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    LOYALTY MARKETING: Touch of class

    Dorothy Lane Market's loyalty program blends high tech with high touch.

    Dorothy Lane Market employs a sophisticated database management system to keep its loyalty marketing program as sharp as a tack. But the program's most unusual feature is decidedly low-tech it is. Each year, c.e.o. Norman Mayne shows up at the homes of his top five customers, bearing flowers and offering warm thanks for their continued patronage. That's just the most extreme example of the many personal touches that technology allows Dorothy Lane to bestow on the members of its Club DLM.

    That intimate attention might come in the form of a handwritten thank-you note, a members-only newsletter with recipes and new product updates, or a phone call to inquire if there's anything more the store can do. The Dayton, Ohio-based grocer's degree of doting rises in accordance with a member's status in Club DLM's spending hierarchy.

    "Our top club member spent $42,000 last year," notes Amy Brinkmoeller, Dorothy Lane's MIS director. "Do you think giving her a discount coupon will really mean anything? But when our c.e.o. shows up with flowers, you bet that makes an impression."

    The three-store independent is well known for trying to add a personal touch to everything it does. "We aren't a typical supermarket," says Brinkmoeller. "Our deli is rather large, and everything we do is from scratch. We have trained pastry makers in the store. We have artisan bakers. We were named one of Food and Wine magazine's top wine shops in the nation. Our wine director visits France once a year. Our meat director visits Italy one week each year to work in a meat shop. We want to be the experts; we want to do all the work and find the best [products and services] for our customers."

    Brinkmoeller is the woman behind the system that makes the Club DLM loyalty program tick, and the attention she devotes to loyalty marketing is no different in quantity from the attention Dorothy Lane's artisan baker pays to his bread. Using a sophisticated database management system, she slices and dices transaction data collected at the point of sale from club members, assigning promotions and targeting different groups for various marketing efforts.

    The grocer analyzes its Club DLM loyalty data using the MarketExpert XR system, from Livonia, Mich.-based VRMS, a developer of customer database products for high-transaction-volume retailers. MarketExpert is an open relational database management system that enables retailers to use frequent shopper data to build customer relationships with one-to-one loyalty marketing campaigns and profit-building incentive programs.

    Using the system, retailers can sort customers, based on virtually any variable in the transaction database. The system helps to identify trends and variances in a customer's purchase behavior, analyze shopping baskets and score households, track promotion results, analyze retention, and forecast sales. The software's list-building capabilities let retailers take action on this proprietary information to build solutions designed to increase customer retention, drive sales, and strengthen profitability.

    "There are set reports, but you can do all sorts of filters, as well," says Brinkmoeller. "We look at a lot based on spending, but of course we'll look at acquisition attrition; we'll look at people who are shopping certain departments and not others. It depends on what comes up. We might look at ZIP code areas; it's all different."

    The technology, plus a little out-of-the box thinking, helped Dorothy Lane address the challenge of operating during the temporary closing of a major access road for one of its stores. "It really affected people because it was the main road to get to our store," says Brinkmoeller. "An entire neighborhood was affected. We ran the ZIP code in our system to determine which club members were there; then we threw their data into mapping software. We sent affected Club DLM members a postcard with a map on it that showed the detour routes, how they could get to us, and gave them offers to bring them back in -- I think we did artisan bread and other items. The time we realized the road closing was affecting the market to the time the postcards went out was just a matter of days."

    Better safe...

    The system also has been used to address food safety issues. When an item is subject to a recall, Dorothy Lane can quickly determine which of its club members have purchased the recalled product. "We proactively ran the list of everyone who bought the item, and we called them," says Brinkmoeller. "We also had the reports at each service desk, so [service desk associates] knew to refund their money."

    Promotions are exclusive to club members, but there are additional segmentations within that elite group, depending on the level of a shopper's spending, or what type of customer he or she is. The club's "Market Report" newsletter, for example, is distributed only to the top 30 percent of Club DLM members. There are no promotions that are sent to the entire list of club members.

    There's no static customer segmentation for Dorothy Lane, however: One offer might target organic customers, while another might target the stores' specialty cheese customers. Brinkmoeller's basic guideline is to answer the questions, what promotions is Dorothy Lane available to offer, and what part of the membership does each offer fit?

    This is not to imply that shoppers not enrolled in the club are given the cold shoulder. The retailer prides itself on a high level of service to all customers. What triggered Dorothy Lane's decision to create a club for special shoppers, however, was a promotion that went awry in 1995.

    "We had a 10-cent sale. We had things like hot cocoa, ice cream cups -- each department had something for a dime," recalls Brinkmoeller. "It overwhelmed the store, we lost a lot of money, and it made our regular customers mad. We weren't giving good service; we had longer lines. Our regular customers came over to us and asked, 'Who are these people in our store?'

    "We did this 10-cent sale to try to help our customers save for the holiday season, but it really backfired on us," she continues. "We wanted to reward folks for a good holiday season, but I think we rewarded the wrong people. We were already debating the club for a couple of years prior to that, and the sale was the event that made it make sense."

    Even so, Dorothy Lane didn't make the move without thinking it through. "This change in philosophy -- that not everyone is created equal -- presented the biggest challenge in setting up Club DLM," admits Brinkmoeller. "That was very hard to accept and to live by. We still treat everyone the same, but we reward differently. I use the analogy 'If you fly Delta, American is not going to give you miles.' Everyone understands that. We want to give back to those who want to give to us. And we want to spend our money on the right people.

    "What was hard was saying it's okay to lose some customers," she acknowledges. "If a member enters the store, we're not going to give them better service than someone who is a nonmember. We're going to give everybody -- if we're doing our job right -- a very good level of service in the store."

    Today this philosophy is the foundation of the loyalty marketing system. While a version of "Market Report" can be found on the DLM Web site, for example, a note at the top of the report explains that the "Club DLM card is required for all sale prices."

    The bottom line is, the most important continuity program run by Dorothy Lane is the store itself. "Club DLM is great to have and has saved us money in that we no longer run traditional flyers," says Brinkmoeller. "But just keeping a clean store and the items on the shelf that people want -- that has to come first."

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