Prog Grocer Sports Mktg Overview RJB 9.08

W W W . P R O G R E S S I V E G R O C E R . C O M • A H E A D O F W H A T ’ S N E X T
FRESH & EASY
from the inside
Score big with
LOCAL SPORTS
BEAT WAL-MART
without price
MAKE CUSTOMER
LOYALTY
work for you
Solid tactics for
A SOFT ECONOMY
FRESH & EASY
LOCAL SPORTS
BEAT WAL-MART
MAKE CUSTOMER
LOYALTY
A SOFT ECONOMY
To o l b o x f o r I n d e p e n d e n t s
A SPECIAL SUPPLEMENT TO
SEPTEMBER 2008
Building
BlocksEffective merchandising is in
the details—here are some top
tips of the trade.
Page 6

TOOLBOX FOR INDEPENDENTS
Table of
Contents
4 Independents Report:
Uneasy transition
A decidedly nonscientific poll suggests
Tesco still has its work cut out
for it in America.
6 Merchandising: Building blocks
Effective merchandising is in the details—
here are some top tips
of the trade.
8 Sports Marketing:
Play to win
Giant Eagle shows
that successful sports
marketing starts with
having the right
teammates.
10 Competitive
Strategies: Service
trumps price
You can compete with
discount retailers—Wal-Mart included—even if
your prices are higher, by devoting your operation to
providing great service.
12 Customer Loyalty: Best in slow
Plying your top customers with intelligent loyalty programs is a sure way
to make the most of this sluggish economy.
14 Economic Challenges: Soften the blow
Here are practical tactics retailers are using to help shoppers deflect
the impact of hard times on their eating habits.
www.progressivegrocer.com Progressive Grocer’s Toolbox for Independents • September 2008 • 3
4
6
8
14

4 • Progressive Grocer’s Toolbox for Independents • September 2008 www.progressivegrocer.com
Could the self-described “Whole Foods
with Wal-Mart prices” come even close to
meeting the ever-changing demands of time-
starved American consumers? What recruit-
ing strategies would the company unleash
to attract qualified workers to ultimately
staff more than 55 locations, and, more
specifically, how would organized labor in
the United States react?
Additionally, many observers were quick to
predict which existing stores would most likely
lose market share to Fresh & Easy.
As the first anniversary of the debut of
Tesco’s venture into America approaches, folks
are still asking,“How has Fresh & Easy fared?”
The jury’s still out
During a recent business trip to Las Vegas,
wherethecompanyhasopenedcloseto20stores,
I sought answers to that question from some
unconventional sources: my taxi driver, a store
employee at the location I visited, and a retired,
award-winning IGA retailer now residing in Las
Vegas. (Note: I also attempted to converse with
two customers who were shopping at a Fresh &
Easy store, but neither spoke English—and my
Spanish was, to say the least, no muy bueño!
Based on the comments I gathered, it’s clear
to me that the jury in Las Vegas is still out
regarding the impact of
Fresh & Easy.
“I’d say that the opin-
ions of people who actu-
ally live in Vegas are
much different from the
tourists and gamblers
that I drive back and
forth from casinos each
day,” says the 50-some-
thing taxi driver. “Over-
all, my neighbors and
others I’ve talked to say
that Fresh & Easy,at first,
seemed reasonably priced. But today they feel
it’s expensive, probably because they’re deal-
ing with the high price of gasoline.”
He continues:“Then there are the people stay-
ing at the casinos who don’t think much of the
[food] prices.They just want to find a grocery store
to buy snack items and drinks, because it’s a lot
cheaper than eating in restaurants on the Strip—
especially when they’ve taken a hit at the slot
machines.”
Inside perspective
He adds:“There was a lot of talk when they
first opened about their employees and hiring
practices. In fact, I recall a bunch of people with
signs picketing one of their stores when it first
opened. It was some kind of union protest. But
that’s all quieted down right now.”
Meanwhile the perspective from the inside
appears to be quite different.
“I left Best Buy to begin my career in the
food industry,” notes a manager trainee, one of
the few employees in the store during my visit,
all of whom were extremely courteous and
appeared to enjoy their jobs.
“So far it’s been a fantastic experience, and
the company offers so many opportunities for
growth,” adds the trainee.“I appreciate how we
strive to make things easy for our customers.
For example,most items are displayed just above
INDEPENDENTS REPORT
Uneasy transition
A decidedly nonscientific poll suggests Tesco still has its work cut out for it in America.
By Jane Olszeski Tortola
W
hen one of the world’s top three
retailers, U.K.-basedTesco, debuted
its much anticipated Fresh & Easy
Neighborhood Markets last
November in California, the entire
U.S. supermarket industry was abuzz with speculation
over whether the grocer would be successful, and what
the impact of that might be.

