BUILDING A SEAMLESS USER EXPERIENCE FOR SHOPPERS October 20, 2013 PRESENTED BY MATT THOMPSON – KROGER | MICHELLE BER

1. BUILDING A SEAMLESS USER EXPERIENCE FOR SHOPPERS October 20, 2013 PRESENTED BY MATT THOMPSON – KROGER | MICHELLE BERRYMAN – THINK INTERACTIVE

2. ABOUT KROGER 2

3. Since 1994, we’ve focused on helping brands create business value through digital channels. ABOUT THINK INTERACTIVE We create digital experiences for a connected world. 3

4. OUR TALK Today, will discuss how we are using insights and trends in mobile adoption and emerging consumer behaviors, as well as, contextual consumer research to build a seamless user experience for shoppers, whether in-store or online.   We will describe techniques for understanding consumer habits, needs and challenges across a full customer journey and the ways in which we are delivering meaningful content to consumers on the right device, in the right moment, with the right services. 4

5. INSIGHTS & TRENDS

6. CUSTOMER & INDUSTRY INSIGHTS The most popular recipe on Pinterest (Easy Garlic Chicken) has been pinned more than 1.6M times. The top 25 recipes on Pinterest have been pinned more than 6.6M times 22% of socially shared food photography documents something the user has cooked and/or the cooking process they went through 20% of kids in Australia think pasta comes from animals Going forward, most smart phone buyers will be older and poorer In 1900, 2% of meals were eaten outside the home. In 2010, it was 50% Tablets are now driving all growth in the PC market 49% of surveyed consumers learn about food from social networks 81% of Americans “cook what they know” 28% of Americans don’t know how to cook Location based services will expand to 1.4B users by 2014 Influence of social channels and social sharing 25% of socially shared food photography is simply to show off “what I ate today” Food and cooking 7% of Americans don’t cook Trends in mobile and apps 53% of Americans say they know less about cooking than their parents 47% of women and 33% of men say they use social media as their primary source for coupons 1 in 2 low income families are interested in learning about cooking healthy meals Geo-targeted offers and push-notifications will expand in 2013 81% of low income respondents rate fresh produce as “extremely healthy.” That number drops to 32% for frozen produce and 12% for canned produce. 57% of Pinterest users interact with food-related content 30% of Americans say they love to cook Context-aware services are on the rise Food is the #1 content category on Pinterest The most photographed foods are desserts, vegetables and poultry dishes 37% of smart phone owners used a mobile price search app while in a store (a quarter have left to buy the cheaper option). 12% of Wal-Mart’sonline sales are made through their smart phone app while customers are in the store 67M digital coupons are likely to be redeemed in the US in 2013 25% of the US population is now using digital coupons Digital coupon savings rose 41% from 2009 to 2010 65% of shoppers research online and purchase in-store 41% of Americans attempt to diet in a given year 85% of families skip healthy purchases at the grocery store because of price 305B coupons were distributed in the US in 2012 giving consumers access to $405B in savings Budgets, coupons and deals Trends in retail and e-commerce Digital coupon users spend 49% more per year than the average shopper 71% of shoppers want access to digital content in the store 53% of shoppers expect greater price visibility via digital channels Health and diet concerns 28% of coupons are used for food products 2 in 3 low income families are interested in learning how to better budget their money for meals More than half of women say the high cost of healthy food is a major driver of obesity, compared with just 37 percent of men. 67% of people start shopping on one device and continue to another device (61% laptop, 4% tablet) 85% of low income parents say eating healthy meals is important to their families 6

