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A major competitive advantage for independent grocers lies in their ability to innovate and execute at retail more quickly than bigger regional or national chains -- and the payoff for the rest of us is a wellspring of some of the industry's most creative and successful promotions.
Recently I connected with some noted independents from across the country whose companies vary in size from one store to 58, and asked them to share with PG readers their perspectives on advertising, what percentage of sales the expense represents, and what promotions work best for their individual stores. Here's what they had to say:
Robert LaBonne Jr. President and c.e.o. LaBonne's Epicure Markets
Operating three upscale supermarkets in Connecticut, Bob LaBonne Jr. spent 1.8 percent of total store sales last year on advertising.
"We include in advertising our weekly flier design, printing, and distribution in newspapers, ROP ads, school and charity advertising, cable television, radio, direct mail, and in-store signage and banners," says Labonne. "Recently we added ValPak direct mailings to the mix, and have enjoyed great success in targeting households located within five miles of our stores, with annual incomes of $30,000 or more."
Regarding in-store marketing efforts, he notes: "Monthly themed three-day weekend truckload sales have generated additional sales and excitement in our stores. We decorate for the occasion, and employees dress up according to the theme."
As a result Labonne reports a 20 percent increase in same-store sales for the week, as compared with the prior year.
He adds: "Senior discounts on specific days of the week also boost top-line sales. And to stay on top of our game, we participate in ZIP code surveys at least once a year, to determine if our advertising distribution is being wasted, or if we're missing opportunities in towns that we may not currently target."
Mark Skogen President/owner Skogen's Festival Foods
Second-generation grocer Mark Skogen and his team operate 10 Festival Foods supermarkets in Wisconsin, and within the next six months they'll add two additional stores to their competitive arsenal.
Because the stores generate higher sales volume, advertising is budgeted at an estimated 0.85 percent of sales, and includes the costs of newsprint ads, creative ad development, in-store fliers, and television and radio ads, as well as electronic media talent and production.
"We've experienced a slight shift to more electronic media from print during the past two years," says Skogen. "We're also advertising more on our Web site.
"Our one-day sales have been the most impactful," he continues. "They're simple to set up and manage. We organize one-day meat sales, pumpkin blowouts, plant blowouts, and even one-day soda sales. We're really able to spike our customer count."
He notes: "We may not make a lot of money on what's being promoted at the one-day sales, but we do make a lot of friends, and pick up some residual business in all departments around the store. There's a lot of hype leading up to these events from our people, as well as from customers. Prior to announcing the sale date, we receive numerous phone calls each year, asking when the event will be held."
Interestingly, when it comes to advertising, the Skogen group operates under what it calls the KISS principle: "Keep it simple, stupid."
"We feel that a lot of advertising is too cluttered or contains too much information for a customer to digest," says Skogen. "We focus on having a handful of featured items in a print ad, or one or two key points that we want to communicate in electronic advertising. We want our customers to 'get' what we're trying to tell them."
Ron Cook Director of marketing Niemann's Foods, Inc.
Headquartered in Quincy, Ill., ESOP-owned Niemann Foods is a major force operating in a competitive Midwest market. The company currently owns 34 supermarkets, 11 convenience stores, 11 Save-A-Lot Stores, and two liquor stores.
According to director of marketing Ron Cook, 1.25 percent of total store sales is allocated for supermarket advertising. Included in the advertising budget are newspaper and marriage mail, radio, television, and direct-mail promotions. Also included are the company's special events, loyalty card program, and Web site, in addition to items such as promotional signs, support materials, and prizes that support in-store promotions.
Cook says that the company's approach to advertising has changed during the past two years in that Web site development and marketing play a bigger role. "We're also focused on improving the quality of marketing materials to enhance the image of our stores," he notes. "Plus we're increasing consumer communication in our advertising materials."
The strategy has paid off. "During the past year, we've had our greatest success concentrating on traffic-building theme promotion events. Most of these events require in-store support and execution."
He continues: "We've been rewarded with great sales increases by implementing strong merchandising and cross-merchandising activities. Examples of these events include a peach party, Friday the 13th sales, a pumpkin blowout sale, and the distribution of a coupon book."
Cook offers the following advertising advice to independents: "Establish and maintain weekly advertising primarily as a function of marketing rather than buying. The weekly ad tends to become a chore, with everyone concentrating on cost, margin, supply, and the vendor, instead of an opportunity to communicate with our customer.
"Consistent, relative information, matched with a rewarding store experience, creates the loyal customer base we're all looking for."
