InformationWeek

March 29, 1999

Buy More, Save More

By Rick Whiting with Jeff Sweat

n the era before big supermarkets, local grocers knew their customers, when they shopped, and their favorite products. Dick's Supermarkets, a chain of eight stores in Wisconsin and Illinois, knows all that and one thing more: It knows who its most profitable customers are.

The grocery chain, owned by Brodbeck Enterprises Inc. in Platteville, Wis., uses a frequent-shopper membership program to gather data about customer purchases. The system captures data on 80% of all transactions within the stores and about 90% of all sales. "We're attempting to go beyond customer profitability to customer potential," says marketing VP Ken Robb.

The company uses data mining software from DataSage Inc. to analyze purchase-history information and build models of customer behavior. This helps the store understand why customers buy the products they do and what additional products they might buy if given the right incentives. Brodbeck offers special prices to customers based on what it knows about them. The supermarket chain focuses on frequent shoppers who spend $25 or more per week in its stores--about half the participants in the program. They get special mailings that offer shopping discounts--the more profitable the customer, the deeper the discounts. "We want to save our best discounts for our best customers," Robb says. "These folks represent 85% of our store volume, and they're extremely important to the bottom line."

The only potential problem is the danger of creating resentment among less-profitable customers, whom Dick's doesn't want to alienate. "Even those customers that are marginally profitable do pay salaries. They create volume and traffic in our stores," Robb says. To avoid problems, the store conducts its programs by sending letters and discount offers directly to the intended homes and not posting signs in the stores to tip off other shoppers.