7. CUSTOMER & INDUSTRY INSIGHTS The most popular recipe on Pinterest (Easy Garlic Chicken) has been pinned more than 1.6M times. The top 25 recipes on Pinterest have been pinned more than 6.6M times 22% of socially shared food photography documents something the user has cooked and/or the cooking process they went through 20% of kids in Australia think pasta comes from animals Going forward, most smart phone buyers will be older and poorer In 1900, 2% of meals were eaten outside the home. In 2010, it was 50% Tablets are now driving all growth in the PC market 49% of surveyed consumers learn about food from social networks 81% of Americans “cook what they know” 28% of Americans don’t know how to cook Location based services will expand to 1.4B users by 2014 Influence of social channels and social sharing 25% of socially shared food photography is simply to show off “what I ate today” Food and cooking 7% of Americans don’t cook Trends in mobile and apps 53% of Americans say they know less about cooking than their parents 47% of women and 33% of men say they use social media as their primary source for coupons 1 in 2 low income families are interested in learning about cooking healthy meals Geo-targeted offers and push-notifications will expand in 2013 81% of low income respondents rate fresh produce as “extremely healthy.” That number drops to 32% for frozen produce and 12% for canned produce. 57% of Pinterest users interact with food-related content 30% of Americans say they love to cook Context-aware services are on the rise 28% of Americans say they don’t know how to cook. Food is the #1 content category on Pinterest The most photographed foods are desserts, vegetables and poultry dishes 37% of smart phone owners used a mobile price search app while in a store (a quarter have left to buy the cheaper option). 12% of Wal-Mart’sonline sales are made through their smart phone app while customers are in the store 67M digital coupons are likely to be redeemed in the US in 2013 25% of the US population is now using digital coupons Digital coupon savings rose 41% from 2009 to 2010 65% of shoppers research online and purchase in-store 41% of Americans attempt to diet in a given year 85% of families skip healthy purchases at the grocery store because of price 305B coupons were distributed in the US in 2012 giving consumers access to $405B in savings Budgets, coupons and deals Trends in retail and e-commerce Digital coupon users spend 49% more per year than the average shopper 71% of shoppers want access to digital content in the store 53% of shoppers expect greater price visibility via digital channels Health and diet concerns 28% of coupons are used for food products 2 in 3 low income families are interested in learning how to better budget their money for meals More than half of women say the high cost of healthy food is a major driver of obesity, compared with just 37 percent of men. 67% of people start shopping on one device and continue to another device (61% laptop, 4% tablet) 85% of low income parents say eating healthy meals is important to their families 7

8. CUSTOMER & INDUSTRY INSIGHTS The most popular recipe on Pinterest (Easy Garlic Chicken) has been pinned more than 1.6M times. The top 25 recipes on Pinterest have been pinned more than 6.6M times 22% of socially shared food photography documents something the user has cooked and/or the cooking process they went through 20% of kids in Australia think pasta comes from animals Going forward, most smart phone buyers will be older and poorer In 1900, 2% of meals were eaten outside the home. In 2010, it was 50% Tablets are now driving all growth in the PC market 49% of surveyed consumers learn about food from social networks 81% of Americans “cook what they know” 28% of Americans don’t know how to cook Location based services will expand to 1.4B users by 2014 Influence of social channels and social sharing 25% of socially shared food photography is simply to show off “what I ate today” Food and cooking 7% of Americans don’t cook Trends in mobile and apps 53% of Americans say they know less about cooking than their parents 47% of women and 33% of men say they use social media as their primary source for coupons 1 in 2 low income families are interested in learning about cooking healthy meals Geo-targeted offers and push-notifications will expand in 2013 81% of low income respondents rate fresh produce as “extremely healthy.” That number drops to 32% for frozen produce and 12% for canned produce. 57% of Pinterest users interact with food-related content 30% of Americans say they love to cook Context-aware services are on the rise 50% of meals are now eaten out of the home (2010). In 1900 it was 2%. Food is the #1 content category on Pinterest The most photographed foods are desserts, vegetables and poultry dishes 37% of smart phone owners used a mobile price search app while in a store (a quarter have left to buy the cheaper option). 12% of Wal-Mart’sonline sales are made through their smart phone app while customers are in the store 67M digital coupons are likely to be redeemed in the US in 2013 25% of the US population is now using digital coupons Digital coupon savings rose 41% from 2009 to 2010 65% of shoppers research online and purchase in-store 41% of Americans attempt to diet in a given year 85% of families skip healthy purchases at the grocery store because of price 305B coupons were distributed in the US in 2012 giving consumers access to $405B in savings Budgets, coupons and deals Trends in retail and e-commerce Digital coupon users spend 49% more per year than the average shopper 71% of shoppers want access to digital content in the store 53% of shoppers expect greater price visibility via digital channels Health and diet concerns 28% of coupons are used for food products 2 in 3 low income families are interested in learning how to better budget their money for meals More than half of women say the high cost of healthy food is a major driver of obesity, compared with just 37 percent of men. 67% of people start shopping on one device and continue to another device (61% laptop, 4% tablet) 85% of low income parents say eating healthy meals is important to their families 8

