Woolworths Rewards Who?

Qantas Frequent Flyer points or Woolworths Dollars – the choice of rewards was presented first to a handful of Woolworths shoppers by email last week. The much anticipated correspondence marks the soft-launch of the rebranded loyalty program, which copped significant flack for it’s planned dumping of it’s relationship with Qantas. Since the unpopular announcement in October 2015, Woolworths has backtracked to ensure their ailing customer base doesn’t further wane. And at an estimated cost of $500 million per year, the largest food retailer in Australia is on track to offer consumers options in the way they are compensated for providing their ongoing patronage and it’s associated data.

While Woolworths Rewards offers shoppers a broader reward platform, it intends to capitalise on ‘a recent marketing industry survey, which determined 4 in 5 consumers buy more from businesses with whom they hold loyalty cards’. While they may buy from those businesses more often, you have to wonder if they are actually loyal. The latest Roy Morgan Research has found supermarket loyalty is more elusive than most of us would believe. The majority of customers apparently shop at a minimum of 2 supermarket chains each month, suggesting rewards programs such as Woolworths Rewards are not actually driving loyalty.

Supermarket mainly shopped at and number of supermarkets visited in last 4 weeks
6442-correctchart

Source: Roy Morgan Single Source (Australia), April 2014 – March 2015

In a bid to increase sales more often, Woolworths engage in tactics that seem counter-intuitive to their program. Instead of rewarding their repeat customers, as their loyalty program would suggest, they instead use special offers to lure in unfaithful customers’ dollars more frequently. Research undertaken by the Australian Frequent Flyer forum has revealed businesses like Woolworths determine the ‘number and nature of offers’ through the data collected on your purchasing habits. Meaning playing the system, through your total spend and frequency, may save you money.

This reward platform is theoretically equally attractive for the systematic quantitative data collected from the point of sale process inherent in loyalty card use. This large scale descriptive data is however meaningless without a dedicated analytics team to steer their marketing direction.

Enter contemporary marketing technique: acquire your own analytics firm.

Woolworths invested $20 million in 2013 into a 50% stake in Quantium, a move which has helped them develop a modern and unique business model, informed out of shared data. Last year, Woolworths matched their existing customer data with that from their insurance underwriter to create an algorithm for risk. Yes, this does seem a little Big Brother-esque, however their findings were interesting – those who purchase milk and red meat were lower risk drivers than those who buy pasta and rice, fill their car up at night and drink spirits – which led to targeted offers to those deemed safer drivers.

Despite this emerging marketing technology, Dr Paul Harrison of Deakin Business School, insists “the use of data by retailers is still very rudimentary”, with a gap existing between the analysts and the marketing decision makers. The technology is there to support seriously personalised marketing, with significant data (purchases, frequency, total spend, time of day) obtained on faceless customers, linked through their credit card numbers. Meaning the only way to completely avoid becoming a statistic is using cash. Surely the information collected is used to encourage bigger spends, more frequently. Is it possible for a company to willingly absorb such expenditure only to not use it? If Dr Harrison is however correct, the huge amounts being invested into obtaining and analysing data won’t be enough to save Woolworths. But it could just be lucrative enough for savvy shoppers to come out on top.

References

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