Talking in circulars

Hardware store circulars have been part of our nation’s newspapers for generations and are a tried-and-true tool for both retailers and consumers. But the nature of the advertising business is changing, and that is having an impact on news print marketing in the home channel.

Consider the case of Gust Family Enterprises. The Colorado-based Ace Hardware dealer recently closed its Boulder location, and owner Dan Gust said one of the reasons the store didn’t do well was that its circulars didn’t seem to have much impact in that market. He said that consumers in that area responded better to e-coupons and deep discounts, “but you can’t build a business on deep discounts,” he said.

Gust also owns stores in the Colorado towns of Longmont and Johnstown, and he still sees a positive response to circulars in those markets—although not as much as a few years ago. “People are getting hammered with circulars they see from so many businesses, so they just don’t have the impact,” he said. “Plus, more people are shopping online, getting their coupons from Ace.com.”

Retailers aren’t ready to abandon newspaper stuffers, but statistics show more and more Americans get their news from the Internet and cable news channels. According to the Audit Bureau of Circulations, for the six months ended March 31, daily circulation fell 3.6 percent for 530 U.S. newspapers and 4.6 percent for 601 Sunday papers after similar declines the previous six months. Such numbers have caused many retailers to reconsider the way they reach out to consumers, and hardware stores are no exception.

One idea: make better use of the circular. Bryan Ableidinger, co-owner of Parkrose Hardware in Portland, Ore., a grees that today’s consumer is inundated with information and advertisements, which makes the front and back covers of a circular all the more critical. “That’s what will get a customer to make a driveway decision: ‘I’m going to hang on to this one,’ “he said. “That’s what’s really changed. You have to grab them with a compelling offer.

“That can be an offer of $5 or $10 off any purchase of $50 or more, or 50 percent off any one item, or taking a wheel barrow that normally retails for $60 and advertising it in a spring circular for $40,” Ableidinger said. “It’s got to be something that most people know the pricing on, so they realize it’s a great deal.”

Between his two stores, Ableidinger direct mails about 40,000 circulars 18 times a year. He finds direct mail is more effective than the newspaper to reach consumers but still not as effective as sending a coupon to a True Value Rewards member. “If 1,000 people come back with a coupon out of that circular, that’s a good percentage, but if you mailed out coupons to 40,000 loyalty customers, the response you’d get might be five times that,” he said.

Carol Wentworth, vp-marketing for True Value, a grees that it’s important to show the consumer how much he’s going to save by calling out the regular retail price and the sale price. The retailer also has to drive home to the consumer that this is a limited time offer and that he has to come into the store to capitalize on it.

According to Wentworth, the number of True Value stores using circulars has not decreased in recent years, but the total number of circulars being sent out per year has. “What’s changed is retailers are being more strategic about using circulars—how many they’re distributing, where and to whom,” she said. “They’re focusing on specific time periods: spring, fall and going into the holidays.”

Wentworth does believe circulars can be used effectively, noting that True Value stores that sent out three spring circulars this year saw 7 percent more transactions for that time period and 8 percent more sales than those stores that didn’t. Further, about 75 percent of what customers purchased in these stores during that promotional period was not featured in the circulars or discounted.

“It’s about getting them into the stores, and then having well-merchandised endcaps and giving them a pleasant shopping experience,” she said. “In a difficult economy, it’s even more important to encourage people to get out and shop.”

But Wentworth said that while circulars are still very important, they are just one part of a balanced approach to advertising in the 21st century. She suggests a strategy that also includes campaigns to target loyalty customers, sponsoring community events and anything else that “creates excitement and gives the customer a reason to come in.”

Western Ohio True Value, which has locations in Minster, Ohio, and St. Henry, Ohio, sends out about 10 circulars a year as part of a diverse marketing plan that also includes local newspaper ads, radio, television and sponsorship of community events. “The younger folks don’t seem to be as interested in circulars, but there are others who look for them, circle items and come into the store to get them,” owner Linda Kuenning said.

Kuenning also noted that because newspaper distribution in her area is declining, especially in the 25 to 35 age group, her store now does direct mailing of circulars, varying between targeting existing customers and using the “shotgun” or random mailing approach. Because of the success of her loyalty marketing program, she intends to cut the number of circulars going forward, but not altogether. “As long as they’re increasing foot traffic and image building, they’ll be part of our approach,” she said.

Steve East, vp-advertising for Orgill, said the percentage of Orgill retailers using circulars has shown a mild decrease over the last five years. But he is still a big proponent of the medium, noting that about 80 percent of people looking to make a large purchase still use circulars to compare pricing.

“Here’s the key to a circular: You have to be priced correctly. If not, you can do more damage than good,” East said. “That’s what I try to drive home to our retailers.”

An increasing number of Orgill dealers are developing their own Web sites, which also contain coupons and specials aimed at driving traffic into the stores. Still, East believes the Internet is still not going to get the average hardware store in touch with the masses. “You’ll reach a lot of people that way, but if you’re trying to promote within a community, still the best way is to get something in their hands that they can read,” he said.

About 60 percent of Do it Best members participated in circular promotions during fiscal year 2008—with 30 percent of those doing six or more promotions—said Tim Miller, retail marketing manager. While this represented an increase from five years ago, he said the nature of these marketing pieces has changed during that time. As consumers have become more sophisticated and segmented, the co-op has begun to take a more scientific approach to circulars.

“We study design trends and match things like color palettes and lifestyle photography to our target audience. Furthermore, the target audience for a rural hardware store with little competition is much different than the target audience for an urban home center,” he said. “Therefore, the nature and physical makeup of a circular cannot be the same for all our members.”

Miller also said that some members are supplementing circulars with Do it Best’s niche catalog promotions like Pro Tool Catalog or Home Decor Catalog. Others are integrating a coupon book with a circular promotion; still others use the in-store radio program with targeted promotions, as well as customer rewards and e-mail marketing programs.

As to the future of circulars, Miller believes we are a still generation or two away from American consumers not wanting to hold a book, thumb through through a magazine or flip through a circular. “Having said that, we continue to study the impact of technology and the buying habits of the younger generations, and—as we always do—we’ll ensure our members are equipped with the right tools to be successful well into the future,” he added.