Catalina in the Digital Age: Case Study Analysis

Introduction: Catalina's Core Business Model

Catalina was in the business of printing coupons for consumers at grocery stores as they waited in the checkout line. Once a customer finished checking out, the Catalina printer would produce a set of coupons tailored to that consumer's personal shopping habits. Consumer Packaged Goods (CPG) firms and retailers paid Catalina handsomely for this service — roughly ten times more than what they paid to distribute loose-leaf coupons through newspaper ad pages. Catalina placed personalized coupons directly in the hands of buyers based on their purchase history.

Catalina's detailed personalized shopping records were among its most valuable assets, and its ability to print coupons in more than 30,000 retail stores across the United States made it a formidable force in the industry (Dolan & Karmarkar, 2014, p. 1).

The Digital Challenge and Leadership Response

The advent of the digital age brought a new and pressing challenge to the company. Should it embrace the mobile and internet-based business models pioneered by companies like Google and Facebook? Would such a transformation be appropriate — or even necessary — moving into the 21st century? Stakeholders brought in a new CEO named Egasti, formerly of Procter & Gamble, to help guide the company through these questions.

At least one board director viewed the transformation as risky and potentially debilitating: "Moving from in-store to online and mobile, we go from competing against nobody to competing against Yahoo, Google, and Apple, and they have already established price levels there that are not attractive. We match those prices and cannibalize our existing checkout business, and our margins are gone" (Dolan & Karmarkar, 2014, p. 2).

Consumer Expectations in the Digital Age

What Egasti understood was that shoppers in the digital age no longer wanted to spend time sorting through fliers and inserts looking for the one coupon that might save them a dollar. They wanted promotions to find them — to tell them how they could save. They wanted to be marketed to directly, and they wanted a personalized experience that was fast, easy, and available on the go (Dolan & Karmarkar, 2014, p. 11).

Catalina could already deliver much of this — just not digitally. Its service still relied on the printing machine and the tangible coupon, which could easily be lost. Considering that only about 1% of the 300 billion coupons printed annually by businesses across the country were ever redeemed, it is easy to see why Egasti viewed digital delivery as the next evolutionary step and why he wanted Catalina to lead that transition.

Egasti articulated the consumer's ideal experience: "I want that coupon in a way I want to get it, wherever it is easiest for me, at home on my computer, or my mobile phone, downloaded to my loyalty card so I don't have to carry anything around" (Dolan & Karmarkar, 2014, p. 11). As Egasti recognized, Catalina already had the personalization capability — it simply needed a new, digital delivery system.

References

Dolan, R., & Karmarkar, U. (2014). Catalina in the digital age. Harvard Business School.