Kroger Sets the Analytics Innovation Pace

According to the 2018 Retail and Consumer Goods Analytics Study, both CPGs (47%) and retailers (63%) cite limited analytics tool sets as their biggest obstacle to achieving analytics maturity[1]. Retailers in particular are struggling to build the strategies, systems and governance to drive their analytics maturity forward. While others are slow to progress, one retailer is emerging from the pack and looking to external partners to fill the internal capability and resource gap: Kroger.

Kroger first began working with DunnhumbyUSA in 2003, utilizing the leader in customer data science to better understand their shoppers and innovate their customer experience. With many retailers still struggling to use data-driven solutions to understand their customers, this move showed that Kroger was steps ahead of the game from the early days. In 2015, Kroger pushed their strategy even further by changing their existing joint venture with DunnhumbyUSA into a long-term licensing agreement. This has given the company the ability to continue using Dunnhumby’s analytics platform, in addition to acquiring more than 500 of Dunnhumby’s U.S. employees to form a subsidiary of the Kroger business, named 84.51°.

This power move established Kroger as one of the first retailers to assume full control over their customer data, but the creation of a self-managed customer insights center was only the first step towards analytics supremacy. Next, they established an in-house agency called Kroger Precision Marketing. The primary focus of the agency is to channel the insights of 84.51° into programmatic, personalized shopper marketing  delivered across the Kroger digital ecosystem. The agency leverages the purchase data from 60 million households from 2,800 stores to create curated campaigns across Kroger digital platforms. While these programmatic marketing capabilities are being used to optimize the promotional effectiveness of Kroger’s store brands, the agency services are also available to Kroger’s 300+ U.S. based CPG partners, empowering their suppliers to also deliver data-driven shopper engagement across Kroger channels.

Last fall, Kroger released a strategic plan for growth called the Restock Kroger Plan. One of the four key pillars of the plan is “focusing strategies on expanding partnerships to create customer value.” In suit with this mission, Kroger Precision Marketing not only offers consumer goods partners the ability to place personalized marketing across Kroger channels, but access to the analytics used to create and optimize that personalization. Three of the primary channels the agency is helping brands forge personalized engagement across include Kroger’s digital websites, influencer community, and direct marketing.

Digital Advertising on Kroger Websites

Brand partners of Kroger can place targeted hero spots and ads on Kroger.com that drive to branded promotional landing pages and mircosites. They can also place personalized ads in Kroger’s monthly e-newsletter and targeted digital coupons on digital platforms, such as Myxx and ClickList. The targeted digital advertisements are produced by creating versioned ads for key household segments based on existing loyalty card data insights. In a recent case study, 84.51° partnered with a household cleaning brand to run three different ad campaigns that leveraged insights on three key shopper segments across two product lines. With each campaign wave, the brand was able to understand how the change in ad creative and format impacted response across segments. By pinpointing the best creative for each audience and optimizing accordingly, the brand saw a significant sales uplift.

A new program released earlier this month called “Boosted Products in Search,” plans to further elevate brands’ digital advertising efforts on Kroger.com by reaching digitally-savvy shoppers with hyper-relevant products within their search results via product listing ads. This program not only works to encourage product discovery and basket size growth among consumers, but gives brands further insight into household preferences as well as access to real-time performance data. These opportunities give brands the ability to effectively reach consumers at what is fast becoming the starting point of many path to purchase journeys – the retailer website.

Word-of-Mouth Marketing on MyMagazine Network

Kroger reinvented this go-to marketing phrase by creating the MyMagazine Sharing Network, an online community specifically designed to evolve Kroger shoppers into brand influencers. The program was jump started in early 2017 with a promotion of a free tote bag for the first 10,000 customers to sign up. This network creates a more intimate extension of the traditional retail experience by engaging consumers in missions that allow them to receive free products coupons, such as writing product reviews and posting pictures on Kroger social media accounts. The more points an influencer gains, the more likely they are to be chosen for further missions.

Through social listening, 84.51° is able to rank top brand influencers and identify expressions of product interest. Using these insights, Kroger Precision Marketing offers brands the ability to deliver targeted coupons and promotions across the platform. While brands get to deepen the loyalty of their existing advocates as well as inspire new ones, shoppers are able to form a more personal connection with the brands.

Direct Consumer Marketing via Loyalty Mailers

Rather than segmenting consumers by broad demographic data, Kroger uses the collected behaviors and preferences of each individual to create customer “DNA” profiles. These forensic like profiles are used to produce personalized mailers containing 12 coupons, specific to an individual’s household, that are sent out quarterly. The goal? To encourage the customer’s preferences, as well as grow their basket size. For example, if a mother buys diapers, the mailer will include coupons promoting the purchase of additional baby products. The coupon mailer also includes a variety of experimentation ads to support continuous insights development. 80% of Dunnhumby’s effort is focused on what it knows about a customer and 20% is focused on discovery. Nishat Mehta, executive vice president of global partnerships for Dunnhumby’s, says that they typically see a redemption rate of 71% six weeks after a mailing and have generated $10 billion in revenue for the retailer[3]. Kroger also mails printed versions of MyMagazine —with recipes entirely tailored to specific households tastes and preferences, bringing value and content together, while moving customers through the shopping experience faster.

Retailers are increasing the use of predictive and prescriptive analytics across marketing spend, pricing and promotion effectiveness, but 75% still have only basic personalization reporting/analytics capabilities, and are only now just making personalization an analytics priority. With Kroger’s new data-driven personalization strategy driving up to 12 times the sales life for their brands in comparison to prior tactics, it is clear that customer analytics is one of the strongest tools retailers and CPGs have to create new value. Retailers struggling to advance their customer analytics should look to establish partnerships with data solution providers to get the ball moving while they still have a chance, in addition to breaking old paradigms and aligning with brand partners around data in new, collaborative ways.

1 CGT/RIS. (2018). Retail and Consumer Goods Analytics Study 2018 – The analytics arm race: may the best insights win. Consumer Goods Technology.

2 Purchase based targeting through multi channel sequential measurements. 84.51°. https://www.8451.com/what-we-do/case-studies#

3 Groenfeldt, T. (2013). Kroger knows your shopping patterns better than you. Forbes. https://www.forbes.com/sites/tomgroenfeldt/2013/10/28/kroger-knows-your-shopping-patterns-better-than-you-do/#503d6a0746a2

 

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