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The Honolulu Advertiser

Posted on: Sunday, December 21, 2003

Retailers focus holiday promotions on repeat customers

By Dina ElBoghdady
Washington Post

In a subtle shift of marketing tactics, some retailers have stepped up coupon offers directed at their most loyal customers in a bid to attract repeat visits from big spenders during the holiday selling season.

The coupons are not the type clipped from newspaper circulars — though there are plenty of those to go around. They're the ones crammed into mailboxes or handed out with a purchase. Eager to wean themselves from discounts for the masses, retailers hope more targeted coupons will limit big bargains to a pool of their best customers.

"Some retailers have recognized that discounting the whole store is not the best strategy," said Richard Jaffe, a retail analyst for UBS Warburg. "It means you will sell your best merchandise on discount and the less desirable merchandise will be left over." All of this cuts into profit margins, Jaffe said.

The Gap sent out "mystery gift cards" in mid-November to customers who had visited the store most often and spent the most money there in the past year. To figure out the value of the cards, worth between $5 and $50, shoppers had to decode them by visiting the store or the company's Web site and punching in the card code.

"In the past, we've been a little bit more reactive in terms of discounts," said Jordan Benjamin, a Gap spokeswoman. "Now we're trying to give exclusive opportunities ... rather than take a hit across the store."

Targeting the profitable

The movement toward targeted coupons is driven in part by recent strides in technology. Retailers have gathered transactional data from shoppers for at least a decade but hadn't done much with it either because the technology was limited or the cost was too high, said Martha Rogers, a partner at consulting firm Peppers & Rogers in Norwalk, Conn.

Today, retailers can slice and dice databases to find out how much a shopper spends and how much it costs to service that shopper, Rogers said. For instance, retailers can avoid sending coupons to consumers who regularly return merchandise or return it used.

"They can decide which customers are valuable," Rogers said. "The ones who are trying to rip them off and the ones who bring a lot of (the merchandise) back are not."

But getting a valued customer to re-enter the store is key, which is why many retailers are embracing "bounce-back" coupons aimed at cultivating repeat visitors.

Bloomingdale's was handing out $15 gift cards to customers for every $100 worth of merchandise purchased in hopes of enticing them to come back and spend more.

Gap gave out "passes" that offered three tiers of promotion. Customers who made a purchase of $50 or more were allowed 20 percent off their next purchase of $100 in November, then 15 percent off a purchase of $75 or more in early through mid-December, and then 10 percent off of a purchase of $50 or more in late December.

Sports Authority has had what it calls the "Julie call" for about two years. Under that program, customers who give their phone numbers to the chain get a recorded message from "Julie" informing them that they have a coupon waiting for pick-up at a nearby store.

"We will do some targeting based on purchasing behavior," said Terry Maloy, the chain's senior vice president of marketing. If a customer purchased footwear, the coupon might be for discounts on certain shoes, Maloy said.

Marketing by stealth

For retailers, targeted coupons do more than lure customers. They allow merchants to keep promotions under wraps so that rivals won't try to match them. "It's really like a stealth marketing campaign," one industry expert said.

Many retailers also think it is easier to keep a loyal customer than to gain a new one, which again makes direct marketing a useful tool — even if it can be much more expensive than conventional mass media advertising.

But how retailers define loyalty can change depending on the season. Instead of looking at who came in most recently and how often, retailers start looking at who came in this time last year and how much they spent, said Trynka Shineman, marketing director at PreVision, a direct-marketing agency in Lincoln, Mass.

And retailers are starting to get more aggressive about mining that data and lowering the barriers on these special coupons and discounts. "It does seem that retailers are mailing deeper into their customer files than they have in the past," Shineman said.

For instance, Hallmark Cards Inc. has nearly doubled the frequency and number of consumers it communicates with through its free Hallmark Gold Crown Card membership program, which tracks purchases and applies bonus points to future items bought in Hallmark Gold Crown stores.

"We're offering them special deals, such as buy five cards and get 200 extra points," said Rachel Bolton, a company spokeswoman.

These kinds of tactics may be more valuable than in years past, said C. Britt Beemer, chairman of America's Research Group in Charleston, S.C. For the first time in six years, the majority of shoppers polled by the group in the days after Thanksgiving said they would not return to the stores they shopped in that weekend.

"That tells me that consumers didn't see the kind of deals they wanted in the stores," Beemer said. "They're leaving to see where else they can get a better price."