Six months on – How Woolworths screwed up a perfectly good loyalty card scheme
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.
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.
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
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.
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…
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.
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.
Its 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.
- August 19 update: Woolworths looks set to drop Woolworths Dollars and go back to offering Qantas points
Tim Burrowes is content director of Mumbrella
We just don’t shop there anymore. The QFF points used to lure me there, but now I just keep it local.
So disappointed am I at this scheme that I have started buying my alcohol at Qantas epicure (its the same price if not cheaper and if you buy a membership with points, its free delivery and a bottle of Mumm – now that’s a reward). I have also changed my current credit cards over to Qantas points cards and I am earning more in card points for Qantas than I am shopping at Woolies. Now I support my local butcher and green grocer again. Woolworths, you lost me and I know I am not the only one. Aussie Consumers are fickle and like a spurned girlfriend, we are not just pissed, we are vengeful and unforgiving. I will no longer scan my card. I will not give you my shopping details, I will rarely shop in your store. I will encourage my family and friends to ‘bring you down’. It was a mistake, just put your hand up and admit it and bring back either a choice or my FFPoints.
You rarely spend thirty bucks in one go? What’s on your shopping list? An apple?
it’s called a right royal F up. Spend $400 and get nothing. It use to be one of the best loyalty programs around and I never entertained going to Coles…never. I have shop at Coles more in the last 6 months than i have in the previous 20 years of being a loyal Woolworths customers. What they did was a big F you to their customers. The only reaction from us must be F you back. Idiots in management have no idea….oh and they’re destroying loyalty to Big W in the process.
As long as the donkeys who designed this idiotic scheme are still at Woolworths, any of them, Woolworths is doomed. As their business declines executives are too busy running for cover, and looking for someone else to blame. And as the business declines there are less funds available to correct the trend.
Absolute disaster is what I call the new scheme. Woolies has probably lost 50% of my previous spend. The rewards dollars are a joke!
Woolies loyaltity program, well they needed somewhere to reassign the geniuses they had heading up marketing for Masters
Need to give credit where credit is due, at least they worked out they are far from the fresh food people – long term cool room fruit and veg aint fresh!
Woolworths say they don’t like points so why don’t they bring in a percentage scheme. They could make it that you get 0.5 percent of your total spend credited as Woolworths dollars. This would be on par with the standard conversion rate of flybuys points. Woolworths claimed they wanted to pay a better rate than flybuys so they could keep the orange ticket scheme to make up the difference. Hopefully they will also increase the number of orange ticket items.
You mentioned the fruit and vegetables promotion. If you want $1 for each $10 you spend on fruit and vegetables then put several transactions through at the one time so you get $1 for each $10. The limit is a transaction limit, not a card limit.
My shopping at Woolworths has pretty much died off for the exact reason. There has always been an IGA closer but the QFF points got me there.
Spot on article Tim! Will be interesting to see where they go from here. In the meantime I’m still shopping at Woolworths as I prefer the shopping experience there over Coles. I miss my QFF points though…
Woolies have lost me as a loyal customer. Surely they should be worried about customers trying Coles only to find them better?
I’ve since discovered that Coles seed better with home deliveries anyway!
Woolies had a 80% stuff-up rate on all my home deliveries and so far Coles have an impeccable record.
Those who were responsible have stepped away as they were largely from the intellectually undercooked Zonk! consultancy outfit, led by strategically inept management.
It can hardly be a surprise that the strategy was undercooked when their leadership core skill was fluffy execution, not considered planning.
They’ve also ignored those who couldn’t care less about the price of products but loyal to Qantas. I used to shop at Woolworths as I was able to double up points (pay with Qantas credit card + swipe Woolworths card) but now there’s no advantage to me choosing Woolworths over Coles or Aldi. Even though the FF point scheme was low reward you still felt like you were getting extra value for your shop. The current program had the opposite effect of being ripped off. In six months I’ve earned 3.80 in Woolworths dollars and that’s actively trying to select the orange tagged items…you’ve got to wonder who they used to do their consumer validation before this went live.
In reply to Lucas, Woolworths sent out a couple of surveys to selected customers ahead of launching the new program. They implied that the amount of products that would earn Woolworths dollars would be more than the number which eventuated. Customers liked the idea of these rebates and thought they would reach the $10 redemption figure quickly. It’s a pity the eventual scheme wasn’t as good as the survey proposed.
In reply to Diappointed, It’s great that Coles are getting you online orders correct but do you realise that there is a surcharge for many of the Coles Online products. They only use the instore prices for catalogue specials and a few other promotional items. Your final transaction will probably end up higher than the Woolworths total. Of course if Woolworths was more hassle than Coles with their online orders it might be worth paying more.
Hey Woolies, seams very clear to me, you got it wrong and it’s time to do a back flip. There’s nothing wrong in that, just fix it. I used to be rusted to Woolies and I did like collecting the Qantas FF points, easy, simple. Now I have fallen under the spell of Fly Buys, the points work just like a cash card, its amazing. They also give lots of extra points that are very easy to earn. Double or triple points here, an extra 1000 there. You soon get $100 on you card, and swipe at the check-out, hey presto. Marketing team at Woolies take note. Your customers are not happy in fact they (we) are (I’m) very unhappy. You guys can read !!!
Thanks for clarifying RG. In my opinion it’s not correct validation of what was implemented was not what was tested in the first place. It actually wouldn’t be a bad rewards program if Woolworths dramatically increase the number of reward items. If customers see their dollars add up quickly (for buying their usual items) they would be more than willing to keep shopping at Woolworths.