9. CUSTOMER & INDUSTRY INSIGHTS The most popular recipe on Pinterest (Easy Garlic Chicken) has been pinned more than 1.6M times. The top 25 recipes on Pinterest have been pinned more than 6.6M times 22% of socially shared food photography documents something the user has cooked and/or the cooking process they went through 20% of kids in Australia think pasta comes from animals Going forward, most smart phone buyers will be older and poorer In 1900, 2% of meals were eaten outside the home. In 2010, it was 50% Tablets are now driving all growth in the PC market 49% of surveyed consumers learn about food from social networks 81% of Americans “cook what they know” 28% of Americans don’t know how to cook Location based services will expand to 1.4B users by 2014 Influence of social channels and social sharing 25% of socially shared food photography is simply to show off “what I ate today” Food and cooking 7% of Americans don’t cook Trends in mobile and apps 53% of Americans say they know less about cooking than their parents 47% of women and 33% of men say they use social media as their primary source for coupons 1 in 2 low income families are interested in learning about cooking healthy meals Geo-targeted offers and push-notifications will expand in 2013 81% of low income respondents rate fresh produce as “extremely healthy.” That number drops to 32% for frozen produce and 12% for canned produce. 57% of Pinterest users interact with food-related content 30% of Americans say they love to cook Context-aware services are on the rise 20% of kids in Australia think pasta comes from animals. Food is the #1 content category on Pinterest The most photographed foods are desserts, vegetables and poultry dishes 37% of smart phone owners used a mobile price search app while in a store (a quarter have left to buy the cheaper option). 12% of Wal-Mart’sonline sales are made through their smart phone app while customers are in the store 67M digital coupons are likely to be redeemed in the US in 2013 25% of the US population is now using digital coupons Digital coupon savings rose 41% from 2009 to 2010 65% of shoppers research online and purchase in-store 41% of Americans attempt to diet in a given year 85% of families skip healthy purchases at the grocery store because of price 305B coupons were distributed in the US in 2012 giving consumers access to $405B in savings Budgets, coupons and deals Trends in retail and e-commerce Digital coupon users spend 49% more per year than the average shopper 71% of shoppers want access to digital content in the store 53% of shoppers expect greater price visibility via digital channels Health and diet concerns 28% of coupons are used for food products 2 in 3 low income families are interested in learning how to better budget their money for meals More than half of women say the high cost of healthy food is a major driver of obesity, compared with just 37 percent of men. 67% of people start shopping on one device and continue to another device (61% laptop, 4% tablet) 85% of low income parents say eating healthy meals is important to their families 9

10. INFLUENCING TRENDS The web is disappearing. “As the web is increasingly integrated into our devices, we’re less aware of “going onto the internet” to access sites like Facebook. We’re just using Facebook.” The physical and digital worlds are fusing. Increasingly with the proliferation of NFC and RFID technologies, embedded sensors, smart devices, geofencing and location-based services, the physical world is becoming a digital information system ripe for interaction with people, devices and other systems. Every moment is a shopping moment. “In 2013 we’ll see significant growth in moments to shop fueled by technology — from the rise of ‘television commerce’ to ‘social media commerce’ and the maturation of ‘mobile commerce.’” Enhanced transparency is critical. “[Brands need] to pick the right ways to interact with online consumers, manage these conversations appropriately, and make the best use of digital consumer data. Moreover, successful companies will need to enhance transparency and become more collaborative in their interactions with shoppers.” Mobile payment technology is evolving. In 2013, 15% of all e-commerce purchases are projected to be made via mobile platforms. Social commerce is just emerging as the newest e-commerce vector. According to Gartner, the mobile payments market has the potential to reach $617 billion by 2016. 10 10