eye level, and customers don’t have to strug-
gle to reach items from high grocery shelves.
Also, we offer a huge variety of prepared
foods—everything from chickenAlfredo or rose-
mary chicken, to Fresh & Easy’s own sushi and
homemade Mediterranean pizza.The items are
very competitively priced, packaged attractively,
and they’re made fresh every day in our
100,000-square-foot central kitchen facility in
Riverside, Calif.”
Trying to sum up the customer feedback
he’s received, the trainee says,“Most of our cus-
tomers view Fresh & Easy as aTrader Joe’s with
Wal-Mart pricing.”
This employee’s obvious enthusiasm
notwithstanding, the feedback from an industry
insider, former Ohio-based independent grocer
Fred Shaker, is less sunny.
Service is key
“Based on my experience as a storeowner,
I feel the Fresh & Easy stores are really strug-
gling here in Vegas,” says the onetime IGA
International Retailer of the Year. “Unlike the
competition, including Smith’s, Vons, Whole
Foods,Wal-Mart,Albertsons, Costco, and oth-
ers, [Fresh & Easy stores] don’t offer the vari-
ety and service that you’d find in traditional
supermarkets. Plus the people I’ve talked to
who’ve shopped at the stores despise having
to use self-checkouts.”
The perishable merchandising is “dispro-
portionate,” Shaker also suggests. “In meat
and prepared foods, many of the offerings are
for one individual, and perhaps two people.
Yet in produce, most items are prepackaged
in larger containers or bags.An individual isn’t
going to purchase a five-pound bag of apples
or oranges, but most of the time that’s the
only size offered.”
Regarding customer service, Shaker says
not to expect to make contact with many
Fresh & Easy employees. “Once in a while
you’ll run into an associate working in an aisle,
and at the front end one cashier is assigned to
assist at all nine self-checkout lanes,” he says.
“People still expect service. Long term, you
can’t operate a successful business without
it. People want to talk to other people when
they’re spending their money.” I
“People still expect service. Long term, you can’t operate
a successful business without it.”
—Fred Shaker, retired IGA retailer
Fresh & Easy offers a broad range of perishable items, but retired IGA operator Fred Shaker, a LasVegas resident, believes the mix to be “disproportionate,”
as the meat and prepared foods are for one or two people, while produce offerings are prepackaged in bigger containers and bags.

In today’s competitive retail environment,
the most successful storeowners and managers
throughout the country are convinced that
operating with a more sophisticated and effec-
tive merchandising strategy in place is critical to
drawing customers into their stores again and
again. This is on top of the givens of location,
cleanliness, variety, competitive pricing, and
customer service.
PG elicited ideas from grocers, wholesalers,
and industry consultants on the most important
and practical ways to improve an independent
grocer’s merchandising strategy.We gathered
photos of merchandising and displays from
leading independents from across the country.
One thing is clear:When it comes to mer-
chandising, some grocers believe that “less is
more,” and focus on creating simple displays
in uncluttered spaces. Others seek to be more
adventurous in designing displays that cus-
tomers are sure not to miss—nor forget—while
perusing the supermarket.
Whether one approach is
going to be more effective
than the other
depends on execu-
tion and the level of
commitment that
the grocer has to
crafting a cohesive
and coherent mer-
chandising image.
Solidly in that
second class of
merchandiser—adventurous—is Jim Bonamino
of Fairfield, Ohio-based, world-famous Jungle
Jim’s International Market. Displayed above his
massive offering of hot sauces, for example, is
a life-size fire truck that appears to be sus-
pended from the ceiling. Now, that’s a hard-
to-miss merchandising display.
Of course, Bonamino’s customers would
expect nothing less from the always “full of
surprises” Jungle Jim’s, where a monorail cir-
cling above the selling floor is just the least of
the store’s theatrics. Bonamino himself is known
to walk the aisles of his store dressed in color-
ful costumes.
Bonamino has quite a few specific ideas
when it comes to merchandising.“You can have
the most creative facility in the world, but if it
doesn’t match the expectations of
your customers, it’s worthless,” he says.“At Jun-
gle Jim’s we’re constantly on the lookout for
wild ways to surprise our customers.”
He adds,“On the other hand, it’s sometimes
the smallest details that can have the biggest
impact when merchandising your store.”
Just what are some of the important details,
small or otherwise, to be addressed by inde-
Building blocks
Effective merchandising is in the details—here are some top tips of the trade.
“P
ile it high and watch it fly!” In years
past, this simple instruction seemed
to be all a grocer would need as a mer-
chandising philosophy. But that was
in pre-Wal-Mart times,
before supercenters spread far and wide and
big drug chains started selling grocery-type
items on at least one corner of the busiest
intersections in towns acrossAmerica.
These are examples of enticing fresh
food displays made even better with
foodservice ware from Rancho Santa
Margarita, Calif.-based Delfin.