I rarely buy $30 in one go. I go to the Woolies in the city and buy a banana and coffee most days. About $5, depending on the weight of the banana. Major groceries now done at Costco and Coles.
Just logged into my Woolworths Rewards account, last earned Woolworths dollars well over a month ago on the 2nd of March, and this was due to them replacing a $4 discount with Woolworths dollars. Apart from that, I have only earned 50c in the past 90 days.. this article is well written and spot on, think that I will stop scanning the card as well, and possibly start shopping at Coles instead..
But if you use the same payment card as you’ve always been using, if they’re anything like Coles, they’ll get the purchase data anyway, without giving any reward.
Targeted Flybuys emails to me feature products that i have bought without scanning my FlyBuys card, which means they must be linking card numbers to Flybuys accounts too.
No idea if that’s ethical or not.
Totally concur. What riles me most is that Woolworths is trying to dictate what discounted products to buy – and so far, none are products I would even consider. QFF points was, frankly, the only reason I shopped at Woolies. Now there is zero reason. I too now shop at the likes of Harris Farm, Aldi, Costco and sometimes even Coles. Big fail Woolworths.
Irrational describers the behaviour quite well. Frequent flyer points are one of the greatest scams of all time (just google it or watch the Checkout sometime). And the sausage fest otherwise known as the Quantas “club” trying to appear desriable through exclusivity….give me a break. In walking distance from most airports are interesting venues filled with people of both genders. Behind those exclusive Quantas club doors…..just try to find a person who isn’t a white overweight middle aged Aussie man. I challenge thee.
I’ve just started using this program and get almost $10 of every shop – yep less than a month definitely and I always seem to get a $10 discount – not sure what I’m doing differently to everyone else but I’m loving it – this is the first time ive been part of a rewards program – if there are others that give rewards please let me know!! I want to join them all ??
Woolworths Reward card has been shredded and account has been closed. Further to alienate customers, some people were getting bonus offers while others were getting nothing. Contacting support gets you a response telling you that you aren’t being targeted for offers and to keep swiping your card! I still do some shopping at Woolies but they can keep their ‘rewards’.
I love the new loyalty program – last shop I got $50 off and every second or so I get $10 or more off. I felt like I never got rewards with the old system. I’m happy!
The other major partner in Quantium is NAB. Woollies don’t need the purchase data. There are enough NAB card holders in the market to build an extremely accurate of picture of your purchase behavior, at Woolworths and beyond, that this is a moot argument to some point. I agree it’s a crap scheme. However the data argument is not as simple as you make it out.
Steve – you’re wrong. Woolies absolutely need their own basket data.
NAB data is anonymised so can only model and profile at aggregate level.
Woolies own data is linked to the specific items, Rewards card and purchase method.
But that’s kinda moot if you don’t swipe your rewards card. Or is it…
We no longer shop at Woolies. We now shop at Coles. I would always go to Woolies just for the QFF points, but now we drive past 2 Woolies to get to the closest Coles and spend on average $300 per fortnight.
I very rarely shop a Woolworths anymore.No real rewards and prices and products are the same as Coles. Have even been shopping at Aldi finding some different buys at much lower prices.
Hi Tim – interesting article overall. One thing you’d want to bear in mind: if you’ve ever used a credit card in the same transaction as the loyalty card then the likelihood is that your data is captured regardless of whether you scan the loyalty card in future transactions. Big data has you tagged.
Once you’ve done that, it’s actually better for the retailer when you don’t scan the loyalty card, as it costs them less.
Woolworths has also offered selected holders of their Rewards card (I don’t know how many) discounts of up to twenty dollars for spending more than $30 per week. This works quite well for me.
The brains behind this redesigned loyalty system might be the same ones behind the redesign of their online shopping – and that’s STILL a shambles
How accurate are loyalty card analytics if less woolies customers are using it ? Surely , the sample from loyalty data is not representative of your average woolies customer ….
Woolies have so many strategic advantages, if they could stop bullying suppliers, had pleasant stores with enough stock on the shelves, stoped employing consultants, fixed online shopping and gave great rewards through credit cards and insurance like Coles & Tesco, life at Fortress Bella Vista would be a hole lot easier.
Ahh it makes me crack the shits.
Woolies dollars earned since Christmas = $2.66. Spend – not huge, as Aldi has won me over in the last year or so, but still probably a couple hundred on hot chickens and particular brands I favour. Pathetic. Took the other half with me to Aldi a couple of weeks ago, spent around $80 on a mid-week catch-up shop. He was amazed at how much we got for the money; thought the same at Woolies would have cost about $120. I think he is on the money for that one. So why would I shop at Woolies for anything I can get at Aldi? Oh well, only another 12 months shopping at Woolies to earn my $10 off. Woohoo!
Excellent article. Like you, I am a fiend for Qantas points and scanned my card every single shop.
I’ve now given up and removed my Rewards keyring and haven’t missed one potential point as I’ve never bought an orange ticket item (not intentionally, it’s just never come up on anything I buy in store…).
It’s an epic fail, but they still want to persist?
This disaster around its customer loyalty program showcases the toxic culture of arrogance that has been present in Woolworths Limited and a key factor in the decline of the business.
Woolworths Mobile have dropped the 10% discount on re-charges using an Everyday Rewards card from June 13th ☹️.