Introduction

Since 1983, Served Consumer packaged goods (CPG) firms

and retailers by cent off coupons (3 billion coupons/year)
Personalization of coupons as per the shoppers purchases
CPG accounted for 80% of Catalina coupons
CEO Egasti called for reinvention of Catalinas personalization
capability to online and mobile distribution of coupons and
media

Three questions by Egasti for future:

1. Positioning of Catalina to CPG firms & to retailers? In store
distribution to remain core product? Entry into online &
mobile?
2. Pricing of alternative distribution methods?
3. How to effectively sell new products? What capability
development and incentive plans should be implemented to
support changes?
Consumer Packaged Goods: Market
Spending and Performance
Tracking
Apart from its own sales force calling on retailers to secure distribution and
favorable treatment of its products, there were three other categories of marketing
activities used for brand promotion:
Trade promotions: Programs offered to the retailers to garner support eg displays,
features in retailers circular and temporary price reductions
Advertising: Directed to the consumer to promote sales and build brand equity
Consumer promotions: Directed to the consumer to promote short-term sales of
the brand. Eg. Cents off coupons, free samples, in-store demos and tie-ins to movies
and sporting events

Trade promotion spending was difficult to track given its common form was a price
reduction off-invoice . It was conducted on an by-account basis. Discounting of
this type was the largest marketing spend category for CPG firms

Digital advertising represented about 25% of the total ad spend in the United
States in 2011 with 50% coming from search advertising and 40% from display ads
Google captured 40% of this spend, and Yahoo, Microsoft and Facebook each
captured between 6 and 8%
 Performance Tracking
In addition to analysing its own shipment data to retailers, a typical
CPG frim engaged either Neilsen or Symphony-IRI. They provided data on
the firms own brand and on competitive brands, such as:
Sales in $ and units
Distribution as % if stores carrying the brand
Price:
everyday
Actual paid during promotions
Store Activity
Feature ad
Display
The firms also offered household level data from 60000 households
in a panel, providing data such as
Penetration (% households buying the product)
But Rate (the number of purchases in the period)
Purchase Cycle (length of time between purchases)
 Couponing Industry
In US close to 1.2% of total coupons are redeemed with total value of $
500 Billion Dollar, 90% of which are through the newspaper flyer or
Free standing insert
Catalinas Initial Premise had two components: Firstly, Targeted coupon
delivery based on purchase behavior Secondly, Constantly tracking the
effectiveness of coupons
Although the Coupons rates declined after an initial high they were still
doing way better than the popular alternatives, with close to 6.9% In-
store redemption rate in 2011
In 2012, The redemption rate for "Internet Home Printed" coupons was
high, viz. 14.2%, trailing only the 21.7% redemption rate of "Instant On-
pack coupons
In Grocery 25% of US grocery shop had a smartphone over of 57%
these were "somewhat" or very interested" in location-specific
advertising and deals
Companies were also developing application on Mobile platforms for
offers during the In-Store buying as well
Background
In 1983, Catalina founders saw advent of POS scanners. They saw this as an opportunity.

They wanted to target customers based on their buying behaviour

With cooperation of retailers they were able to put their idea to use

Stores were equipped with POS systems which saved the purchase information

Catalina coupons were next purchase coupons, typically valid for 8 weeks, but were used within 2 weeks

Pre 1993: coupons were mainly used for competitive switching

Post 1993:
Differential pricing based on coupon type

Started loyalty cards

Same retail chain purchase history

 Catalina Business Model -
Growth
Scope of activity grew from 2000 stores to 35000
stores in 10 years
These stores represented 60-70% of groceries and
personal care
Catalina distributed coupons for 500 brands with 23
of 25 companies having highest marketing spend
By 2011 Catalina had 210 million unique identifiers
They employed experimental designs
Test and control groups to see effect of coupons on users
Catalina Business Model Selling
Catalina Services
CGP Firms
Brand Development Team
Achieve (Revenue Goals) Develop (business plan) Analyse (Data and design
solutions)
Catalina generated 80% revenue from CGP firms
Catalinas work for CPG firms
Volume/share Gap issues offering share driving solutions
Program support New item launches, issues and tracking
Understanding Consumer shopping basket analysis
Understanding product outflow lost loyalty, brand shifting

Retailers
Integrating POS systems with retailers
Distributing coupons on behalf of retailers
Catalina generated 20% revenue from retailers
The Changing Landscape of
High Frequency Retailing
and Catalina
Substantial capital Plans
Building on E-centives platform,
investment in equipping introduced Coupon Network
35000 retail stores by Catalina at
dispensing Catalina offers couponwork.com in April 2011
Technology changed the way Online coupon space was already
of interaction into an Omni- crowded by this time.
channel shopper
By 2011 1% coupons were
Multiple ways of interaction distributed online and only 5%
Computer, Website, Social redeemed
Media, personalised
Catalina was known in industry
communication and in-store
for having a strong content and
as well.
First step taken before a strong sales-force
Catalina didnt play on price but
Egastis joining acquisition
content and had a price of $80
of E-centives, a veteran in
CPM compared to $60 CPM of
online marketing
competitors
communication
 The Reinvention
Opportunity
New opportunities beyond traditional coupons, e.g
customer loyalty
Low redemption rate of coupons of 1%
Catalinas competitive advantage Personalization
Competitive weakness Delivery

Safeway
1600 stores, $44 billion, multiple brands including Vons
and Randalls
Just for U digital marketing and loyalty program.
Personalized prices and digital coupons on Safeway Club
Card
Integrating brick and mortar, online and mobile experience
Raised questions about Catalinas product portfolio
 The Reinvention
Opportunity
Kroger
2400 stores, $82 billion, multiple brand names; Fred Myer and Ralphs
Personalization Key component of loyalty strategy
Analyses loyalty card purchase data to drive sales
Catalinas partnership viewed tactically rather than strategically

Mobile Opportunity
Mobile Technology on Grocery Shopping Focus on Convenience
Mobile app based personalization strategy by Ahold( a market leader)
Fully integrated app with targeted messaging and other functions
Acquisiton of Modiv Media Strategy of Catalina to gain foothold
Entry into market as a while label rather than a Catalina branded app
Modularize app to capture gaps in already existing tech at retailers
 Egasti Decision
Egasti was confident that the right path for Catalina involved continuing to
expand its product line, adding mobile and online to its distribution models
The critical question, however, was how to present the product line to its two
customer groups, CPG firms and retailers
For in-store there was no real competition and Catalinas $130 CPM price was
justified over the years in various studies
For online, the price set for coupon network by Catalina was $80 CPM. As yet,
Catalina had not differentiated itself from the crowded field of online coupon
distributors
For Mobile, prices were being established by multiple methods including
auctions, in the absence of clearly comparable metrics, and many firms
investing in the hope of their platform eventually winning-out. Some ads were
served as low as $2 CPM
 Continued

Catalinas sales capability and motivation was another area of concern. There
were doubts whether theyd be capable and motivated enough to sell the full
product set of the reinvented Catalina
Should Catalina continue with the same sales force or should mobile specialists
be hired
Finally, Egasti was considering how the company should respond to the shift in
the CPG focus from inducing brand switching to fostering brand and customer
loyalty
Exiting the competitive switch coupon business was also a consideration