11. INFLUENCING TRENDS • Authenticity and imperfection matter. • Consumers seek authentic products and services, complete with natural patina. Heirloom tomatoes, purple potatoes, lumpy carrots and other natural looking foods have increasing appeal. • Real food, farm-to-fork and urban gardening are on the rise. • Consumption of ancient grains like quinoa, amaranth, teff and chia continues to increase. • Hooftymatch, FoodHub, Market Mobile, Farmigo, Farm Fresh to You and other online marketplaces are emerging to connect consumers with locally grown, locally sourced fresh foods and vegetable box delivery. These marketplaces are connected to the growing “locavore movement.” • Cities like Chicago, Portland and New York are embracing community gardens. • Wellness is increasingly important. • 57% of people want support in their healthy living goals. • Baby Boomers will control just over half the dollars spent on grocery by 2015. Research shows this group deliberately thinks about how they eat with 70% of Boomers seeking more fiber in their diet, 60% trying to consume less fat and cholesterol and 40% trying to eat less fried food. • Mindful living transforms the way people navigate eating, shopping and wellness. • Consumers are becoming more concerned about the humane treatment (care, feeding, end-of-life practices) of the animals they eat. • “MovNat” is an exodus from gyms and a return to natural forms of exercise outdoor such as running, walking, climbing trees, balancing on rocks, etc. It’s a direct affront to the sedentary lifestyle of many urbanites. • People are seeking coaching in all aspects of life: general wellness, life, finance, meditation, fitness — even breathing, sitting, communicating and colon health. • Purposeful pleasure is deemed as more meaningful than instant gratification. 11

12. THE CUSTOMER CONTEXT

13. CENTER OF THE CUSTOMER RELATIONSHIP Today, one touch point lies at the heart of Kroger’s customer trust and loyalty — the store. Digital offers an increasing number of touch points — each of which is an opportunity to amplify relationships and reach customers where they live, work and play. Tomorrow Today Tomorrow 13

14. THE STORE EXPERIENCE IS COMPLICATED For many, grocery shopping is an exercise in logistics and scheduling. Today, it requires a trip to the store — along with planning ahead, thinking about what’s needed and juggling time and money. And it’s not always pleasant or enjoyable. When shopping looks like this, who wouldn‘t want a little help? List & pen in hand Groceries piled high Sleeping baby taking up most of the shopping cart 14

15. THE CUSTOMER JOURNEY IS... 15

16. THE CUSTOMER JOURNEY IS... 66% of Americans rank grocery shopping as their most time-consuming chore... 16

17. THE CUSTOMER JOURNEY IS PHYSICAL 17

18. BEHAVIORAL INFLUENCES Brick & Mortar Shopping Behaviors Conflict between online & offline spending patterns Interaction differences between physical and digital Digital Shopping Behaviors Blur between shopping specific behaviors & other digital behaviors Digital Engagement 18

19. THE CUSTOMER JOURNEY IS AN OPPORTUNITY Breadth of journey Depth of journey Every phase of the journey is a chance for Kroger to amplify customer relationships. 19

20. CUSTOMERS NOW EXPECT OMNI-CHANNEL EXPERIENCES “ Shoppers are no longer loyal to an individual channel but rather to experience across channels . . . they expect the seamless integration of the online, physical and mobile shopping experience by 2014. Digital Shopper Relevancy Report — Capgemini “ IN-STORE DELIVER SHIP 20

21. THE ROLES OF KROGER’S DIGITAL CHANNELS An omni-channel approach to digital throughout the customer journey will... Improve Customer Understanding DriveAwareness Create Engagement Amplify Relationship Deepen Loyalty For customers, this results in saving time, saving money and achieving success with personal goals. For Kroger, this results in increased spend, share of wallet and loyalty. 21

22. THE DIGITAL RELATIONSHIP LOOP Momentsof Truth Deepening digital relationships with Kroger is more about the exchange of value, leading to the savings of time and money. “When” Deepening digital relationships with customers is first about the exchange of value, ultimately leading to greater market share and the exchangeof money. VALUE Dialogue Location “How” “Where” Insights “What” RELATIONSHIP LOOP “Why” 22

23. THANK YOU