: Kroger Co. teamed with London-based dunnhumby to learn about customers' behavior -- from which brands they buy to what kinds of promotions they respond to -- by analyzing data gathered by the grocery chain's loyalty cards.

TARGETED COUPONS: Kroger says about 95 percent of a recent mailing was tailored to individual households based on their shopping habits, meaning customers received coupons mainly for items they regularly buy.

GETTING MORE: In addition to targeting its coupon mailings, Kroger uses the analyses to guide strategies for promotions, inventory and other business activity. Now, dunnhumbyUSA is signing up other major U.S. retailers and consumer companies as clients.

-- Associated Press