Thursday, March 2, 2006

High Touch Selling

Biometric technology takes center stage at NGA's Technology Symposium. MARCH 01, 2006

Single-store independent Green Hills, based in Syracuse, N.Y., is pioneering the use of biometric payment technology to create promotions that target shoppers individually. "

Grocers go to market using channels that aren't really effective," said v.p. Sterling Hawkins, who spoke last month at the National Grocers Association's Technology Symposium. "In 1965 Procter & Gamble only needed three 30-second TV spots in order to reach their audience. Today that number stands at 117. Trade promotions are decreasing in effectiveness, as are coupons, which are down to a 1.3 percent redemption rate."

He noted that less than 10 percent of Green Hills' customers were buying items that were on the front page of their ad fliers. What's more, less than 1 percent were buying products from the inside of the ad. "We also see that our loyal customers are receiving a disproportionate amount of our marketing spend," said Hawkins. "The convenient shoppers are receiving much more than they deserve, leaving what little is left over for the loyal shoppers. Added to this, we were seeing a huge amount of customer variance. The top 5 percent of our customers were generating 33 percent of our total sales, while the bottom 30 percent of our customers were generating less than 1 percent. Those best customers are also shopping more frequently: 127 times a year, spending more each time they visit, and staying with us over longer periods of time.

"To address this, Green Hills leveraged its biometric payment system, supplied by San Francisco-based Pay By Touch, to provide individual customers with relevant, timely, and differentiated offers to maximize their shopper lifetime value, delivered to the POS with the touch of a finger.

Here's how it works: Green Hills shoppers sign up for the loyalty program as they enroll with the biometric payment system. In addition to their payment options, such as credit and debit cards, they can add the loyalty program to their "electronic wallet.
"Each week every customer household receives a set of personalized offers that's customized to it, and when the consumers shop, these offers are delivered to them at the POS when they scan their finger." There are no coupons, no cards," said Hawkins. "We also have a Web-based shopping utility where shoppers can log on and view and manage their shopping list, or print it out at a kiosk in the store using just their finger." Using the system, Green Hills is able to run multiple reward programs for any one individual, as well as different programs for different individuals. "I may be in the steak club, he may be in the soda club, but we're both in the Thanksgiving turkey promotion. This way customers are in control of when, where, and how they receive their marketing communications.

As such, they can view them by the Pay By Touch system, via e-mail, or on a personalized Web page, and the infrastructure is built to support any digital device that gains critical mass, such as cell phones."Currently the system is up and running with Green Hills' 200 employees, and is set to go public in just a few weeks.

Missouri's first biometricsEnhanced security, cost savings, and shopper convenience drove St. Charles, Mo.-based Mid-Towne IGA's decision to install a biometric payment system in its store last November, according to v.p. of operations Scott Kohrs, who also spoke at NGA's Technology Symposium. The system, from BioPay (now owned by Pay By Touch), has already generated results: (
Pay By Touch Buys BioPay for $82 Million )

"Our average transaction size with someone paying using the BioPay system was nearly $40, while our typical transaction size is in the neighborhood of $20, so they're spending more with this technology," said Kohrs. "We haven't had any fraudulent payments since we started with this program in November. Plus it has generated lots of local and national attention, which brings people into the store. "The system also offers more security for shoppers enrolled in the system, noted Kohrs. "Customers, once they are enrolled, can literally shop without their purse or wallet," he said. "As a result you can't have your credit card numbers stolen.

In the case of a regular personal check, not many people realize this, but it will pass through anywhere from eight to 12 people's hands before it's returned. So it may seem like a secure thing because consumers are used to it, but in reality there are many opportunities for people to take advantage of it.

"In addition to its loss prevention benefits, Kohrs found that biometric technology helps cut transaction costs as well. "Typically the national average for a credit card or debit card transaction is from 80 cents to as much as $1.80 or more per transaction," he noted. "In our case, we use a check-cashing service, so by the time everything is said and done, with bank charges included, a check is now in the range of $1 per transaction. With BioPay, a typical transaction under $100 costs 20 cents."

Because of this, last month Kohrs began phasing out the payments by paper check with a "check replacement" program, during which store associates will encourage these shoppers to switch their payments to the biometric system. Although Kohrs expects to lose some diehard check writers, he predicts they'll be back before long, once they realize how simple the biometric payment system is to use.

Paper checks are the only form of payment Kohrs wants to get rid of, he stressed. "We're not seeking to eliminate debit cards and credit cards—I think those will be around forever," he said. "For the most part, we're looking to get rid of the check-writing customer. We feel that's one of the biggest areas of fraud, and we end up chasing down a lot of $25 checks. [The new program] is one of the main ways you can save some money and some headaches." One side benefit the biometric payment system delivered was exposure.

Mid-Towne IGA is the first grocer in the state of Missouri to employ the technology, and when the press release hit the wires Thanksgiving eve, reporters descended on the store. "That weekend a total of 55 broadcast stories went out across the country, and that buzz continues to this day," noted Kohrs. "It's definitely helped drive customers to the store."

Copyright 2006 Progressive Grocer