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Vons Cos. knows the power of a database.

In the seven-year history of its VonsClub preferred shopper program, the more than 4 million cards issued to club members represent one of the oldest and largest such efforts in the U.S. One measure of its success is that the program has helped the retailer significantly increase its level of marketing sophistication.

Through its program, whose membership has been growing by an average of 25% a year, Vons has collected information about its customers for a database that makes it possible to work more effectively with manufacturers and others to produce savvy and targeted marketing efforts.

"We use the information to pinpoint opportunities or problems that we may see with our consumer base," said Mike Hendry, manager of electronic marketing and product promotions for the Arcadia, Calif.-based company. Vons, the nation's ninth-largest supermarket chain, operates 334 stores.

Mr. Hendry explained: "You can look at global scanner data and many other numbers that are general to all retailers, but when you have this kind of data, you take it to a household level and really understand what's truly happening in your stores."

Here's how the VonsClub card works.

The consumer swipes the magnetic card through a card reader at checkout and automatically receives discounts on items Vons has chosen to promote that week. At the same time, the computer collects detailed and comprehensive data about the items purchased by the cardholder on that store visit and combines them in the database with lifestyle information it has already obtained about the customer. This database then is used to inform Vons' marketing efforts.

The VonsClub program, which the chain's top management has described as one of the company's most important strategic initiatives, dovetails with several of Vons' goals. For example, the detailed point-of-purchase information collected via the VonsClub scanner cards provides a powerful tool for helping the chain attain its goal of increasing its private-label business to 20% of store sales. Private label reached 16% of sales in 1994, up from 13% in '93.

In particular, the database contains insights about which private-label products offer the most promise for Vons and also information about which specific customers are the best prospects for each of the private-label items the grocer decides to offer.

The VonsClub also fits nicely with another strategic thrust: the chain's efforts to increase customer loyalty. Vons has used its electronic database capabilities to help the chain improve links with community organizations. That, in turn, creates opportunity to strengthen store/customer ties.

For instance, Vons' new CheckOut for Children school donation program enables VonsClub consumers to electronically credit their checkout purchases to the school of their choice without having to collect register tapes. All schools that are registered with Vons and accumulate a minimum of $20,000 in customer purchases are eligible to receive a portion of a total cash donation of $750,000 from the grocer.

"Schools don't have people to count up millions of dollars of receipt tapes," Mr. Hendry said. "Now, all they have to do is tell people to join VonsClub."

Through another data-related project, the Target Vons direct mail program, marketers of brand name goods can reach households that actively buy products in a particular brand's category. In 1993, Vons launched the monthly targeted direct mail program, which uses the VonsClub data to create direct mail pieces that might contain six to eight different promotional offerings aimed at specific households.

"The idea behind this program is getting the right offer to the right customer at the right time," according to Vons' Mr. Hendry.

"We are trying to educate our manufacturing community that target marketing is another-and probably the most effective-way they can market to their customers," Mr. Hendry said.

At the same time that it has been collecting reams of customer information, Vons also has made a significant effort to avoid running afoul of rising public concerns about confidentiality. For instance, the grocer never discloses names and addresses of its consumers to manufacturers.

"We do full data analysis for manufacturers," Mr. Hendry said. "However, we have strict privacy policies that we try to adhere to. So manufacturers are never sold names or rented names."

Despite Vons' active use of information, Mr. Hendry advised those wanting to get into database marketing not to jump in blindly.

The reason that some companies have failed in this area or haven't begun to get involved, he said, "is that they are not sure what to do with the data. You have to go into database marketing very focused, have a strategy and form a plan of how you are going to use the data from the onset."

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