MARKETING RESEARCH CASE EXERCISE
UNDERSTANDING A CUSTOMER DATABASE FOR GROCERY STORE RETAILERS

Few grocery retailers have yet amassed much capability for targeting their marketing to consumers based on known buying behaviors. Even though checkout scanners are widely used to capture purchase data, only a handful of retailers, such as Safeway, Von's and Ukrop's, have built a database that links product data to purchases by individuals or hours-holds. Safeway is the largest company to have done so. The division operates 120 stores in Washington, D.C., Maryland, and Virginia. It functions as an autonomous business within the 1,057-store nationwide chain that produces annual sales of $16 billion. The division began the database effort in 1993, tying scanner purchases to consumer households with a frequent buyer program called Safeway Savings Club. Consumers were invited to join the club through acquisition mailings and in store promotions. Upon completion of an enrollment form that captures important demographic information, participants are issued and encoded scanner card to present at the checkout counter. Presentation allows them to reap discounts on advertised items and take advantage of in-store promotions throughout the store. This electronic discounting gives the consumer hassle-free access to savings while ensuring that Safeway can amass detailed history on consumer purchases.

There are a number of critical success factors that Safeway had to consider in this database venture. One is protection consumer privacy. Safeway does not release actual names of its retail customers to any of its distribution partners. Detailed analysis and modeling reports are provided to package-goods manufacturers for a fee. For more history on Safeway consult the company's Web page at www.safeway.com.

1. Identify several reasons why Safeway would develop such a sophisticated database for grocery store consumers. What do you think id the primary value of such a database for Safeway?

2. What is the value that this database can provide to package-goods manufacturers like Nabisco, Procter & Gamble, and Hershey?

3. If given the task to develop a similar database for a local grocer, what key variables would you use?