Opinion

Aldi’s new ad misses the points

In response to Aldi's recent anti-loyalty campaign, Bernard Wilson - who has worked in the field for both Myer and Woolies - argues the positioning is a strategic misstep.

Sun Tzu wrote that “when the enemy occupies high ground, do not confront him”. It strikes me as irrational that Aldi would feel the need to attack the majors on loyalty – where they hold the high ground – rather than continue to focus customers on its compelling core proposition.

Regardless of reality, customer perception has been that the majors cannot compete with Aldi’s lowest prices on a wide range of high quality product. Best value (price) remains the second most important driver of a customer’s decision to shop with a grocer, and whilst economically a loyalty program does have a marginal impact on price, it is not considered in that way by most customers.

Challenger brands often succeed by directly taking on the competition and landing their point of difference. But Aldi’s point of difference is price.

So why has Aldi not continued to fortify its own high ground?

The News article yesterday, which quoted an Aldi spokesperson, revealed some of the flawed thinking that may have convinced them there was an opening.

Firstly, Australians love points. It’s as simple as that. I experienced this first hand when we launched the first iteration of Woolworths Rewards. Who remembers Woolworths Dollars?

The second point is largely irrelevant given the first, but the maths is wrong. Aldi are focused on what is known in the industry as the “base earn” – the 50 basis points a member gets on every dollar spent. But they are ignoring all of the over and above offers given to members on mass, or as unique individuals: to bring this to life, think about how often double or triple points are advertised, or spend $100 get $10 or $20 in points. So the actual earn rate of most members is well over 50 basis points. (This is just on groceries and ignores the additional value a member can unlock across a partner network – say, with the grocer’s financial services products, or with affiliates).

Finally, Aldi is underestimating the importance of personalisation. The Aldi spokesperson said: “We don’t need to know the individual person and send them a half-price offer.” Whilst correct, it misses the emotional response which manifests in loyalty. Woolworths can send a unique customer a special offer – for them alone – on a product that they often buy. A version of that product may be available at Aldi at a similar price, but like it or loathe it, loyalty isn’t always rational.

But the key point is why Aldi feels the need to go in this direction, which – in trying to highlight a competitor negative – seems at odds with the positivity of their existing brand proposition of “Good Different.”

The spokesperson nailed it when he says of Aldi: “Our approach to loyalty is to provide good prices.” I wonder why they haven’t stuck to reinforcing that. Good different.

Perhaps it says more about Aldi’s competitive pressures than anything else? Customers may be starting to realise that the majors are actually more price competitive than ever, confronting Aldi on their own hallowed turf. But, unlike Aldi, they have listened to Sun Tzu, and are sticking to reinforcing their own core propositions rather than directly confronting Aldi in their advertising.

Bernard Wilson most recently ran Myer’s loyalty program, and prior to that was part of the Woolworths Rewards and WooliesX leadership teams.

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