That’s starting to change. Larger chains such as Tesco of the United Kingdom, Kroger, Safeway and Ahold USA are all working on tests that target promotions and pricing based on loyalty programs. Stop & Shop, a Quincy, Mass.-based chain owned by Ahold USA, which is itself a unit of the Netherlands’ Royal Ahold, has recently spent millions to develop a data warehouse that allows the company to send out targeted direct-mail offers, offering discounts on diapers for shoppers with babies or ice cream to those with a sweet tooth.

Even some smaller chains are getting into the CRM fray. Price Chopper, for example, provides real-time information to customers on their loyalty points balance, which shoppers can amass for greater savings or rewards. Using software from Shelton, Conn.-based VRMS, Price Chopper is able to mine customer data in order to send out targeted offers. For example, if a customer has shopped regularly at Price Chopper for three years and then stops, the company can send that customer offers to entice her back. Or if a customer shops at Price Chopper, but never buys produce, it can send that person some produce coupons.

Price Chopper won’t reveal how its customer loyalty program has affected its bottom line, but insists it has been beneficial.

Grocery chains should also focus on providing the best assortment and product placement for their customers. One way to do that is to use software that sets prices based on customer demand, a sharp contrast to Wal-Mart’s lowest retail across-the-board philosophy. D’Agostino Supermarkets, a family-owned 23-store chain in New York City, says it has seen revenue grow 9.7 percent and gross profit dollars rise 16.1 percent since it started using software from DemandTec of San Carlos, Calif. Such software helps D’Agostino and others understand which grocery items are key to their customers so that promotions are successful.

At Giant Eagle stores, based in Pittsburgh, the IS department has been working with colleagues in the retail operations group on a knowledge management project they hope will boost the chain’s competitive edge by allowing individual stores to share money-saving practices. "We’re facing competition all along the line from the new mass market, including Wal-Mart, Costco and Target," says Bob Garrity, senior vice president of IS at Giant Eagle. "We’re always looking for opportunities that will help us stay competitive by improving customer service."

Giant Eagle began work on the knowledge management project four years ago and kicked off its pilot program two years later. Now, 120 of its 216 stores are equipped with new PCs so that employees in the meat, dairy and produce departments can log on to the company portal, known as KnowAsis, and share or receive tips on product assortment and how best to arrange products. The company invested $1.5 million in new PCs and says the entire initiative has cost more than $2 million. Giant Eagle has already seen an ROI from the project, says Bob Guy, director of retail operations, information and knowledge. He declined to provide a number but says the company no longer has to publish some 200 procedure manuals (such as how to cut meat or arrange products on display) because they can now be automatically updated online. So when the chain decides to change the "planogram" for its meat department displays, it can now send out digital photographs instead of sending someone out to each store.