business news in context, analysis with attitude

We had a piece yesterday about how Ahold’s Giant Foods of Carlisle has converted an eight-year-old Tops Market in the Rochester area to be a Martin’s Super Food Market, hoping that a stronger EDLP program, better perishables, a wider selection of organic and natural foods, a recipe center and expanded self-checkout offerings will entice customers away from a nearby Wegmans Food Market. Officials there say the conversion is a test of a new format, and could be expanded if it performs well.

One MNB user responded:

It is sad to see the decline of this once outstanding chain. When I called on them 25 years ago they were a class act and gave Wegmans all they could handle. It is interesting to see what effect buyouts and mergers have against a truly great regional chain created by Danny Wegman and Family, who get people like Mary Ellen Burris etc. and are continuing to expand their message directed STRICTLY at the customer. Might be a direction for others to survive, ya think????

We think.

And another member of the MNB community offered:

Interesting that their move is somewhat similar to the Safeway/Dominicks situation. Safeway wanted their brands in the stores perhaps to reduce costs of labeling. Not what the consumer/shoppers wanted. They wanted the Dominicks label. However, I will give Safeway credit for bringing in new management and seeing their influence in the look and feel of the stores.... much improved. Good luck to Ahold.

We’ll see.

We reported yesterday that the San Diego-based Privacy Rights Clearinghouse has sued Albertsons and its pharmacy operations, charging that the retailer is violating privacy agreements by sharing information from prescription drug customers with pharmaceutical companies. Albertsons has denied the allegations, saying it has never sold or given away shopper information.

One MNB user wasn’t buying the denial:

Innocent until proven guilty or settled out of court, I'll bet on the latter. This substantiates my position of supplying personal data to obtain frequent shopper cards.

Business cannot be trusted with sensitive information! Corporations walked in and ethics walked out the door.

We got the following email from a member of the MNB community:

In commenting about the Safeway strategy article, one of your readers writes that "the EDLP strategy has never worked". I beg to differ.

Up in this part of the country (New England), Hannaford has done an excellent job of establishing and maintaining its pure everyday low cost and pricing philosophy for many years. They do not use loyalty cards, they do not run BOGO's or weekly "hot" specials... they just sell groceries at a fair price. With their emphasis on outstanding perishables and customer service, they have been able to hold onto their customer base in the face of enormous competitive pressure from Wal-Mart (another somewhat successful EDLP operator) and other supermarket companies.

EDLP can and does work. It takes a long term commitment versus a cursory, half-hearted attempt at staying the EDLP course, along with superior "perimeter" departments.

Given the chance, many customers will eventually will come to appreciate and prefer the ability to buy only one box of strawberries to get the best price, rather than two or three. They might like not to have to pull out another card from their wallet, or to get charged a different price should they have left theirs in the car or at home.

This may seem a little harsh, but it seems to us that there are a lot more retailing executives who p[refer cursory, half-hearted commitments than there are retailers with the discipline to make long-term strategies work in the face of tough competition. And so it goes.

In a piece yesterday about coupon inefficiency, we commented that we found “the statistic about ‘80 percent of all coupons distributed through inserts in newspapers” inconsistent with the phrase, “most potent arrow in many a marketer's quiver.’

“In 2004, when so many targeting tools exist that allow marketers to reach precisely the customers they want to reach with the offer that they believe will best entice them, the notion of just sending coupons stuffed in a newspaper to everybody who gets the newspaper just seems so…antiquated.”

Not surprisingly, some folks disagreed.

MNB user Denise D. Sladek wrote:

As someone who sold targeted promotions for years ... even the cadillac of targeting - InterAct Marketing (they targeted consumers at the store level based on their 52-week shopping history) - I just have to say that's its all about low CPM and reach.

Our clients who use Valassis are getting a CPM that's 1/8 the cost of a major publication and they can reach 55 million households if they wish!

We understand the cost argument, and it is a legitimate one.

MNB user Phil von Stade wrote:

Coupons are Advertising, Promotion, and a Trade Incentive all in one. They may not be as exciting as a Super Bowl ad, but they're cheap (relatively!) and damned effective - long and short term.

Okay, but for the record, we didn’t compare them to Super Bowl ads…which sometimes seem like the height of insane ad spending.

MNB user Philip Herr had a different take:

Your comment on Coupons being inefficient when there are so many other focused opportunities to reach consumers: Consider Direct Mail (junk mail). You'd be hard-pressed to find a more targeted medium than that. And yet, at best, DM response is lower than coupons -- somewhere in the order of 1.5%. And that doesn't stop them from filling your mailbox.

Unfortunately the advent of highly targeted and effective communications is yet to arrive. Only on the web, where your search elicits messages that are specific to your needs, can the concept be realized. And we all know how welcome pop-up ads are and the fact that the vast majority of people do ignore banner ads.

The reality is that advertising is still primarily a scattershot and percentage game. But the target is moving rapidly and the percentages are lower all over. So until we can replace this system, it stumbles along.

And another MNB user agreed with our assessment:

Antiquated they are. The Sunday paper we read had three fat packets of coupons in it yesterday. I do not open these packets. I am a bargain shopper and rely on ads from super markets and Aldi's low prices for my shopping.

These slick paper things are a nuisance to try to read because the pages are loose and slip all over. To go through many pages of products I will never be interested in, deal with the slick pages and waste my time on such a project (looking through the ads, paging through the coupons in the store, trying to find the right product and the package size in the store) to save a few cents does not interest me. I have used on line offers of a dollar or more off a new product or a free sample that I saw advertised on TV. Cents off coupons do not interest me. I do not have time with a busy life to make a special trip, on say, Wednesday, to a store that doubles coupons or honors other store coupons. Just give me the lower price on the shelf, thank you.

And finally, we had a piece yesterday about how founder Jay Walker is considering a move into the vending business, which prompted the following email from MNB user Dan Jones:

Priceline has done a nice job of applying Adam Smith econometrics to inefficient market places. That is why airline prices and hotel room prices work. Also, and very importantly, the current Priceline businesses do not have the ability to store inventory, so there is an opportunity cost that is clear for each vacant seat or room, that can be priced.

Does vending really have these opportunities?

I would love to see Priceline get into healthcare. Elective surgeries could be performed when there is a lull in demand, at a lower cost. I know it sounds radical, but something radical must be done in Healthcare.

We get your point. But we have to admit that “name your own price for healthcare” scares the hell out of us.
KC's View: