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Business Observer Friday, Nov. 19, 2010 10 years ago

Coupon Kings

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A company that lives and breathes data is finally going digital, specifically for online coupons. It makes the shift with an arsenal of weapons.
by: Mark Gordon Managing Editor

Catalina Marketing executives like to boast about the company's whopper-sized treasure trove of data — all 600 billion rows of it.


The more data, the better, the St. Petersburg-based company believes. This way it can constantly provide its clients, mostly drug stores and grocery chains, up-to-the date information on consumers' buying habits. Catalina clients then turn that data into a personalized coupon at checkout, many times on the back of a receipt.


But such a large library of data doesn't come cheap.


For example, John Kuemmel, the firm's vice president of IT, says the company's floor of locker-sized servers costs millions of dollars to build and maintain. He declines to elaborate on a specific cost.


“We do spend a lot on technology,” admits Kuemmel. “We have to. That's what makes us who we are.”


Indeed, the company is recognized as one of the national, if not global, leaders in delivering real-time messages to individually targeted consumers. The onetime publicly traded company, with 1,200 employees in nine countries, reaches 90 million households through more than 50,000 stores. It maintains a staggering 300 million shopper transactions a week.


The recognition continued Nov. 12, when the Tampa Bay Technology Forum named Catalina its 2010 Technology Company of the Year. Catalina has been recognized by TBTF in the past, including in 2007, when Eric Williams, executive vice president and chief information officer, was named CIO of the Year.



The 'right leader'


But while the awards and recognition are nice, it's merely a glossy backdrop to Catalina's core challenge: To enter the world of online and digital coupons. It's a massive undertaking for a 27-year-old company as large as Catalina.


“As a company we looked into the future and we knew we had to get into the digital space,” Kuemmel says. “We know we are the new kids on the block, but we think we will catch [our competitors] and surpass them.”


Kuemmel's confidence stems primarily from two spots. One, the company is just four years removed from successfully carrying out another big shift, when it went from black and white coupons to a color printing system.


The move took months to plan and research given the sheer volume of people who grab a Catalina coupon every day. The switch worked so well, however, it had a 'what were we waiting for' feel to it. In fact, Kuemmel says Catalina's coupon redemption rate doubled when the company went to color.


“It was sexy,” says Kuemmel. “It made us look more like the Sunday paper.”


Kuemmel's second area of confidence in the digital move is based on personnel, from a new executive down to the front line. The executive in charge of digital services, Chris Henger, comes with serious online chops: Henger was an executive with Google before he accepted the Catalina position in March.


“Chris clearly understands how Catalina is uniquely positioned to make digital marketing a measurable and scalable opportunity,” Catalina Chairman and CEO Dick Buell says in a press release. “He's the right leader, at the right time, to capture this opportunity on behalf of our company and, more importantly, our retail and manufacturing clients.”


Henger has spent the past decade in interactive online marketing, mostly with DoubleClick, a leader in Internet advertising. Google bought DoubleClick in 2008 and Henger played a key role in the transition.


Catalina didn't stop with Henger.


In May, Catalina bought a pair of digital coupon businesses from Invenda Corp., a Maryland-based digital marketing firm. Buell says the coupon lines, E-centives and Collabrys, provide Catalina with proven technology and a host of patents and intellectual property.


“We believe this acquisition will accelerate efforts to link various forms of online advertising, mobile communications and video couponing,” Buell says in a statement.



Gilligan time


Still, online coupons are a long way from Catalina's humble start, which is sometimes affectionately referred to as the 'Gilligan's Island story.'


That's because the five co-founders were boating together near Catalina Island in California in the early 1980s when their ship broke down.


The five men, executives in the grocery and other mass-market retail industries, spent several days on Catalina, where they fished and chatted about how to connect better with consumers. They all thought TV, radio and Sunday paper ads weren't targeted enough.


Catalina Marketing was essentially born that week, while the executives waited for their boat to be fixed. The idea, to base coupons on what a customer previously bought, was a new marketing concept at the time.


The idea was nonetheless a hit, and the company grew fast and wide. Countries it now operates in include Germany, Italy and Japan.


Catalina was also publicly traded for a time, listed on the NYSE. The company was taken private in 2007, when it was bought by Hellman & Friedman, a private equity firm with offices in San Francisco, New York and London.


Whether public or private, Kuemmel says Catalina has maintained a loose, creative work environment. It allows people to feel comfortable taking chances, he says, which will be especially important in the go-digital move. Kuemmel was an executive with Tech Data for seven years before he joined Catalina in 2002.


“We still want to have that entrepreneurial spirit,” says Kuemmel. “We don't want to be a GM or a Ford that gets bogged down in processes.”

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