Mike Lee Advertising director Marketplace Advertising, LLC
Coordinating the advertising and promotional efforts for 22 IGA stores operating in Ohio, Mike Lee and the storeowners with whom he works believe that timing is everything.
"Two-day meat sales generate the most excitement and sales, with produce department special- event sales running a close second," says Lee. "Any time you run a sale, whether it's a one-day event or two, creating a sense of urgency is vital. Properly executed, a two-day sale can generate for us the same amount of sales that meat and produce typically generate in a week.
"We've also achieved great results with some of our wholesaler-sponsored promotions. Through Supervalu, we've run weeklong promotions such as 'Customer Celebrations,' 'Extreme Values,' and 'Summer Saleabrations.' Supervalu helps out with the cost of product, plus they provide us with type A items for each department."
Lee notes that most of his retailers, who convene as a group every three weeks to discuss industry trends and meet with vendors, budget 1.5 percent to 2 percent for advertising.
"We're very careful regarding the gross profits generated on ad items," he says. "Also, we pay close attention to the number of items that we advertise from each department. During slower weeks, we're considering running a four-page ad, vs. eight pages. As you know, in this business every penny counts."
Mike Bassett President Bassett's Market
Having doubled the size of his Ohio-based company during the past two years, Mike Bassett has also boosted the ad spending for the four supermarkets he operates by the shores of Lake Erie.
"Since opening our two new stores in 2005, we've increased our budget to cover the cost of television advertising, with which we've had great success," notes Bassett. "Overall we manage a tight budget that on average runs us 1.25 percent of sales.
"I do a monthly televised cooking segment on one Saturday each month, and the draw has been terrific," he adds. "But the best advertising I've done lately is to give a house away for free! All the people had to do was move it! It was a story that was covered by over 300 newspapers across the country."
According to Bassett's marketing director, Connie Roberts, the house was given away to make room for the expansion of the company's fuel station.
Rudy Dory President Newport Avenue IGA Plus
Award-winning West Coast retailer Rudy Dory is recognized as one of IGA's finest. The operator of one store in Bend, Ore., Dory is also one of the global alliance's most creative members.
For a single-store operator, there's not much room for error when it comes to projecting expenses.
"I try to budget 1 percent of sales for advertising, but last year, due to road construction in front of the store, we actually spent 1.28 percent," says Dory." It worked for us because sales were up 3 percent during the eight months that the road was closed."
Surprisingly for a grocer his size, Dory relies on an advertising agency that his company hired four years ago "to help develop and control the store's image."
"I feel that independents rely on, and put too much emotion into, the weekly price-and-item advertising to get people to come into their stores," explains Dory. "Since statistically so few people actually make their buying decisions at home vs. in the store, the emotional drain of 'I should've had this item or that item as a lead' hardly seems worth it."
Dory would rather be "investing in community projects, or providing the finest meats in your marketing area" -- because it pays better dividends in the long run. "That's my story, and I'm sticking to it," he quips.
Bill Orr Owner Bill's Fresh Markets
While we've yet to meet in person, I feel like I've known Bill Orr all of my life. He's an avid fan of PG, and likewise, I've become a big fan of Bill's Fresh Markets, based in Jonesboro, Ark. Orr and his son, Wally, are always willing to share their insights on the industry.
"My son and I were combing through P&Ls just yesterday, trying to find a way to cut expenses," says Orr. "Advertising comes up every time. We've been growing our business doing what we're doing, but it's definitely expensive. You know the old saying: 'Only half of my advertising works, but I'm not sure which half.'"
Operating seven conventional stores, the Orrs spend about 1.75 percent on advertising, including circulars, inserts, radio, television, and direct mail.
"We're constantly monitoring what we're doing," observes Orr. "We've recently added more television ads and direct mail, and we're producing and distributing fewer inserts in the local newspapers, especially in smaller towns.
"We don't see a need to insert and mail a town whose population is just 3,000 people," he continues. "Doing both just increases the cost of advertising, and doesn't result in a net gain."
He sees a lot of potential in the Web. "We promote our Web site in all advertising. Our goal is to train the customer to just go to Billsfreshmarket.com and retrieve a copy of our ad any time they wish. The Web site is a low-cost tool for us, and it eventually will enable us to reduce our spending in the newspaper."
Most important, according to Orr, is to back up what he promises in his advertising. "If we promote fresh meat and clean stores, our stores will be clean and the meat will be fresh. Otherwise we'd just be wasting our time and money.
"If you don't have what you've promised the customer, you lose credibility," he concludes. "All the ads you can buy won't restore the confidence you lost by not telling the truth."
Independent Retailing Editor Jane Olszeski Tortola can be reached at [email protected].