Tech It to the Limit

New gadgets aim to eke more input out of shoppers.

Faster, smarter, more personal. Welcome to the future. Packaged goods makers and retailers are testing gadgets that personalize selling in-store and streamline back-end operations such as inventory tracking. Emerging tools let marketers talk to — and hear from — consumers up and down the aisles.

“With budgets tighter than ever, there is more scrutiny placed on everything brands do,” says Jesse Aversano, senior vp-business management for in-store marketing company News America Marketing, New York City. “Companies are testing more to see if there is a better mousetrap out there.”

The most ambitious may be Procter & Gamble’s test of Smart Package, an on-shelf tracking system that records each time a shopper picks up a product — and whether or not she puts it back down.

Developed at the Massachusetts Institute of Technology, the system uses microchips embedded in packaging to signal an on-shelf circuit board, which passes information to a central database at P&G. In theory, that would help P&G better tailor manufacturing, distribution, and (conceivably) promotion by providing information as close to real-time as possible.

According to The Industry Standard, the system costs $10 per on-shelf circuit board and as much as five cents per package for the product chips. P&G declined to comment on the test.

Expensive technology is a tough sell in a tight economy, and this will be a telling year for marketers’ commitments. It’s a tricky climate for new in-store ventures, with 2000 spending on technology-based programs rising a relatively lackluster 3.9 percent to $904 million — much less robustly than other segments of the promotion marketplace, according to PROMO estimates (see the Annual Report of the U.S. Promotion Industry with this issue). Industry sources say corporate consolidation and the slowed economy have made marketers more cautious.

Loyal Followings

One segment ripe for new ideas is loyalty marketing. Discount-based loyalty programs have proliferated to the point of clutter. They’ve become so undistinguishing that fewer than 25 percent of retailers and manufacturers plan to spend more money and time on them as sales drivers, according to Cannondale Associates’ 2001 Industry Benchmarking Study. The Wilton, CT-based consultancy reports marketers instead will step up analysis of data collected through these programs to arrange stores more efficiently and better target shopper needs.

“People [sometimes] have five loyalty cards, so it’s hard to see how that’s generating loyalty,” says Cannondale partner John Carlson. “The more innovative [marketers] will make their programs stand out in ways that are more effective then just getting discounts when you swipe your card.” That means developing promotions using frequent-shopper data offering other kinds of incentives such as frequent-flier miles or charity donations.

Still, some retailers see potential overlap between existing card programs and other in-store tools. New Mexico grocer Furrs recently wrapped a six-month test for a card-based version of News America’s Smart Card on-shelf coupon dispensing system in 12 of its stores. About 5,000 customers were issued new Furrs Club cards that could be inserted in the red-box machines on shelf. Discounts are logged onto the cards and activated at checkout. Forty percent of participating shoppers liked the system, reports News America, which currently is negotiating with a 100-store retailer to add the system.

“The big problem with loyalty programs is that, once everyone has a loyalty program, no one has one,” says News America senior vp Henri Lellouche. “There’s a lot of pressure to create unique components. There is a lot of retailer interest out there because everyone is trying to get past the simple bar-coded loyalty card.”

Getting Specific

Retailers continue to add niche programs. The Great Atlantic & Pacific Tea Co., Montvale, NJ, last year rolled out its Baby Bonus Club program in metro New York A&P stores, offering a $20 rebate for every $200 shoppers spend on specific baby-related SKUs. Rebates are presented at checkout. “If you can attract young families, they’re more likely to make all of their purchases here,” says A&P director of consumer marketing services Ellen Evans.

The program launched in 1999 in A&P’s Southeast Michigan Farmer Jack stores, where it helped to boost related product sales 17 percent in a one-year period. Mars Advertising, Southfield, MI, handled.

Video chain Blockbuster, Inc., Dallas, last year teamed up with neighboring tech firm Retail Services, Inc. to form stand-alone marketing company Freebie, whose Smart Offers loyalty program awards coupons based on rental histories tracked in Blockbuster’s database. Coupons are printed on receipts as members check out their flicks. The program has been running since last summer in Blockbuster’s 4,300 company-owned stores, with eventual plans to expand to 800 franchised stores, too. Local retailers including Jiffy Lube, General Nutrition Centers, and AMC Theatres pay negotiated issuance fees to tap into the system and deliver coupons. Freebie is pitching the service to supermarkets, department stores, restaurants, and other retailers.

Watch Your Step

Displays also are getting a high-tech touch. Framingham, MA-based Staples is testing News America’s ShelfVision, a battery-powered display featuring a moving card behind a special screen that gives shelf ads the element of motion. Glaxo SmithKline Consumer Healthcare tried ShelfVision last year in Walgreens and Dominick’s stores to hype Nicoderm CQ smoking cessation kits. Reckitt & Coleman, Montvale, NJ, used it in drug and grocery stores to launch a new Lysol fragrance with displays depicting a rushing waterfall.

