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It's just another day at American Greetings, the nation's second-largest greeting card marketer.

In one of 400 test stores, the sales force is stocking cards with an extra Universal Product Code-one keyed to a test card's design-to measure how well it sells. At one of the company's major retail accounts, sales reps sweep hand-held computers over the regular UPCs of cards still on the shelf in the midst of a key holiday selling season to determine which slow sellers need to be replaced in a hurry.

Information specialists are presenting category management programs to a supermarket chain to determine optimal placements of new cards. And in American Greetings' Cleveland home office, market researchers are using a sophisticated data system, armed with information that goes down to the city-block level, to determine which among its thousands of retail outlets are best suited for a new Spanish-language card or a new child's birthday missive.

Greetings from the brave new world of information-driven marketing.

Perhaps most significant about the American Greetings example is the intriguing new direction it represents in the use of scanner data. Although significant attention has been given to the way scanner data can help improve many aspects of the marketing mix, only recently has the more sophisticated use of information begun to be applied to the new-product testing and development process.

These are new capabilities and opportunities that marketers can't afford to overlook. One reason is the product development process is ripe for improvement.

According to Jim Findlay, president of testing services at Chicago-based market researcher Information Resources Inc., 72% of all new products and 55% of all line extensions fail-after an average of $15 million each has been spent to introduce them.

On top of that, new products are taking on an increasingly important strategic role. Most package-goods marketers already have slashed costs to the bone with just-in-time delivery and Efficient Consumer Response programs. They need successful new products more than ever as a revenue source to bump up the bottom line.

"A 1% increase in volume can equal something like a 3% increase on the bottom line," said Jim Huguet, president of trade consultancy NEO Inc., Trumbull, Conn.

Unfortunately, increased sales volume is becoming harder to achieve. It's tough to expand unit sales of existing products in today's saturated markets, and competitive pressures make price hikes difficult.

"You used to be able to raise prices," said IRI's Mr. Findlay. "Now, with Wal-Mart and Kmart [keeping costs down], you can't do it anymore."

New products are therefore vital, but elbowing them onto already-bursting retail shelves isn't easy.

"There are something like 15,000 to 20,000 new products introduced every year," said Ray Jones, managing director of consultants Dechert-Hampe & Co., Northbrook, Ill. "But the average store carries only that many products in total. Logic tells you there's a problem here."

The result, he said, is a closer look at stock-keeping units, SKUs, by both the marketer and the retailer, to weed out inefficient ones.

"They're saying, `Do we really need this glass cleaner in six sizes and four flavors?"' Mr. Jones explained.

Apparently they don't. A just-completed study for the General Merchandise Distributors Council, conducted with the cooperation of Procter & Gamble Co. and McNeil/Johnson & Johnson, made extensive use of scanner data to eliminate SKUs in two categories. That made more room for new products while at the same time driving up total sales from existing products in each category.

The study was conducted in 21 Chicago area Dominick's Finer Foods stores by Meridien Consulting, Westport, Conn.-in the shampoo category for P&G and analgesics for J&J.

The purpose, said Jeffrey Hill, Meridien managing director, was to "find out how many SKUs should be carried in each category and what is unnecessary duplication." He added, "If instead of 150 SKUs there are 120 [in a category], that frees up something like 4 linear feet of shelf space."

Marketers, he said, can then go after that four feet for new products "with solid marketing plans, bringing customer analyses to the chain, bringing in geodemographics, looking at heavy users and matching the geographics of that retailer."

With information systems available today, Mr. Hill said, "You can draw a circle around each Dominick's store and I can tell you the demographics down to the finest detail."

That's what American Greetings has done to help it pinpoint the correct niche for each of its new cards. Three years ago, the company secured the exclusive use in the greeting card industry of a database system from Lancaster, Pa.-based Market Metrics. The system slices and dices data minutely on a geographic basis.

"For every store in the U.S., for every mass merchandiser, chain and supermarket, the customer trading area is calculated," said Karen Bartelme, American Greetings' director of market research. That means American Greetings can tell what kind of people (age, sex, income, ethnicity, etc.) shop at every store.

While the U.S. Census can tell a company that a neighborhood is 25% Hispanic, Market Metrics goes further, informing American Greetings that, for example, 35% of people who shop in a particular store are Hispanic.

The company then can vary its product mix to fit individual shops. For example, American Greetings' Ms. Bartelme said the company will place a full giftwrap section in a shop frequented by affluent consumers and a smaller display in a store a mile away that caters to a less ritzy clientele.

This approach doesn't directly inspire new products, or new cards, she said, but it does help American Greetings place cards it has already created from focus groups and more traditional marketing methods.

The information explosion is very much in evidence in other areas at American Greetings, too. The company restructured itself in 1991 to embrace the information revolution, appointing Tim Persons to the new post of manager-retail technology. Mr. Persons' group coordinates the testing of new cards with the extra UPC code, and the use of hand-held computers by the sales force.

Although American Greetings wouldn't say how much money technology has saved it, it's clear these programs have helped speed new products to market and enabled the company to move more quickly in the marketplace. That flexibility is especially crucial during holidays, the key selling season in the $5.9 billion card category, when 57% of sales occur.

When retailers share scanner data with American Greetings, Mr. Persons said, the company can replenish shelves once or twice in a holiday season by using continuous product replenishment. That allows American Greetings to move faster in replacing slow sellers.

"Before, you'd have to do it manually," Mr. Persons said. "An army of people would tally up [the slow sellers]. Now we can get sales results in seven days." Previously, he added, new products "were often a roll of the dice. Now we can make an intelligent decision faster about what's a [new product] winner."

American Greetings doesn't use its data to eke out new shelf space since companies in the card industry generally contract to be the only brand in the store. However, the company does use scanner data with some grocery retailers to help determine the right mix of old and new products, and to come up with better display configurations.

Some industry watchers are predicting the technology wave will also enable more cooperation among retailers and marketers in the area of new products.

Dechert's Mr. Jones said some of his clients are including retailers in the new-product development process. He said these companies include food brokers and retailers "on a blind basis," in focus groups and other new-product research, "recognizing all the stakeholders" in the new product's success.

"It'll never get to the point where there'll be a Lever/Dominick's brand," Mr. Jones said. "But more of the stakeholders will have an opportunity for input."

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