Circular Logic

Ahold USA leverages the Web to take its advertising message to customers while circumventing print.

The weekly circular is the centerpiece of most supermarkets' promotional efforts, but with newspaper circulations in decline, chains are rethinking how to get their specials in front of customers.

Anticipating this trend, Ahold USA of Carlisle, Pa., is testing ways to deliver its circulars online to shoppers.

“Newspapers are declining. Circulars are in important part of the spend,” says Rebecca Kane, VP, brand management and customer-specific marketing at Ahold USA. “So we knew that it was important for us to figure out new ways to connect with our customers to be successful.” She spoke at the recent LEAD Marketing Conference in Chicago. LEAD, produced by the Cleveland-based Shopper Technology Institute, stands for Loyalty, Engagement, Analytics and Digital.

While the number of newspapers delivered on Sunday in major markets has remained flat over the past decade, at a little more than 900, ad revenues have declined 48 percent since 2006, says Rob Gierkink, chairman and CEO of Datalogix in Westminster, Colo., who also spoke at the session.

“In the last five years, revenue has been cut in half, but with the same number of competitors,” he says.

Meanwhile, supermarket spending on newspaper circulars is disproportionate to the media consumption of their core shopper, women ages 25-54. While half of women's media consumption is radio and television, 37 percent is online, and only 13 percent is print; supermarket spending on print is typically more than 60 percent of the total ad budget, and only 2 percent is spent online, according to Forrester Research of Cambridge, Mass. In 2000, 9.2 percent of newspaper revenues came from circulars, but in 2010, because of the decline in other advertising, that number had increased to 18 percent.

“At some point, there will be a massive change in the number of newspapers that is printed this country,” Gierkink says. “These things always seem to take longer than you think they will. For example, one day you wake up and the Blockbuster stores are shut.”

“The big question is: What happens with circulars going forward?” he asks. “What happens to the distribution vehicle and the big marketing investment that retailers and CPGs are putting into print circulars?”

Ongoing Tests

Facing this trend, Ahold has been testing online delivery of its circulars in a number of campaigns run since spring of last year. These will continue this year and during 2012, Gierkink says. The Stop & Shop Supermarket Co. and Giant Food-Landover chains have been combining loyalty data with a program from Datalogix that enables the retailer to find its customers while they're online and deliver the circular to them in real time.

“From our pilot, we've seen promise in its ability to allow us to measure incremental sales directly, and we've also seen the ability to test and learn from the medium,” Kane says. “So it is a useful tool that we want to keep testing and learning from, and continuing to use as a new way of reaching customers online.

It's also much more cost-efficient than direct mail, which can cost $400 per 1,000 pieces, Gierkink says. In Ahold's online tests, with postage eliminated, the cost is one-fiftieth, or $8 per thousand, with good, measurable results. “For every dollar they spent in media, they got $7.10 back in sales in the store as measured across more than 1 million households on their frequent shopper program,” he says. If a retailer like Ahold were to only target customers who change their shopping behavior as a result of seeing the circular, that return would be as much as $20-$30 for each dollar spent.

The tests involved choosing a group of Ahold's active customers that the company was most interested in reaching, which numbered more than 1 million households, and providing that information to Datalogix for targeting. Datalogix combined Ahold's data with its database of 100 million households.

From “audience partners” — Web publishers that collect names and addresses as part of their registration — Datalogix matches this information with its database and drops a cookie with no personal information. By tracking these cookies on various ad networks as the consumers visit websites, a banner ad from Ahold is substituted for another, less relevant ad only for those people. Both the “audience partner” and the host website where the banner ad appears are compensated by Datalogix.

The banner ad offers some promotional information, but links to an online version of the Ahold chain's circular. Two Ahold ads were presented for comparison, as well as a public service ad for a control group.

“That banner ad is just like sending a direct mail piece; it's a way to go direct to your customer,” Kane says. But in the case of the digital promotion, in-store visits and sales were directly attributed to the online campaign through the shopper card data.

“We decided to set it up for a 10-week program where we would deploy that weekly circular from Friday to Tuesday to align with the print circular schedule, and in individual market areas,” Kane says. “Then we would test two different kinds of creative, so we could understand how well we do with targeting messages direct to our customer, but also how well different kinds of creative perform.”

Ahold also tested the impact of standard versus rich media. With standard media, the customer views a message instructing them to click on the ad to see the weekly circular, which would link to the chain's website. There, the customer could find a personalized circular based on their ZIP code, Kane says.

”For the rich media unit, they didn't even need to click,” she adds. “We were testing if we could serve up information within the view that they are looking at without forcing them to click through, and could we drive incremental sales.”

What Ahold Learned

The biggest benefit from the tests was a definite return on the investment, Kane says. “We got a good, strong return on the first campaign, and we've seen a strong return on some of the other campaigns that we've run. They vary based on the different types of customers, as well as the different types of messages. We feel comfortable that we can easily tell who has been targeted, and we can set up testing measures behind the scenes to measure incremental sales.”

Ahold also found that the campaign generated higher incremental sales for its better customers. Less loyal customers did not respond as well, she says.

“The third thing we learned was that creative definitely does make a difference,” Kane notes. The rich media outperformed the standard media, and we are now just continuing to think through the uses of that.”

Finally, Kane says Ahold became convinced that this system is a good direct-measurement tool. “Although we could look at the click rate and the page views, we ended up concluding that was less important, because we can get direct to the customer based on our frequent shopper data. So it becomes a very measurable way of looking at how we are driving sales.”

Based on her background, Kane says this type of online campaign essentially is direct marketing. “It is all about testing, learning and optimizing, and we've started to integrate this into our direct marketing customers.” PG