pendents seeking to sharpen their merchan-
dising efforts?
Make sense
“First, it’s important to remember that cus-
tomers perceive value through their five senses:
sight, touch, scent, sound, and taste,” advises
Melanie McIntosh, a retail consultant and owner
of Vancouver, B.C.-based Inspire Retail Solu-
tions (www.inspire.bc.ca).The focus of her firm
is to help hundreds of independently owned
businesses develop merchandising strategies.
Says McIntosh:“We must appeal to as many
senses as possible to get customers actively
involved in the shopping experience.What we
see, smell, and hear directly affects what we
ultimately decide to buy.”
“Consider ‘sound’ in a supermarket,” sug-
gests McIntosh.“Music adds to the overall envi-
ronment of the store, and should appeal to the
customers you’re targeting. For example, if your
customers are on the younger side, trendy
music may be more appropriate. But it should
in no way offend older customers.
“In addition, the music must add ambiance
to the store, but it shouldn’t be so loud that it’s
immediately noticeable,”she cautions.“It should,
however,help to cover up
the sounds of those mov-
ing about,including other
customers, vendors, and
employees, etc.”
McIntosh, who holds
a B.A.in fashion merchan-
dising,also cautions retail-
ers never to underesti-
mate the power of taste.
“Those in the food
industry certainly know
the power of free sam-
ples,”she says.“On a per-
sonal note,while I can be very thrifty when need
be and pass over many unnecessary luxuries,
when it comes to food, I’m easily swayed. My
children beg me to take them shopping at Costco
just to try all the samples.”
“In fact,” she adds, “I know many
people who are now addicted to those
little frozen cream puffs that they inno-
cently tasted at a sample table.”
Showtime!
While McIntosh’s approach involves
using many aspects of merchandising to
enhance a store’s overall image and
attract customers, another respected
resource in the food industry, Structural
Concepts (www.structuralconcepts.com),
a case manufacturer based in Muskegon,
Mich., focuses specifically on the presen-
tation of fresh food.
Whether it’s bakery, deli, or other areas of
the store, Structural Concepts stresses that
effective merchandising is all about stimulating
the desire to purchase.
Regarding the merchandising of fresh food
cases, Structural Concepts offers the following
proven tips designed to enhance presentation:
• Black interior color: Black minimizes the
appearance of the display’s hardware, and allows
fresh, colorful product to stand out.The eye is
drawn to the food, and the display case disap-
pears.
• Glass shelves: The transparency of glass
allows light to filter throughout the display.
Food appears as though it’s floating. In addi-
tion, glass shelves (vs. wire racks) are more flex-
ible for the use of specialty serving ware, mer-
chandising props, etc.
• Tiered and angled shelving: Seeing as
much of the fresh food as possible is the key.
Tiered shelving brings the food as close as pos-
sible to the front of the display for maximum
product visibility on all display levels.
• Interior lighting: Lights, camera, action!
Without balanced interior lighting, the show
can’t go on.
• Removable shelves: Food products vary in
size. An effective display is one that has the
flexibility to adjust and/or remove shelves to
accommodate the variety of products your cus-
tomers want.
• Mirrored interior ends and rear doors:
Mirrors make the display appear larger and
fuller, enhancing the customer’s perception of
freshness.
• Create a theme: Be creative. Add mer-
chandising props like artificial flowers, bottles of
wine, or fabric to create an eye-catching theme.
• Specialty serving ware: Use specialty
plates to upgrade the appearance of the dis-
play and to add visually stimulating color. I
IGA stores nationwide work with supplier and
manufacturer members of the group’s Red Oval
Partnership.Above is a display designed by an
IGA retailer to promote an IGA marketing event.
A simple bottled water display can be turned
into a refreshing tropical waterfall with a little
ingenuity.

