True Value helps retailers compete in the 21st century

A revolution is taking place in the hardware business. Faced with increasing competition from big box home improvement stores and discount chains, local hardware chains are taking the fight right to the consumer – in a personal and one-to-one way.

Their “secret” weapon: the bar code scanner. By collecting customer purchase data and using it to market to consumers in a one-to-one manner, many True Value retailers are changing the way they go to market.

At the forefront of this movement is True Value Co., a $2 billion wholesaler with more than 6,000 independently operated stores worldwide. Through the rollout of its True Value Rewards program, the company is learning what customers buy and when, then rolling that information into a marketing program that can help it drive traffic and boost sales.

A CHANGING LANDSCAPE

Much of what has been driving the change is increased competition. As the big box home improvement stores have increased their coverage across the country, neighborhood hardware stores have found the going tough.

They’ve lost a significant portion of their market share. In fact, a recent survey found that more than 68 percent of consumers said they purchased materials at a big box store for their latest home improvement project.

That’s impacting sales and has local retailers, such as True Value, looking at ways they can gain an edge on their bigger competitors.

“There continues to be fragmentation in the home improvement industry,” says John Schmidtke, True Value manager, Loyalty and Direct Marketing. “But, if we can understand the wants and needs of consumers better, we then have the ability to compete more effectively.”

In addition to increasing sales, enhancing retention and driving customer acquisition, the True Value Rewards program also provides the corporate office with visibility to valuable sales information from their independent retailers.

But here’s where the True Value Rewards system differs from most other retail loyalty programs.

True Value gives store owners/managers access to the information and encourages them to use it. They become individual marketing directors, equipped to deliver highly targeted marketing messages to customers and prospects in their area.

That’s not something these retailers are used to doing, though, and has forced some adjustments, says Schmidtke, a nine-year veteran at True Value.

“The biggest challenge we’ve faced, and still face, is cultural,” he says. “We’ve all been raised as mass marketers and it’s hard for some to accept that the world is changing and that we must change as well, or risk becoming irrelevant to our customers.”

One challenge in creating the system was getting stores to make use of it.

“One challenge in getting retailers to use the information was finding a way to make it quick and easy for them to do so. Our retailers are not data analysts – we want them out on the sales floor with their customers, not stuck in the back room trying to make sense of their data,” says Schmidtke. “Our loyalty and direct marketing partner, Insight Out of Chaos, understood this well and created a custom Web site that thoroughly addresses this need.

“With a few clicks of the mouse, our local retailers can mail a lawn and garden mailer to their top 30 percent of customers who have previously purchased a lawn and garden item,” says Schmidtke.

True Value Rewards also offers the stores a variety of communication tools – everything from self-mailers to letters to postcards and even e-mails – all of it branded with the True Value Rewards identity, but with the ability to be customized to fit the store’s unique needs.

If store managers can’t find a template they want to use, Insight Out of Chaos can develop a custom piece, just for them.

And that’s only just the beginning of what stores can do with the program, he adds.

“Once the piece has run, retailers can review how their mailer performed on the customized Web site. They can see how many households were mailed, what the response rate was, and sales associated with redemption, among other things.”

Such measurement lets the store know what’s working, but it’s also a way for the corporate office to track activity and better understand what’s selling by customer segment.

“Now we know not only what sells at retail, but when, to whom and for how much. Knowing this will make us a better partner with our local retailers.”