Floor graphics are, er, stepping up too, with lights, sound — and even scents. FloorGraphics, Princeton, NJ, this year will launch Floor Animators, a battery-operated mat that lights up and speaks when stepped on. Mats can even release fragrances to herald a new flavor or scent. “It’s based on the premise that, if you slow shoppers down, you will get more selling seconds,” says FloorGraphics ceo Richard Rebh.

Gillette Co. tested the devices in Brazil last summer to promote Mach III razors. Ads featured alternating lighted panels that gave the razor’s blade a shimmering effect. “They’re very entertaining,” says Evans at A&P, which has been using floor ads for several years and is considering the animated variety. “There’s so much clutter at shelf level, and the floor has so much unused space.”

Crashing Kiosks

While in-store kiosks still find favor with many manufacturers and consumers, suppliers are working to figure out what approach works best. Many chains use kiosks for loyalty and coupon programs, but need to be careful that they don’t slow down store traffic.

“Multi-functional units that require lines are not working for loyalty programs,” says Seth Epstein, president-ceo of Tactical Retailing Solutions (TRS), Farmington, CT. “There have been of lot of dead bodies in the road.”

Among the corpses is InterAct Electronic Marketing, Charlotte, NC, which abruptly shut its doors in the U.S. last year. According to chairman and ceo Steve Leeolou, the company closed shop after the stock market began nosediving last summer. “It became apparent there would not be enough capital to keep our business current and move forward.”

At the time, InterAct was operating about 3,000 ShopperPerks kiosks in 20 different grocery chains. The systems tailored offers based on a frequent-shopper data, delivering a screen of customized coupons when a shopper swiped his card.

InterAct tried to sell off its kiosk assets but received no attractive offers. Participating retailers were left to decide how to proceed. The company is, however, retaining its patents for possible licensing in the future, says Leeolou.

Part of the problem was the fragmented retail scene in the U.S., says Leeolou. Those 3,000 stores InterAct worked with represented just 10 percent of the total market. Interact has much higher penetration in Europe, he says.

InterAct’s fate is an indicator of how hard a sell kiosks are to time-crunched consumers who don’t want to stand in another line to print coupons. “You’re asking shoppers to change they’re behavior as they’re walking in the door,” says A&P’s Evans. “That’s difficult to do.”

Leeolou is still bullish on the market. “A kiosk is a box with an Internet terminal and a printer,” he says. “The applications and the marketing strategies to get people to come to them — that’s what needs help.”

Epstein agrees, and estimates that 250,000 additional kiosks will work their way into retail locations over the next four years. What retailers want are “multi-functional kiosks that can do several things at once” such as ATM withdrawals and theater ticket sales as well as coupons and promotions. If loyalty programs are the single goal, there are faster machines that reduce the transaction period, he suggests.

TRS installed high-speed coupon kiosks called The Personal Savings System in Giant Food Stores, Prevo’s, and Stop & Shop stores last year. Safeway, Inc. began using them in a pilot test of a program called My Safeway Offers in January. Pet stores, home-improvement chains, and even casinos are testing kiosks to enhance loyalty efforts, Epstein adds.

“To think kiosks won’t be important in the future is a mistake,” says Leelou. “You will see much more interest.”

Do It Yourself

Catalina Marketing, St. Petersburg, FL, is working with Symbol Technologies, Holtsville, NY, on a hand-held Personal Scanning System that puts coupon dispensing literally in the hands of customers.

About the size of a flashlight, the gadgets can be housed within stores on a locked rack that releases a unit when a customer swipes a credit or debit card. Users then traipse through the aisles, scanning items as they fill their carts. The tally can be paid at the register or automatically billed to a credit card.

Catalina is developing software that will enable the scanners to offer coupons and other offers based on the purchases being made. “If they just picked up lettuce, for instance, they might get a message saying, ‘There’s a new dressing in Aisle 6,’” says David Diamond, Catalina’s president of emerging business. Diamond says the scanner could reduce checkout time by 95 percent.

Catalina is talking with U.S. retailers, although none have signed on yet. Tests are already running in Europe. “As soon as we get a pilot retailer, we’re ready to roll with it,” Diamond says. A smaller version of the scanner that could be integrated into keychains, cell phones, or even pens could be available within five years, he says.

The biggest test of any technology is whether consumers will use it. Which gadgets will pan out? Stay tuned.

Budget Testing

Both manufacturers and retailers have taken advantage of good times to test the latest in-store technologies. But with the stock market down and the specter of recession hanging over the U.S., will the trend continue?

“[Large] companies like Pepsi will always find $30,000 to run a test. They know they can’t afford not to experiment,” says David Diamond, president of emerging business for Catalina Marketing, St. Petersburg, FL. “But with a slowing economy, it will be more difficult to get them to spend the money to take [a program] from experimentation to mainstream.”

Kraft Foods last year spent $3 million to beef up its interactive capabilities on its Web site, Diamond says. That might not have happened in a slower economy. “People committed big chunks of money to new technology without having 100-percent understanding of what they were getting. That will go away if the market is tight.”