DDR Tries To Win Shoppers With Customer-Tracking Coupons

DDR Corp., which owns 500 outdoor shopping centers across United States, Puerto Rico and Brazil, is one of a growing number of companies that are waging a digital battle for the hearts and minds of consumers by texting them coupons as they approach the parking lot.

As The Wall Street Journal reported on Tuesday, many retailers are employing the technology in an effort to discourage shoppers from using their smart phones to compare the price of goods they see in the aisles of one store with better deals that may be available elsewhere. The technology is being used by other kinds of related busineses—including grocery chains and retail landlords such as DDR.

DDR is conducting a six-month test of ValuText, a marketing tool that sends offers to customer cell phones when they are close to stores. The 27-shopping center test, which started in December, is an effort to fight back against online shopping which has taken business away from brick-and-mortar retailers across the country.

DDR’s malls are usually anchored by retailers like Wal-Mart, Bed Bath & Beyond and Kohl’s. Such big box retailers have been hard hit in recent years by the recession and the rise of online shopping. And DDR remains unprofitable after the recession and the rise of online shopping pushed major tenants like Linens ‘N’ Things, Circuit City and Goody’s into bankruptcy.

The technology, known as geo-fencing is an attempt to draw customers back into the physical stores DDR depends on for its business. The strategy is also a response to customers who already come into stores but treat them as showrooms, ordering online after they are done browsing, or using mobile phones to search for cheaper prices in the stores of competitors.

“How do we compete with all the clicks that occur in the industry?” said John Kokinchak, chief administrative officer at DDR. “We wanted to bring those clicks to the bricks.”

Kokinchak said typical Smartphone apps like FastMall, which alert customers to savings and help direct them to shops as they move between stores, wouldn’t work in outdoor shopping centers. Unlike at indoor malls, where shoppers mill around and may check mobile devices for deals, customers at shopping centers typically go to one store and go home. So the marketing has to hit customers automatically as they first approach the area.

Placecast, the company which created the geo-fencing technology used by DDR, has deals with major cell carriers to periodically check if customers are within the designated area. When customers pass through this invisible perimeter they receive deals–20% off, two-for-ones–the same kind of offers found in traditional coupons.

About 10% of the 7,000 consumers who signed up to receive the offers have used the coupons. Kokinchak says that while the number may sound unimpressive, it’s much higher than the response rate for traditional direct mail offers, which is around 1%. That’s because customers are already near the shops and don’t have to remember to bring a physical coupon from home–they can just show their phone to the cashier.

So far the program is not very sophisticated in its targeting of customers. DDR doesn’t have access to sales information for the stores, so they cannot target customers based on past purchases. The same coupons are sent to most customers coming to the same shopping center, said Michael Barber director of digital strategy for Cohn Marketing, which launched the program for DDR.

About 90% of the customers using the service signed up via text message which would have made filling out long questionnaires difficult.

“If we had opted them in and then asked them 10 questions they would have opted back out,” says Barber. “They wouldn’t have been interested.”

The remaining 10% signed up online and picked general categories of products they are interested in. They receive coupons based on those responses.

Barber says the company is looking at how to better target customers for the second phase of the program, which will start in June, and expand beyond the current locations. Details of the next phase are still being hashed out, he said. The current test locations include shopping centers in Miami, Denver and Chicago.

While the program offers discounts for the big box retailers like Kohl’s and Wal-Mart, those companies are not directly involved in the program. Instead DDR offers it as a free service for those tenants by scanning through deals the chains already offer in ShopLocal, the group of savings circulars offered around the country. After DDR identifies the deals already on offer, it picks the promotions with the most general appeal in each locality, and imports them into the ValuText system.