However, developing and executing pro-
grams that maximize a retailer’s investment is
no easy play to make, according to Rob Borella,
senior director of marketing and corporate com-
munications at Pittsburgh-based Giant Eagle.
“First, you must make the decision about
with whom you want to align your company,”
says Borella. “Fan avidity, store locations, and
identifying where an opportunity exists are key
components of the decision.”
The independently owned chain of 200-
plus stores, with
yearly sales in
excess of $8 bil-
lion, sponsors a
number of profes-
sional, semi-pro,
and collegiate
organizations,
including the
NFL’s Cleveland
Browns and Pitts-
burgh Steelers, but
also teams that
only a local could
love. It’s a strategy
that many smaller
independents can
learn from.
“We identify
ourselves as the
hometown grocer
in our markets, and
like to identify with
the hometown
teams,”says Borella,
who has been a part of the Giant Eagle team for
seven years.“When there’s not a professional-
league team in one of our markets, we look for
either minor-league teams or university partner-
ships to extend our reach into the community.”
Such is the case for Giant Eagle in the mar-
ket of Altoona, Pa., located in the foothills of
the Allegheny Mountains.“The Altoona Curve,
a popular minor-league baseball team, offers
family-friendly and affordable entertainment,
and we see a lot of Curve fans in our stores,”
says Borella. “They’re families on a budget
who are looking for a good value. Going to a
minor-league baseball game is a great way for
them spend an evening—and for Giant Eagle
to identify with a
community in which
we operate.”
Looked at in this
way, each market,
large or small, pro-
vides unique spon-
sorship opportuni-
ties. “Take, for
instance, the Colum-
bus, Ohio market,
where we operate a
number of stores,”
continues Borella.“In
addition to the Ohio
State Buckeyes, the
NHL’s Columbus
Blue Jackets are
extremely popular,
and have a huge fan
base. As much as
we’d like to be a part of the Buckeyes’ market-
ing, it’s not available to us because another
retailer, Kroger, for whom we have great
respect, has for years enjoyed that exclusive
relationship.Thus, we allocate the majority of
our spend in Columbus on serving as the offi-
cial supermarket of the Blue Jackets.”
That spend in all markets is, by design, less
Play to win
Giant Eagle shows that successful sports marketing starts
with having the right teammates.
S
ports-related marketing is an effective way
for grocers of any size to differentiate in the
market—and, just as importantly, it can pro-
vide companies with an
opportunity to leverage the
intense passion that consumers have
for their favorite teams and pastimes.
Rob Borella

about branding and more about support of the
community and driving traffic to Giant Eagle’s
stores, according to Borella.
Working the quadrants
Giant Eagle dissects each opportunity into
component pieces.“Basically, with sports mar-
keting we look at purchasing four areas of
inventory, or ‘quadrants’,” explains Borella.
“That big sign in left field, electronic sig-
nage, signage on the facility’s concourse—these
all serve as a branding component. Next, there’s
the team media piece. Securing radio spots,TV
spots, team publications, and Internet presence
are imperative to the effort.”
Also included in the inventory mix, says
Borella, are the hospitality component and
the promotion piece as the third and fourth
quadrants. “Ticket packages are used for the
most part internally and serve
as rewards for Giant Eagle asso-
ciates, and it’s through the pro-
motional piece that all of in-
store activation, such as offering
family discounts on event tickets,
takes place.”
“It’s the activation phase that
can be most challenging,” adds
Borella.“When you put together
in-store promotions, typically
what happens is that a team is
involved with a CPG company
who’s looking for a traffic-driving
promotion such as a sweep-
stakes event.
“The sweepstakes promotions
are nice, but we’ve found that the
business results are less effective
than promotions that can benefit
all of our customers. Therefore,
we’d rather develop programs
such as our ‘Steelers Advantage’
promotion, which has a number
of national CPG companies
involved, all of which manufac-
ture high-volume products.”
In the Steelers Advantage
program, when a customer buys one of the
participating products, he or she is provided
with an instant benefit such as a discount at
a team shop.
Borella says that
developing programs
where anyone participat-
ing “wins” is more suc-
cessful than those that in
the end award just one
grand prize. “[The ‘every-
one wins’ programs are]
tough and require a lot of
investment and coordina-
tion,” he suggests. “But
they benefit all of our cus-
tomers—not just one.”
Overall, Borella reports
that it’s through combin-
ing the four
levels of sports marketing inven-
tory that Giant Eagle wins.
“We have the signage, brand-
ing, visibility in team media, and
an enormous supply of event
tickets to distribute to associates
and customers.All of these com-
ponents allow us to leverage our
brand equity with the fans of the
team.”
In the final analysis, Borella
comfirms the importance of
luck in the mix as well.“A lot of
stars have to align in order to
drive traffic into our stores, to
create relevancy to fans and
customers, and to achieve the
objectives of both the retailer
and the sports team.”
Scoring runs
Without question, Giant Eagle
expects a significant return on its
annual multimillion-dollar sports
marketing investment. To calcu-
late the ROI, it turns to Niles, Ill.-
based Paragon Marketing Group,
which manages a sponsorship portfolio of $100
million annually and whose many clients
include Gatorade, ContinentalAirlines, One-a-
Day,Totinos, and Kaiser Permanente.
“We’ve developed a great working rela-
tionship with Tony Schiller, who oversees cor-
porate consulting at Paragon and assists Giant
Eagle in rationalizing and evaluating each
spend,” notes Borella. “Tony came from the
sports world and understands both the retail
and team sides of sports marketing.Through
Paragon’s proprietary model that looks at all
four marketing quadrants and assigns
weighted scores, and Tony’s expertise, we’re
able to calculate actual dollars generated by
our investments.
“Paragon is unique in that it provides our
company with a clear picture of how much we
invested, the dollar value returned, and how
we’d compare in other markets if we were to
have executed the same sports marketing pro-
gram,” says Borella.
“For us, it’s not all about visibility and eye-
balls and how many minutes we were onTV. It’s
about achieving real business results.” I
Giant Eagle’s successful sports marketing gambits
include tying its fuelperks! gas discount program
in with its sponsorship of the Pittsbugh Pirates
(far left). Other examples are its “Steelers
Advantage” program (left) and its support of
the NHL’s Columbus Blue Jackets (above).

