Science Project

How Food Lion’s application of scientific techniques has deepened its understanding of customers

By Rob O’Regan

MIKE HAAF HAS STAKED an extreme position on the art-versus-science marketing debate: The senior VP of sales, marketing and business strategy at Food Lion literally has rocket scientists on his marketing team.

Haaf began his own career as an electrical engineer designing nuclear power plant control systems, and he has employed that left-brain expertise to develop the highly structured test-and-control environment in use at Food Lion, one of the largest supermarket chains in the southeastern United States. In the ultracompetitive grocery business, where Wal-Mart and other supercenters are gobbling up market share at the expense of local and regional chains, any competitive edge counts. And Haaf believes Food Lion has a significant one: a deep understanding of customers gained through its scientific techniques.

Those customer insights have helped Haaf’s marketing team develop crystal-clear positioning for the company’s four supermarket brands (Food Lion, Bloom, Bottom Dollar and Harveys). Customer data is brought to bear on all aspects of the business, from the design and layout of stores, to product pricing and selection, to employee training. Eight customer segments, modeled using a combination of syndicated data and transactional information from its approximately 1,300 stores, help guide the growth strategy at Food Lion, a subsidiary of Delhaize America (owned by Brussels-based Delhaize Group).

“The segmentation work is galvanizing the organization,” says Haaf. “We have operators, merchants, training people and human resources starting to get their hands on this information because of the power of it.”

A renewed focus on the customer led to Food Lion’s launch of the Bloom brand in May 2004. Initially a concept store, Bloom is now an established brand in the Food Lion portfolio. “We identified an unmet need in the marketplace: designing a store around the customer, as opposed to our convenience,” Haaf says. Unlike traditional grocery stores that are organized to make it easy for a particular vendor to stock its products, Bloom layouts include product “universes” in which, for example, breakfast cereal is grouped near milk and orange juice.

Bloom also has served on occasion as a test bed for emerging technology. The stores feature such innovations as portable scanners, which a shopper can use to keep a running tally of items placed in her cart, bagging them as she goes. When done, the scanner totals the charges and the shopper pays without having to remove the groceries from the cart.

Such changes have helped Food Lion to move away from its reputation as a grocer focused only on price and reinvent itself and maintain market share against Wal-Mart. “Food Lion historically has not been the most innovative company,” says Lorrie Griffith, editor of The Shelby Report, a food industry publication. “But they do seem to be rising to the challenge and realizing that people are looking for more than good prices—they’re also looking for convenience and quality.”

Food Lion plans to roll out more Bloom stores this year and will apply some Bloom innovations to its other brands as it remodels and revitalizes stores in existing regions. Safe to say that Haaf won’t make any of these changes without significant testing, based on proven scientific principles. “As a scientist, I approach this with a hypothesis, and I test against it and try and disprove it,” he says.

Haaf’s toolbox includes software analytics tools as well as advanced “design of experiments” techniques, in which multiple elements within a process are carefully evaluated to determine the best course of action. A map in Haaf’s office plots the dozens of tests the company is running at any given time.

“We test a small market and read [the results] against a geographically dispersed control market of stores,” he says. “We’re able to isolate the particular initiative that we’re testing, and we are able to read concretely what works and what doesn’t.”

The tests that don’t work, Haaf emphasizes, are as important as the ones that do. “One of the things we love is abject failure,” he says. “Because the test is small and controlled, we know it’s not going to do us any damage [if it fails]. And then we know where not to put our resources anymore.”

Originally published on cmomagazine.com, February 2006. Reprinted with permission of CXO Media, Inc.

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