Marketer A-List 2013

Kroger's Not Lagging Anymore: Smart Data Tactics Propel Grocery Chain

With Dunnhumby Assist, Grocer Taps Analytics to Grow Sales in Tough Sector

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Kroger Co. isn't the sexiest marketer. It was, by its own admission, "late to digital." Its stores don't have quite the visual pizzazz of some other successful supermarket operators like H-E-B and Wegmans or Trader Joe's appeal to hip urbanites. And the Kroger name is invisible to its own customers outside the Midwest and South, operating behind local banners such as Ralphs, Smith's, Dillons, Fred Meyer and King Soopers.

Though a distant No. 2 to Walmart in U.S. retail sales, Kroger grew sales 6.6% to $92 billion last year, double or more the pace of the next five leading supermarket players, who ranged from up 3.1% to down 6.3%. Its same-store sales grew 3.3% in the fiscal first quarter ended May 25, even as Walmart saw same-store sales decline 1.6% in its first quarter, ended May 31.

In fact, Kroger has posted 38 straight quarters of comparable-store sales growth through the deepest recession since the Great Depression, beating Walmart on the top line for more than five years.

Getting most of the credit for Kroger's marketing success story have been analytics by Dunnhumby USA, owned 50% by Kroger and 50% by Dunnhumby Ltd., which in turn is owned 100% by U.K. retailer Tesco. Dunnhumby USA manages data from Kroger's loyalty-card program to tailor offers to the retailer's customers and plan joint marketing programs with suppliers.

Dunnhumby CEO Stuart Aitken said 95% of Kroger's sales growth during the past decade has come from existing customers, a testament to using data to retain loyal customers and get them to spend more. (Kroger didn't return a request for comment on that figure.)

But the less-heralded side of Kroger's success story has been a painstaking effort led by Natalie Ream, VP-customer communications and marketing, to bring the rest of Kroger's marketing services in-house over the past nine years. Today, all media buying and planning, creative services and even commercial production and printing, are in-house. It's all part of getting more efficient while focusing relentlessly on the customer, Ms. Ream said. That's driven in large part by shopper data, used not just to generate deals but also to find what media work best, improve merchandise assortments or adjust prices.

That data and customer focus turns up other ways, too. Kroger has been applying a GE-style Six Sigma program to reduce checkout times, waiting until stores in an area reach a reliable benchmark before advertising "shorter lines and faster checkouts."

And while Kroger has been late to implement digital, Ms. Ream said it's catching up fast. Kroger's app is now in the top 2% among iOS downloads and its shoppers are increasingly using such things as downloading digital coupons, of which the retailer has now distributed 700 million.

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