I was curious to find out how aggressive
Wal-Mart’s Every Day Low Price Strategy really
was. I learned it was indeed aggressive, but also
that you can beat it.
I compared 50 of the most commonly pur-
chased branded items,the staples that most gro-
cers do everything in their power to price compet-
itively. Consumers are known for leaving one
store for another if they determine that these
staple items at the first store are priced too high.
The typical rule of thumb is to strive to equal
the market on all of these items. Obviously this
requires that grocers do their own frequent shop-
ping cart comparisons.Wal-Mart is infamous for
performing such aggressive price comparisons
for each of its stores. Each week its department
managers shop the competition’s stores, noting
prices; then they adjust pricing accordingly.
In this wayWal-Mart’s pricing is established
on a very local level. Indeed, two Wal-Mart
Stores in the same geographic area are likely
to have different prices, based on the specific
competition each faces.And contrary to popu-
lar belief,Wal-Mart’s goal isn’t to be the lowest
on every item in such a shopping cart compar-
ison—but you can bet the bottom total on the
Wal-Mart register tape will be.
In my comparison,I was careful to make cer-
tain I matched products exactly.What I found
was astounding:On those 50 staples in my com-
parison,Wal-Mart’s prices were fully 20 percent
lower than the prices at the grocery store.
But despite this obvious price advantage,the
parking lots of both stores were full of cars,and the
aislesweremuchthesame.Ibegantoquestionthe
theory that a grocer’s staples needed to be priced
the same as its discount competitor’s. On closer
observation I determined this grocer was thriv-
ing because the store provided great service.
Without great service, grocers must match
discounters’ prices on staples.With great serv-
ice, pricing becomes less critical, though still
important. (In a market where a grocer is
in direct competition with a discounter,
it’s recommended that the grocer’s pric-
ing stay within 15 percent to 20 percent
of the discounter’s prices.)
A grocer providing great service can
effectively neutralize the discounter’s price
advantage and level the competitive play-
ing field.The key is to capitalize on the fact
that shopping at a discount behemoth isn’t
convenient, and service there is almost
nonexistent. Not every customer is inter-
ested in the trade-off for a discounter’s
offering of low-quality products.This opens
the door for grocers to use their own stores’
stellar service and tailored product assortments
to gain competitive advantage.
Here are 10 lessons about service for all
grocers to embrace, regardless of whether
they’re in direct competition with a discounter:
1. If you’re not a discounter, don’t
try to act like one.
When it comes to competing against super-
stores,discounters,or category killers,grocers need
to avoid being pulled into price wars.It’s a battle
price operators must win, and will at any cost.
Once you’re sucked in, your business will spiral
downward as expenses rise and sales volume falls.
And there’s no turning back:By sending the mes-
sage to customers that you,too,are a discounter,
you’ll have changed their expectations—forever.
Control your own destiny by designing your niche
strategy with products targeting local tastes and
preferences, as well as great service.
Service trumps price
You can compete with discount retailers—Wal-Mart included—even if your prices are higher,
by devoting your operation to providing great service.
By Michael Bergdahl
T
his past year, I delivered a keynote speech at
the Montana Food Distributors Association’s
annual conference in Butte. As part of my
preparation, I decided to perform a shopping
cart comparison of grocery prices at a super-
market with those at a Wal-Mart Supercenter. I made
certain that the two stores I chose were a stone’s throw
from each other, and vying for the same customers.

