THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Monday, March 11, 1996 TAG: 9603090316
SECTION: BUSINESS WEEKLY PAGE: 06 EDITION: FINAL
SOURCE: BY ROGER A. GRIMES, SPECIAL TO BUSINESS WEEKLY
LENGTH: Medium: 89 lines
Let's say you're in Food Lion someday and take a package of hot dogs to the checkout counter. When the clerk scans the hot dogs, a computer somewhere notes the purchase and prints up free coupons for ketchup and buns.
This typical coupon mass marketing scheme has made a small fortune for Catalina Marketing Corp. of St. Petersburg, Fla. But it also underscores serious privacy questions as computers and data bases proliferate.
Started in 1983, Catalina how has about 420 employees generating more than $113 million in sales with an expected 20-percent to 30-percent annual growth rate.
Catalina is the nation's leading supplier of in-store electronic scanner-activated consumer promotions reaching more than 126 million consumers each week.
The idea is simple. When you buy a product and it is scanned for purchase, a Catalina PC connected to the cash register searches its database and generates a specific coupon when certain items or types of items are noticed. These customized coupons have yielded an 8 to 14 percent redemption rate, more than tripling the standard expected participation.
Catalina has contracts with the General Mills and Coca-Colas of the world. Some manufacturers only want coupons printed when a competitor's product is sold, but others want to encourage continued use for loyal consumers. Customers get more coupons for items they will purchase on later visits.
Grocers such as Food Lion benefit by talking with Catalina and creating in-store promotions. For instance, if you buy three heads of lettuce, a coupon for salad dressing is printed up. In all, everyone profits. Manufacturers sell more product, consumers get cheaper prices, and grocery stores reap the rewards.
To notice what Catalina is doing is important to the society we live in. The sheer number of computers invading nearly every facet of our lives is changing the way we live. While many in the computer industry will argue about privacy invasions, there is no denying that computers will begin to know everything about what we buy.
Information will allow companies to customize marketing approaches for each consumer. No longer will we fit inside some general demographic of male or female between the ages of 16 and 80. We will be described by our exact age, income, types of cars we like to own, foods we like to eat, and things we would like to try.
The Internet is a large extension of the personalized marketing principle. On-line surfers are never forced to visit a place they don't want to go. With clicks of a mouse, users choose what locations they want to visit and at their convenience. So, when I visit a golf site at 3 a.m., the advertisers on that Internet page can at least be guaranteed that I will like golf.
All the tools of the information age are converging. Many predict that in the near future we will be able to download programs such as Seinfeld into our television and watch it at anytime we want.
If we decide that we want to watch it without commercials, we will pay a little more. With commercials, shows will be free or at a lower cost. Television producers will be able to charge us more for a Top 10 show than for last year's re-runs.
Who would ever pay to watch a television show? That's how cable and HBO got started.
And because telephone, cable, Internet, and software companies are joining forces to provide more services, each will be able to share with the other what they know about your habits.
It is not unreasonable to think that if the telephone company notices lots of long distance calls to Europe, that the advertising that accompanies your Seinfeld episode might be from a local travel agency.
It is no more than an extension of the current practice of selling massive mailing lists to interested companies. The age of information will allow the mailing list to be full of consumers directly interested in a particular product. Suppliers pay more for specific target mailing lists than they do for general audience addresses.
Information is making companies manage assets smarter. Using daily downloaded data gathered from the cash register, some companies are perfecting the art of just-in-time inventories.
The ice cream delivery truck pulling up to the local store might know exactly how many chocolate half-gallons to deliver versus vanilla cartons. The beer truck leaving the local distributor knows exactly what to deliver where. When finished, he returns to the factory with an empty truck.
With the exception of consumer privacy issues, this marketing model will be good for everyone.
Consumers will no longer be besieged by pounds of useless junk mail. Companies will sell more products. And hundreds of marketers will grow rich in the process. MEMO: Roger A. Grimes can be contacted via e-mail: groger(AT)infi.net
by CNB