Six months on – How Woolworths screwed up a perfectly good loyalty card scheme

tim burrowes landscape

Today marks six months since Woolworths made one of the poorest decisions in Australian loyalty marketing history by ditching its Everyday Rewards scheme. The disastrous move to near-impossible-to-acquire Woolworths Dollars has removed many of the incentives for customers to spend more – and left them with virtually no reason to share their data with the supermarket, argues Mumbrella’s Tim Burrowes.    

I’ve been on strike for a while now.

Virtually every night I stick it to the man.   

Yes, six months ago, I stopped scanning my Woolworths Rewards Card.

woolworths rewards card

We used to have a deal, Woolies and me. Like millions of others, every time I shopped there, I’d scan my card. It was automatic.

As a result they’d know all about my shopping habits

And in return I’d get Qantas points every time I spent over thirty bucks.

It was that thing marketers dream of – they’d created a habit.

For what was in a reality a tiny reward, they had the keys to my data cupboard. After all, I rarely spent thirty bucks in one go, but I automatically swiped the card anyway, without a second thought.

And this is the beauty of supermarket loyalty schemes.

Originally, loyalty marketing was simply about incentivising people to shop in the same place because they were chasing a reward.

But the prize of knowing a huge amount about the habits of almost every shopper was arguably far greater.

Grant Harrison addressing the Retail Marketing Summit this morning

Harrison: Supermarket loyalty pioneer

It was what turned the Tesco Clubcard into a marketing legend when it launched 20 years ago. One of the men behind it, Grant Harrison, spoke at the Mumbrella Retail Marketing Summit in Sydney a few weeks ago.

And it explains why Woolworths invested in data firm Quantium back in 2013, for a reported $20m.

Axed: Everyday Rewards

Axed: Everyday Rewards

Until late last year, things were, I’d imagine, going quite well.

People were well and truly in the habit of sharing that data. Which meant that specific offers could be tailored for them based on sophisticated statistical data their shopping behaviour.

Famously, Target in the US once figured out that a teenage customer’s switch to unscented lotion suggested she might be pregnant, and sent offers before her father found out.

But to do that, you need really good data.

Along with habit, one of the principles that drives great loyalty marketing is gamification – how to keep customers incentivised and playing along. It’s why people keep swiping left (or is it right?) on Tinder, and Qantas is world class at it. Each time you hit a status target, you’re encouraged to get to the next one.

The leap from bronze to silver looks fairly straightforward, and those couple of complimentary invites to the Qantas Club look attainable.

But once you get to silver, gold looks possible, which offers entry to the Qantas Club every time you fly with the airline.

Yet once you get inside the Qantas Club there’s that inner sanctum of the Business Lounge, where presumably the free toasties are even better, if only you can attain that Platinum Status.

qantas QFF gold platinum

And of course, once you’re platinum, they let you in the First Class Lounge for international flights. And very motivating the marketing messages are too…

qantas platinum

I’ll be darned if I know how I’ll get that elusive 365 additional status points before October 31, but you can bet your life I won’t be flying Virgin for the next six months. And that’s the point – a really well-designed loyalty program promotes irrational behaviour.

And then Woolworths blew it. It clearly didn’t consult anybody who knew anything about behavioural economics. It decided to drop the scheme and walk away from its Qantas arrangement. Instead came the lacklustre Woolworths Dollars.

One of the places where Woolworths went wrong was in trying to appeal only to the rational consumer.

It figured it could win the argument that it was spending the money on lower prices instead. And it gave far too much weight to the fact that many customers were doing nothing with their points. That wasn’t the problem they thought it was – even those who didn’t do much with their points liked earning them.

Another principle of behavioural economics kicked in – loss aversion. It infuriated existing customers who felt they were losing something, and months on, it still annoys them, if the brand’s Facebook page is anything to go by.  Read on below ….

Worse still, even if some existing customers have continued to scan their card out of habit, it’s hard to see why new ones would bother to sign up for the scheme.

Woolworths’ argument that if it spent less on buying Qantas points, it could invest more on cutting prices, made sense.

The problem though was that it seemed unsure quite what strategy to follow. If you focus simply on everyday low prices for everybody, then why would a customer bother to swipe (or even carry) their Woolworths Rewards card if they could have the discount anyway?

But clearly, Woolworths wants the data, too. So on a tiny number of products, it gives a small discount on a future shop, based on earning Woolworths Dollars.

And this is where things get baffling and frustrating for a customer.

You’ve got red and white tickets which symbolise the reportedly soon-to-be-defunct Homeprice products and ‘Low Price Always’ products. These are nothing to do with Woolworths Rewards.

Then you get yellow tickets which represent ‘Special’ reductions. Also nothing to do with Woolworths Rewards.

And orangey-yellow discount labels on food that’s about to pass the sell-by date. Again, nothing to do with Woolworths Rewards.

Only very rarely, do you come across an orange label offering future Woolworths Dollars as a discount if you buy the product and remember to scan your card.

The major criticism from consumers is that these Woolworths’ Dollars are rare.

Last week, the AFR reported that suppliers have not been supporting the scheme, meaning Woolworths will need to invest more of its own money in discounts if it is to stand any chance.

Indeed, at the moment, the discounts under the scheme are almost non-existent, and they seem to be getting rarer all the time.

There’s currently a temporary offer for a Woolworths Dollar for every $10 spent on fresh produce. But it’s capped at $1 per shop and ends this ends this week.

woolworths rewards fresh

Last night I walked every aisle of my local store.

If I bought one of every single product in the store, I estimated that I would have walked away with just $11.80 in Woolworths Dollars.

Let’s just repeat that. If you bought one of everything in the store, you’d get $11.80 off your next shop.

That accords with an anecdote in the AFR story of one customer who spent $1279.39 and received just $4 in Woolworths Dollars.

Not exactly going to change consumer behaviour is it?

There is now, by the way, at least a means of changing those rare Woolworths’ Dollars into QFF points, which followed the backlash on the axing of the Qantas tie-in. But by the time a customer has their few Woolworths Dollars, using them for a discount on the next shop will usually be more attractive.

And the problem for Woolworths is that it is facing pressures from all fronts.

flybuys colesIts traditional foe, Coles, has the FlyBuys card, which offers the much simpler scheme of a point for every dollar spent. There are many ways of cashing in points, including with the Virgin-aligned Etihad frequent flyer scheme.

Then you get the likes of Costco, which demands a membership card for all customers.

And of course the simple low price squeeze coming from the likes of Aldi.

The thinking behind the relaunch of Woolworths Rewards was to try to be a bit of everything.

Hence the confusing rainbow of orange, yellow and red tickets across the store.

But as a result, the store is stuck somewhere in the middle, and it needs to make a choice.

If data is the most important thing, then embarrassing a climb-down as it will be, the time has come to ditch Woolworths Dollars and return to a simpler scheme where a customer is incentivised to scan their card every time because they get points every time.

Or if competing with everybody else on price is most important, then make that the focus. Then decide whether this is always with, or always without, the card.

But after six months, it is time to accept that if there was an opportunity to persuade shoppers that Woolworths Dollars offered value, the moment has gone.

Some of those involved in switching to this now discredited scheme have since left the organisation, which may make it slightly easier to move on.

It was a bad idea, badly executed. Now it’s time to go back to what worked.

Tim Burrowes is content director of Mumbrella


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