2. It’s the little things that count.
Are your floors, windows, and bathrooms
clean? Customers either overtly or subliminally
may assume dirty facilities equal substandard
food quality. Are your shelves always well
stocked? Simply being able to find the prod-
ucts they want can persuade customers that
there’s no reason to shop anywhere else. Is
there staff in place to ensure enough cash reg-
isters are open? Customers hate to wait.
3. Customer loyalty card programs
are a way to show you’re loyal to your
customers, not the other way around.
Thestrategybehindloyaltycardsisbrilliant:You
reward customers for returning, by providing dis-
countsthatareonlyavailabletocardholders.Many
grocerswithloyaltyprogramshavefoundthemtobe
highlyeffectivenotonlyinretainingcustomers,but
also in gaining new ones. It creates value for cus-
tomers while earning a lifetime of loyalty to your
store. It’s one of the most effective tools you can
usetocounteractthepressurefromdiscounters.
4. Wal-Mart’s founder, Sam Walton,
taught employees to ask unhappy
customers this question: “What
would you like us to do?” Then he
empowered them to fix the problem.
“The customer is always right.”Those of us
who work in grocery retailing know this isn’t lit-
erally true, but when it comes to customers, we
must act as if it were. Your employees must
always project a positive attitude, and show
respect for the customer’s point of view. If you
treat customers right, you can likely count on
future business, and even good word-of-mouth
advertising.Argue with a customer—even if you
ultimately prove that customer wrong—and
you can likely count on the opposite effect.
5. Out of stock is out of business.
Walk through your store as if you were a cus-
tomer.Whatdoyousee?Arethereunmerchandised
productsinboxesonthefloor?Doyouhavedifficulty
navigating the aisles easily with a shopping cart?
Are there holes in your inventory where products
are missing? Great execution of store operations
requires a commitment to training your staff to
aggressivelyremerchandiseshelvesthroughoutthe
day.Beinginstockisthewholeballgameinretailing.
Shopthediscounters,andyou’llseehowthey’refail-
ing to keep products in stock throughout the day.
The grocers who keep their shelves consistently in
stockhaveasustainablecompetitiveadvantage.
6. Stack it high and let it fly.
When you advertise promotional products,
make certain your buyers are empowered to
take the risk of buying deep enough to ensure the
products are available for the life of the promo-
tion. Few things are more annoying to a cus-
tomer than to shop at a specific store for a spe-
cific product advertised at a great price, only to
find it’s out of stock.
7. Use an “outside-in” approach to
selecting products and services.
Choosing the right products for his stores and
hiscustomerswasoneofthegreatsecretstoSam
Walton’ssuccess.Heusedan“outside-in”approach:
He visited his stores and asked customers every
day what they liked and disliked in the product
mix,and what products were missing.Wal-Mart’s
buyers still use this approach each week.
8. The customers are in charge,
and can “fire” you by simply
spending their money elsewhere.
Whopaysthebillsatyourbusiness?I’mtalking
abouttherent,lights,gas,electric,andevenyourpay
and benefits.The answer, of course, is your cus-
tomers, by choosing to spend their hard-earned
money in your stores.Every day you should think
about what you’re doing to make your customers
wanttocomeback.Explaintoyouremployeesthe
concept that the customer is the boss, and the
importance of providing great service.
9. Plunder your competitors’
stores for ideas.
Grocers need to make a practice of studying
the local competition’s pricing structure, prod-
ucts,and promotional activity. Don’t limit your-
self to grocery stores,either.Visit specialty stores
for ideas on merchandising, graphics, and sig-
nage. SamWalton always said that there are no
extra points for original thinking, and if you can
copy an idea already in use by another retailer,it’s
much cheaper than designing a solution from
scratch. Require each member of your manage-
ment team to go out to others’stores periodically,
and have them report what they find.
10. Sam Walton positioned the
returns desk at the front of his
stores so customers in the checkout
line could see how other customers’
problems were being handled.
It’s easy to smile and thank customers when
they make a purchase, but how do your
employees react when that same customer
tries to return a purchase?Your customers will
learn more about your company from the way
you deal with a product the customer wants
to return to you. If you appear to mistrust your
customers and make them feel like naughty
children when they try to return a product,
they’ll leave you.
Wherever Wal-Mart has opened stores
around the world, there are grocers who aren’t
just surviving in its shadow,but are also thriving.
Customer service is one of the most important
common denominators of these operators.
They’ve discovered that great customer service
requires staffing with great people,training them
properly,empowering them to serve,and retrain-
ing them periodically. It also helps to have a
company culture that values service above all
else. You can compete with discounters—just
remember to avoid the temptation to compete
on price, and never forget that great service
trumps low-price competition.
Michael Bergdahl is an international business
speaker, author, and turnaround specialist who
worked for Sam Walton in Bentonville, Ark.
as Wal-Mart’s director of “people” for the
headquarters office. Reach him at
mbergdahl@aol.com or visit his Web site,
www.michaelbergdahl.net.

