Data mining is big business for Kroger & getting bigger all the time

CINCINNATI - Bill Brown shops at Kroger at least twice a week and without fail uses his Kroger Plus card during every visit.

"It’s like VISA – I never leave home without it," said the Amberley man, with a laugh and a smile.

Brown knows the card is Kroger’s key to knowing exactly what he buys and when he buys it, but he doesn’t think it’s an invasion of his privacy.

"Not at all because of the savings on the things I like to purchase in the first place," he stated.

Those savings come in the form of coupons he regularly gets in the mail.

Millions of Kroger customers across the nation get Loyal Customer Mailings at their homes all over the United States as well – and it’s not by accident.

They’re the product of data mining.

"Our efforts are trying to drive loyalty for life with our customers," said Sukanyua Madlinger, Kroger’s vice president of merchandising for the Cincinnati/Dayton area. "Customers are rewarded with offers on what they buy, instead of trying to be sold something else."

It’s a complex process to match the best customers with the right coupons. For instance, one recent mailing featured 95% customization.

"You’re not going to get the same coupons as I get and I’m not going to get the same coupons my neighbor gets," Madlinger said. "It’s going to be based on what I buy."

Data mining isn’t new to businesses, but it’s rapidly growing as firms seek to improve their bottom line.

For example, 40% of all U.S. households have one of Kroger’s loyalty cards.

Mining the data for Kroger is dunnhumbyUSA, a downtown Cincinnati firm in which the nation’s largest grocery chain owns a 50% stake.

Stuart Aitken, dunnhumbyUSA’s chief operating officer, refers to data mining as consumer insights.

"We’re looking for the motivations and the understanding behind what consumers do and buy," he said. "Essentially what you’re looking to do is reward the behavior you seek."

Over 330 dunnhumby employees crunch numbers on a daily basis, trying to identify the people Kroger wants in its stores as much as possible.

"Typically, we’re looking at visit frequencies – how often you come to the store and then total spending – how much you spent within the store," Aitken said. "From a business perspective, it’s truly building that bond and connection with their best shoppers."

Kroger isn’t dunnhumby’s only client. Procter & Gamble, Macy’s, Pepsico, Coca-Cola, Kellog’s, Kraft Foods and Home depot use the company’s services.

The list is a who’s who of American retailing and manufacturing. Panera Bread is using dunnhumbyUSA to design and implement a customer loyalty program.

Tons of data is collected and process daily, leading to questions about privacy.

"Some consumers are concerned about ‘Big Brother,’" Aitken acknowledged.

To counter that sentiment, shoppers can opt out of receiving mailings. In addition, dunnhumby does it’s data mining anonymously.

"When we do data mining, we’re not doing it on an individual household name," said Aitken. "We’re not saying Tom on Elm Street. What we’re looking at are random numbers assigned to each household and then saying households one, two, three, four and five will get a Coke or Pepsi coupon."

Madlinger takes it a step further.

"We absolutely do not sell our data," she stated. "We understand the importance of that privacy and we hold it very close and dear to our hearts."

Data mining is just one way Kroger tries to win customers for life. The others are friendly employees, product freshness and a variety of goods.

"The bottom line long-term – the card is a great tool for us – but it still comes down to great old-fashioned customer service," Madlinger added.

The Kroger Plus card has another customer benefit. If a shopper buys a product that’s recalled, Kroger can call that customer to notify them to bring the item back to the store.

Whatever the reason, the Kroger loyalty programs are working.

"They have beat their largest competitor, Walmart, for the last six years largely because they’re looking at customers," said Aitken. "Looking to deliver value for their customers on a daily basis. That’s their primary focus. A byproduct of that is profitability."