‘We’re working hard to get out of paper ads’
But don’t take my word for it. Instead of attempting to characterize the disruptive impact of these changes on newspapers and other mass media, I am sharing today the actual comments of a major newspaper advertiser who candidly states:
“As people become more digital, there’s an opportunity – which we’re working hard at – to actually get out of the paper ads, and make the ad itself personalized for every household.”
The intention to shift from mass print advertising to targeted digital marketing was articulated by Steven A. Burd, the chief executive of Safeway, in an earnings call with securities analysts on Feb. 21.
In reporting on the conversation, Advertising Age noted that Safeway, which is the 10th largest retailer in the country, cut its newspaper ad spend to $20 million in the first 11 months of 2012 from $33 million as recently as all of 2010. See selected metrics below.
At the same time, Safeway has boosted the membership of its Just for You digital loyalty program to 45% of its base of 12 million customers, according to Ad Age. Burd’s goal, reports Ad Age, is to get some three-quarters of his customers into the program, which sends targeted offers to individuals based on their carefully monitored consumption patterns.
Thanks to Seeking Alpha.Com, here are the relevant excerpts of the comments that Burd and his colleagues made in the recent earnings call:
Deborah L. Weinswig, Citigroup analyst: Steve, you say that Just for U has been better than expectations. Can you talk about the components of that and what you think the key drivers have been?
Burd: Well, when I say better than expectations, we’re delivering about 50% more on – of added weekly sales per household – than we had anticipated. And what’s happening is, our best customers are becoming increasingly more loyal and buying more items per trip. And that’s been true now for – since the beginning of Just for U. Did that help you?
Weinswig: Yes. Are you seeing that you’re getting kind of more loyal customers?
Burd: Yes, our loyal customers are becoming more loyal, and customers that were less loyal are entering into that more loyal category.
Robert L. Edwards, Safeway president: Yes. And Deborah, I'd also add that mobile users are higher than we had predicted. We’ll show you some slides at the Investor Conference in a couple of weeks, but we’re very pleased with the percentage of Just for U users. They’re using mobile technology because their incremental spend is higher and more frequent as well.
Burd: In fact, it's higher by about 40%. And we have – I think since our last call, we’ve – maybe we launched the iPad application.
Burd: So we basically are on all smartphones, plus an iPad application, which is quite different from the pure mobile application. And it’s attracting a lot of users. Still, I would say, the majority of users are still at the desktop stage. But we think that will change over time.
Edwards: I think we’ve also been surprised at the amount of digital coupons that people are accessing on the website. Well, again, we’ll show you some data on that in a couple of weeks. So that's been a very positive feature of the program.
Weinswig: And how has your relationship with your vendors changed as a result?
Edwards: Very positive. Again, we’ve got some slides prepared to show you some incremental sales that our top CPG [consumer product goods] vendors are realizing relative to rest of market. And so the participation has been quite high. And so I think we’re pleased, but more importantly, our major CPG vendors are very pleased as well.
Burd: You might recall that we started Just for U with about seven or eight of our key vendors and only recently have expanded that to the broader group.
John Heinbockel, Guggenheim Securities analyst: Steve, if you think about Just for U, and the impact of payroll tax and more recently – I guess two reasons — the rise in gas prices, do you think Just for U has offset that impact, or the impact from those negatives have not been nearly as great as we might have feared? What do you think it is?
Burd: Yes, I think that Just for U has clearly had an impact. When you look at our numbers, we can’t really see any decline that resulted from the payroll tax going up. Keep in mind that a Just for U user can save anywhere from 10% to 20% off normal Club Card pricing. And so that puts you right down there with the dollar stores and mass and everybody else. And so I think that Just for U has really helped. We cannot see any blip in our numbers as a result of the payroll tax kicking in.
Edwards: I think actually that if disposable income is down because of higher payroll taxes or fuel cost, I think it actually plays to the strength of Just for U, because we can target specific individuals based on their shopping patterns and what we think is happening with their disposable income, because it doesn’t affect all of our customers equally. And so I think it actually plays to the strength of Just for U.
Burd: The other thing, John, is that Just for U applies to people of virtually all income levels. Talking to people at really some relatively high income levels, even the so-called top 1%, they’re using Just for U because they all have iPads, they all have iPhones. And it just seems crazy not to take advantage of pricing tailored to the individual household.
Heinbockel: And one other thing related to Just for U: At some point there should be a benefit for you in terms of pulling back some promotional spend more broadly. When – I know we’re not there yet – when do you think we get to the point where it does have a positive impact on gross?