nesses, bolstering margins, and maintaining or
growing customer shopping visits and reten-
tion.What’s the secret ingredient?
It’s a loyalty program—or more specifically,
the intelligent use of data gathered through a
loyalty program.
You’ve heard the numbers:The top 30 percent
of customers generate approximately 80 percent
ofannualsalesandevenmoreofprofits.Theyshop
more often and spend more per trip than the oth-
ers.Theseareyourbestcustomers,andthetimehas
never been better to treat them accordingly.
Here’s a crucial lesson: It’s more cost-effec-
tive to gain more business from your exist-
ing top shoppers than it is to chase less reg-
ular shoppers. Your best customers are
favorably predisposed toward you, because they
obviously already like your store.
Another lesson: Market to your customers,
not yourself. Wide appeal and high perceived
value are the watchwords for successful loy-
alty rewards.
At Green Hills,our family-owned supermarket,
located near Syracuse,N.Y.,we launched a conti-
nuity program late last fall that ran through the
holidays,and for me drove home anew the power
of loyalty.This was a classic best-customer mar-
keting ploy,based on rewards with high perceived
value and wide appeal; in this instance we used
high-quality Arzberg porcelain dinnerware from
Germany.Shoppers could earn points by spending
and other specific activities with us, and redeem
those points for free dinnerware.
The results of the continuity program at
Green Hills were mind-blowing, including:
•A sales increase of nearly 5 percent attrib-
utable to the program,
•A gain for gross profit margins,
•A reduction in total marketing and adver-
tising costs, and
• ROI greater than 150 percent.
I can hear the comments now: “Sure, but
Green Hills is a single store—what works there
isn’t scalable to larger retailers.”Wrong:These
programs are regularly run by some of the
largest retailers in Europe andAsia, with nearly
identical results.
You might also reason:“The Syracuse market
is an aberration; this program wouldn’t work in
my area.” The Syracuse market is different—it
has a declining population,a stagnant economy,
and world-class competitors such asWegmans,
Price Chopper, Wal-Mart, Target, and Aldi. But
those circumstances only indicate that if it works
in Syracuse, it’ll work elsewhere.
Programs like this work because it’s more
cost-effective to grow business from your best
customers. For example, before our continuity
program, a Green Hills best customer needing
milk and bread would have more likely stopped
at the convenience store across the street,
where it’s easier to get in and out. However,
the program draws her to us instead, because
even those few dollars gain her more points.
The evidence is in the gross margin. Green
Hills collects extensive data and can drill down
into what changes in shopping behavior cause
sales lifts and margin gains.We discovered that
during the program, sales of center store items
to participating customers grew significantly.
For example, customers in the program
spent greater than 20 percent more on laundry
detergent than they had previously. (Even our
best customers regularly purchase these sorts
of commodities from our larger competitors.)
Nonparticipating customers, on the other hand,
spent over 15 percent less on detergent, a trend
many supermarkets are seeing as shoppers
scrounge around for better value.
Of the top 10 percent of shoppers ranked by
spending,over 80 percent participated in the pro-
gram.These customers generated 40 percent of
total sales over its duration.Of the top 30 percent
of shoppers, nearly 60 percent participated.
Theseresults,alongwiththeresultingcustomer
engagement and excitement, reaffirmed for me
the enduring power of best-customer marketing.
Gary Hawkins is the c.e.o. of Green Hills, and
also of Hawkins Strategic, a consultancy that
develops strategies for employing customer
data throughout the supply chain. He can be
reached at gary.hawkins@greenhills.com.
Best in slow
Plying your top customers with intelligent loyalty programs is a sure way
to make the most of this sluggish economy.
By Gary Hawkins
T
he economic climate has put the retail
industry on a harrowing roller coaster ride,
complete with soaring costs and plunging
margins. But despite this, hundreds of retail-
ers operating thousands of stores across the
country could be cost-effectively stabilizing their busi-

10 • Progressive Grocer’s Frozen & Refrigerated Trends • March 2008 www.progressivegrocer.com
HBC

These economic challenges provide food
retailers golden opportunities to offer prac-
tical solutions to assist those consumers
who are electing to, or are being forced to,
adjust their lifestyles, especially when it
comes to how they shop for food and what
they buy.
Recently released studies from market
data analysts Nielsen and IRI reflect some
of these lifestyle changes. The results from
the research indicate, among other trends,
that:
• Shoppers are buying less expensive store
brands.
• Consumers are taking fewer trips to the
store, but making more purchases during each
store visit.
• They’re spending more on home enter-
tainment, instead of outings such as restau-
rant visits.
All of these trends suggest prime areas
for which grocers ought to be pulling
together some new strategies. Here are
some ideas.
Private brands and more
Price has always been important to the gro-
cery shopper, as past annual surveys from PRO-
GRESSIVE GROCER have indicated.Yet now there
seems to be more interest in low pricing than
any time in the past 30 years, and independent
grocers with the right store-brand strategies
can capitalize.What’s more, operators that also
claim price positioning in their markets can
really clean up.
One such grocer is Dick Casey, operator of
two Food 4 Less Stores in Joplin and Spring-
field, Mo. Casey is claiming significant sales
increases over the rate of food inflation.
He reports that even though his is a price-
impact format, many of his customers nonethe-
less are showing much more interest in buy-
ing his store brands. In response, Casey is
promoting store-brand items not only at his
“Wall of Values,” but also throughout
the store.
The kind of traction in private label
sales that Dick Casey is seeing in his
stores supports a larger trend in the mar-
ket.A recent study from Nielsen reported
that 35 percent of shoppers said they’re
buying less expensive brands. Just about
any grocer can develop effective strate-
gies and tactics to meet savings-minded
customers’ needs.
The toolbox of strategies should
include:
Displays: Dick Casey’s emphasis on
displays—his Wall of Values, plus other spots
in the store—is an effective plan. It puts a qual-
ity product in front of his customers, at a value
price. Because of the size of Casey’s stores
(around 50,000 square feet), he can build mas-
sive displays, but for smaller stores, designated
end caps can work equally well.
Basket checks: Some retailers have begun
to use basket checks of their private branded
products against national brands in their own
stores. Signs graphically highlight the savings
their alternative products can offer to cus-
tomers.
Second-tier private brands: These items
provide even more savings, and when well
signed, they can help to satisfy those in need of
stretching their food dollars even more.
TPRs: Here, it’s back to basics, but maybe
with a twist. Grocers might need to re-evaluate
their existingTemporary Price Reduction guide-
lines, asking questions such as:Are there enough
items showing price reductions, even of a few
Soften the blow
Here are practical tactics retailers are using to help shoppers deflect the
impact of hard times on their eating habits.
By Paul Adams
C
onsumers at just about every income level
are feeling stressed by the squeeze on their
wallets and pocketbooks, imposed by high
prices for energy, food, and other commodi-
ties of daily life. In particular, for many of us,
those extra dollars we once were able to spend on dis-
cretionary goods are now being spent on basic expenses.

