'We Know You Have A Dog'

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By John Foley
Issue date: Feb. 17, 1997

Peapod LP, an eight-year-old grocery delivery business, beats the competition with a database.

Rather than try to deliver more, or cheaper, groceries than its competitors, Peapod uses database technology to outpace them. The Evanston, Ill., business can deliver personalized service because it knows more about its customers than most companies.

Peapod takes all grocery orders online, which lets it track each household purchase. "If you buy diape rs, we know you have a kid. If you buy dog food, we know you have a dog," says Thomas Parkinson, Peapod's chief technology officer and co-founder. Third-party data and online surveys augment purchasing data to give Peapod a detailed profile of the 35,000 homes it serves.

Peapod collects customer data in an Informix database running on a Hewlett-Packard HP9000 server. The more data it collects, the more Peapod knows about a customer's preferences. "It becomes very difficult for a customer to switch to a competitor when so much time has been put into customizing," says Parkinson. "It would be like switching from Quicken to MS Money."

Peapod's database and Universal Event Processor-a proprietary engine that tracks online activity and triggers custom offers and advertisements-is attracting the attention of much larger companies. Its corporate clients include Anheuser-Busch, Bristol Meyers, Kraft Foods, and Ralston Purina.

The concept is catching on. Since it was founded in 1989, Peapod's revenue has d oubled each year, ending 1996 at $30 million. This year, Peapod expects to triple its customer base and double service from five U.S. cities to 10.

Peapod uses its 60-Gbyte customer database to create online promotions that target specific households. It can use customers' order history to direct them to other products they may be interested in, Parkinson explains. For example, Peapod recently offered people who purchased baby products several high-margin items such as humidifiers and electronic thermometers.

Top Shopper
Peapod gets its revenue from both shoppers and suppliers. It charges consumers a premium for its service-5% on top of the grocery bill, plus a $6.95 delivery charge. The company also sells information about its customers to consumer-goods manufacturers, many of whom are striving to better understand who buys their products and why. In fact, Parkinson says the company's database will be its major profit center in the future. Also, Peapod runs promotions for consumer-goods companies.

Peapod also intends to commercialize its Universal Event Processor, a proprietary database engine that tracks the multiple "events" in a marketing campaign and triggers actions based on predetermined factors. Peapod hopes to turn the database engine into an off-the-shelf product. Though it was written in C, Peapod is using Rogue Wave's development tool to rewrite the database engine in C++ and adding ODBC drivers from Visigenic so it can run on several platforms.

But Parkinson says one-to-one marketing requires a careful balance of customer and corporate interests. "We walk a fine line," he says, "between providing customer service and making them happy, and gathering as much information as we can without pissing them off."

Return to: " Market Of One: Ready, Aim, Sell! "

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