Ahold increases loyalty and basket size with personalized coupons

This article was published in the August 2016 issue of STORES Magazine.

Whether it’s a coupon for half price, buy one/get one free or a simple 20 percent off, shoppers are still attracted to good deals. There was a time when retailers could distribute coupons in mass quantity to get consumers in the door and increase basket size, but now the digitization of payments and access to consumer information allows retailers to be far more targeted in their offers.

In business for more than a century, Netherlands-based Ahold serves markets in the United States and Europe. It has nearly 800 supermarkets across the United States with 121,000 associates and more than $26 billion in 2015 sales across four branded regional divisions, including Giant Carlisle and Stop & Shop New England. Ahold also operates Peapod, one of the nation’s leading online grocery shopping and delivery services.

“Getting coupons as personalized and targeted as possible increases performance.”

— Matt Simon,
Ahold USA

Much like any grocer, coupons have long been a part of business for Ahold. Matt Simon, vice president of loyalty and digital marketing at Ahold USA, says there has been a progression over the years from mass coupon distribution to customization.

“We want to make sure the coupons are relevant to the customer, that they’re timely, strategic and have the right offer value,” Simon says. “Getting it as personalized and targeted as possible increases performance.”

Category opportunities

Ahold works in collaboration with Catalina to make that happen. The personalized digital media marketing company specializes in delivering customized messages to shoppers based on their past, present and future buying behavior. Jason Test, senior vice president of retail brand development at Catalina, says the company’s coupon printers are in 26,000 food/drug/mass merchandise stores in the United States and 40,000 globally. Catalina works with most major brands and with such retailers as Target, Walgreens, Winn Dixie, Kroger and Rite Aid.

Either through opt-in rewards programs or anonymized credit and debit card data, Catalina tracks consumer purchase behavior by brands and categories. Test says the company obtains data on nearly 15 billion transactions per year from 260 million unique shopper IDs, spanning nearly 80 percent of all U.S. households.

This massive amount of actionable customer purchase data allows retailers to find interesting insights around loyalty, consumption and coupon preferences. Catalina users can capitalize on consumer shopping behavior by segmenting information by categories and brand.

“We can go in and look at household penetration for a particular brand or category,” Test says, “then we can sit down with the retailer and help them better understand opportunities in their categories.”

Customized campaigns

Simon says Catalina’s system distributes coupons that are relevant to the customer, timely and have the right offer value. All coupon campaigns have strategic goals beyond simply offering a discount, such as new product trials, increasing loyalty and basket size or driving spending in select categories.

Ahold’s coupons run the gamut, but the key common factor is that all offers are based on previous purchase history.

Coupons “run the whole gamut,” he says, including category offers, product offers, national brand offers, store brand offers and even bundles around meals. The one key factor they have in common is that all offers are based on previous purchase history.

“It’s about getting as personalized and targeted as possible,” Simon says. “That drives increased performance and it’s the main role in our partnership with Catalina.”

Ahold consistently uses variable campaigns to look for key areas of opportunity. It recently implemented what Test calls the “loyalty ladder.” Over a period of time from 12 to 20 weeks, the retailer will aim to drive total sales through various segments. The offers could be dollars off total baskets or in a particular category where they know the consumer likes to spend. Test says it is carefully aligned with key performance indicators to produce a measurable ROI.

“If we know someone normally spends $50, we might give them $10 off the next basket size of $75 or more,” Test says. “So for every $1 you spend, you might get back $5 in retail sales.”

Each register at Ahold’s stores is connected to a Catalina coupon printer that is integrated with the point of sale and Catalina’s system. During the payment process, Catalina matches up the customer’s card with purchase patterns and instantly delivers coupons for manufacturers’ brands, store brands and even in-store promotions. Simon says the ability to deliver relevant and valuable coupons based on shopper preferences can spark repeat visits and loyalty.

Targeted coupons can not only increase loyalty but entice shoppers to consider more products. Catalina’s recent study “Engaging the Selective Shopper” found that at a time of abundant choice at grocery stores, consumers on average buy less than 1 percent of available products in a store during the year.

Even top shoppers who account for 80 percent of all store purchases buy just 1 percent of available products. The study also found that “one size fits all” promotions and advertising don’t resonate with the majority of today’s selective shoppers.

Digital coupons on tablet, laptop and smartphone

Measuring performance

Test says every relationship with a retailer starts with clearly defining its goals at the beginning of the program. Catalina can also check in real time and make adjustments when things aren’t working. Most retailers measure the success of their campaigns through ROI and by meeting their targeted goals. While those goals are sometimes to solve problems, they often use the data to find untapped opportunities.

In one example, Test says a retailer may learn that a regular shopper buys formula and baby food but not diapers. That retailer may then be able to offer coupons and tweak the offer to entice the customer to increase their spending at the store in that particular category.

“They’re obviously buying diapers somewhere else,” he says, “and there’s a recognition you might have to fork out a heavy offer to get them to buy.”

While paper coupons remain popular, Catalina can use the same data to deliver coupons digitally to the smartphones of loyalty program customers. It can integrate with any app, website or digital channel to offer personalized mobile coupons from a pool of thousands of manufacturer-funded offers and promotions.

Test says a big advantage of Catalina’s technology is the ability to set up strong test controls and analysis to measure how the campaigns impact purchasing behavior. “Redemption is really a non-issue,” he says. “It’s more about the incremental lift in sales you get, relative to the cost you paid for the program.”

Ahold validates success in a variety of ways including incremental sales, trial rate, repeat rate and growth of basket size. According to Simon, it’s not about redemption rate but rather using detailed analysis to demonstrate slow, continuous and incremental improvements in customer loyalty.

On other occasions, performance indicators can cover things like driving top line sales and getting customers to try new products.