cents? Is there a clearly defined over-
all strategy forTPRs? Does the signage
program have appropriate impact?This
is an “old” program, but one that still
can effectively demonstrate to cus-
tomers that a store is trying harder to
help them save.
For those of us who can remem-
ber the inflationary years of the late
1970s and early 1980s, we may find
ourselves returning this and some past
tactics to draw attention to price pro-
grams. For others, however, the TPR
may be a whole new game.
The few, the pleased
With 78 percent of shoppers indi-
cating that they’re combining shop-
ping trips as a way to limit some of
their driving, this presents an interest-
ing opportunity to make the fewer trips
they make to your stores more of a
pleasure.
Grocers Jimmy Wright of Opelika,
Ala. and John Zagara from Cleveland
Heights, Ohio serve entirely different
customer segments. However, they’re
both famous in their markets for their
“Pick 5” meat programs.
The Pick 5 program enables shop-
pers to mix and match various (and
usually higher-priced) selected fresh
and processed meat products in units
of five for a set lower combined price,
usually $19.99. Not only does this offer
noteworthy savings, but the program
encourages shoppers to stock up, mak-
ing their shopping trip more productive
for the travel time and fuel spent.
Wright says that the program continues to
gain in popularity, and is greatly appreciated
by his customers who are acutely affected by
the tough economic conditions. Plus it’s helped
to drive his store’s meat sales to record levels.
One other program that’s gaining renewed
popularity is the“bundle” or club pack program.
A growing number of conventional stores are
again promoting large packs of consumable
products, such as paper, as a way to“help” their
shoppers get more done while driving less.
Coming home again
According to research from a Cooking and
Intelligence Phone Survey conducted in April
2008, 43 percent of consumers said that they’re
eating more meals at home compared
with a year ago.What an opportunity!
This is an outstanding chance for
grocers to step in as solution providers,
rather than as mere replenishment mer-
chants. Happily, some smart retailers
have already understood what’s hap-
pening, and have designed some attrac-
tive programs.
Hen House Markets in Kansas City,
Kan., for example, has two programs that
enable its customers to save money and
take home nutritious meals at the same
time.
One is called “What’s for Dinner.”
Monday through Friday, Hen House
stores’ deli departments offer a preset
family-sized meal each day, at a price
in the $10-to-$15 range. The rotating
menu includes such offerings as pot
roast, baked chicken, and meat loaf, with
all the trimmings. It’s quite a nice alter-
native to fast-food fare, and a much bet-
ter value as well.
The company also offers a “Meal
Deal” program. If a customer buys the
center-plate meat item in the deal, a
selection of other items, including a bev-
erage, comes with it free.Typically, $10
to $12 will buy a family meal in this
program.
What Hen House is doing shows
us that, with good planning and some
innovation, grocers can provide
attractive meal solutions that meet
the needs of those who are changing
their lifestyles to save a few bucks—
and these days the numbers of such
customers are growing.
Paul Adams is president of Paul Adams & Asso-
ciates, a training/development and retail con-
sulting company working primarily with inde-
pendent retailers in the United States and
abroad, as well as with food distributors and
service companies in other industries. He can be
reached at pauladams100@comcast.net.
Hen House Markets in Kansas City, Kan. runs a “What’s for
Dinner” program offering a preset family-sized meal daily, at
a price ranging from $10 to $15.

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