CVS’ new CMO headlines IRI insight summit

ORLANDO, Fla. —It is clear that the retail industry, and the discipline of merchandising in particular, has evolved to the point where achieving success is determined by those organizations best able to use the latest technology to manipulate massive amounts of new data around consumer insights and customer segments, and then collaborate effectively with trading partners to execute programs that drive category growth.

That is a strategy that continues to unfold at such retailers as CVS, Wal-Mart and Food Lion. Top executives from those companies shared information with a record-breaking 1,400 attendees at the Information Resources Inc. Summit about how consumer insights, supplier collaboration and technology underpin their business strategies.

When it comes to consumer insights, no company is further along the curve than CVS. Chief marketing officer Rob Price elaborated on the company’s ExtraCare loyalty program, which is now in its seventh year and has more than 50 million active card holders.

“I think this is the largest loyalty program in the world,” Price said.

As with any loyalty program, the objective is to migrate customers from low-value behaviors to higher-value behaviors, and the company does that by constantly demonstrating the value of ExtraCare through touchpoints and programs, such as circulars, customized e-mail messages, direct mail, ExtraCare coupon books, cash register coupons and shelf-ready displays co-branded with ExtraCare signage. The company also uses “go signs” at the shelf, which are a last-minute invitation to the consumer to purchase the product. Price said CVS will use an estimated 1.5 million “go signs” in its 6,300 stores this year.

The newest ExtraCare initiative relates to the company’s in-store ExtraCare Coupon Centers. The vertical kiosks are rolling out to the highest-opportunity stores first and will be in half of stores by year-end, according to Price. Going forward, CVS is investing in upgrading technology to accommodate what is expected to be substantially increased volume and complexity in a program that continues to grow.

While the ExtraCare card enables CVS to gather tremendous insight about its best customers purchasing behavior, Wal-Mart doesn’t have a similar program and for the longest time was flying blind. That situation changed several years ago when the company rebuilt its marketing department and invested in consumer research to identify customer segments and the key drivers of their behaviors.

“We are listening to our customer about how to make the experience better,” said Wal-Mart pharmacy divisional merchandise manager Sandy Kinsey. “Let’s face it. Going to Wal-Mart is not easy. We have big parking lots, big stores and big lines.”

The company has made progress on reducing checkout times through a new labor scheduling system and is also focused on providing brand names at unbeatable prices because research showed customers don’t want cheap.

Unless the product is a prescription drug. Kinsey highlighted Wal-Mart’s $4-generic drug program as an example of Wal-Mart’s brand promise of “save money, live better,” and noted that “we have saved Wal-Mart customers more than $1 billion on their prescriptions, and that is very conservative.”

She added that the company is on a quest to lower healthcare costs for Americans and said, “we will continue to research and understand our customers better.”

At Food Lion, chief operating officer Kathy Green also offered details on the company’s consumer insights strategy and how it has reshaped the company’s business model. Food Lion had a onesize-fits-all approach that worked well for a long time, until consumers and the competitive environment changed. That put the company on what has been a four- or five-year journey where business decisions now are guided by an effort to serve eight unique customer segments and seven market clusters determined by the segments of customers that live near stores.

Because Food Lion now operates multiple banners, including Bloom and Bottom Dollar, and given the fact that the eight customer segments shopping its stores have different needs, Green indicated store-specific product assortments now are part of what has become a pretty complex operating model.

“Gone are the days when one product goes across all stores,” Green said. “ Vendor collaboration is what will enable Food Lion to bring its strategies to life.”

The concept of consumer insights and customer segmentation are marketing fundamentals familiar to brand stewards in the world of consumer packaged goods. However, until fairly recently, it was a different story on the retailer side of the equation where there has been a less-granular understanding of customer shopping behaviors.

Now that awareness of the next leg of competitive advantage has emerged, retailers and suppliers are playing catch-up on their investments in technology and consumer insights capabilities.

According to IRI chairman Romesh Wadhwani, the retail industry has “woefully under-invested in technology that supports the most important growth-driving processes.”

IRI contends it has solved that problem, and unveiled at the Orlando meeting what attendees were calling a game changing product, called Liquid Data, that contains what IRI president and chief executive officer John Freeland called 50 breakthrough solutions that support a wide range of business objectives to drive the creation of value.

Liquid Data is a product that took three years and $100 million to develop, and early adopters include General Mills and Frito Lay, according to Freeland.