Apple Pies Charm Core Customers

Pet owners respond to sur-pies mailing.

For one pet supply retailer, several thousand apple pies did what coupons couldn’t: they created goodwill among customers while keeping store margins intact.

Having to rely on direct mailings that offered discounts had been a problem for Dave Ratner, “chief instigating officer” of Agawam, MA-based Dave’s Soda & Pet City. “They were killing us,” he says of the postcards.

Ratner, who tracks customer purchases through coded coupons and Club Dave, the chain’s in-store loyalty program, found that the mailings generated bulk purchases of low-profit soda and pet food instead of the more lucrative pet supplies.

This past Thanksgiving, in place of the firm’s usual quarterly discount mailing, Ratner bought 3,000 apple pies from a local supermarket for $2 apiece – significantly less than what he was rebating to his customers.

Ratner mailed coupons good for a free pie to just under 3,000 of his best customers, based on how much they spent from the beginning of the year. The coupons were a thank-you for being a loyal customer and didn’t require a purchase, although recipients had to come into the stores to redeem them. Nevertheless, total sales for the week jumped 30%.

Although Ratner didn’t say whether the number of customers increased as well, the coupon probably was at least partly responsible. They could only be redeemed during the three days before Thanksgiving, a period that traditionally has been off for the business.

Ratner’s decision to mail fewer coupons than pies was a practical one; inventory control proved difficult.

“Pies are fragile,” says Ratner, whose hands-on role in disposing of the broken ones, which he didn’t want to give to customers, caused him to gain 15 pounds.

Ratner also wanted to have enough pies on hand for “the next guy in line” – the customer who wasn’t highly ranked enough to receive a coupon, but was in the store when another customer redeemed a coupon.

Ratner plans to double the number of pies he will give away this Thanksgiving, and will consider different incentives for mailings at other times of the year.

In special circumstances, however, Ratner will still use discount coupons. For example, last August Procter & Gamble Co. purchased The Iams Co., which markets a brand of pet food that had been available only through specialty stores.

Right after the acquisition, P&G announced it would widen the brand’s distribution channels to include mass-market outlets. By late last year, its efforts to do so were in full swing, and Dave’s was feeling the impact in lost sales.

Adding to the injury, Iams had the highest margin among all brands carried, even surpassing that of the house brand. At the same time, Internet-based pet supply companies began aggressive marketing strategies late in the year.

“You couldn’t turn on your TV and not see one,” says Ratner. “I didn’t know how much we would lose [to them].”

To counteract competitors’ efforts, he mailed out discount coupons to the top 3,000 names in his database. The coupons were valid only during the second week in December, another traditionally slow week for the chain.

Sales for the Dave’s stores spiked, and according to Ratner, the revenue was “found business” that did not cannibalize Christmas sales. The same customers who made purchases during the discount period came back a week or two later to buy rawhide chews and catnip-stuffed mice for their pets’ stockings.

These results further convinced Ratner that he didn’t have to discount to protect his customer base.

Ratner hasn’t done a mailing since, although he plans to resume the free goodies quarterly mailings before Thanksgiving, if for no other reason than he likes receiving thank-you notes from his customers.