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Woolworths has been forced into yet another embarrassing backflip over its troubled in-store loyalty program,
which has fallen flat with shoppers and suppliers alike.
The supermarket giant is expected to unveil another reboot of its rewards program in the next two weeks as it
battles to win over customer loyalty.
The prime bugbear among shoppers -- they must search through stores for products tagged with an orange
ticket that then go into the shopping basket to earn "Woolworths dollars" -- will be eliminated and is likely to
be replaced with an easier system that will see Woolworths customers earn one point for every $1 spent in-
store.
A leaked confidential Woolworths document sent to store managers and widely circulated online and on social
media revealed the new rewards program -- the third reworking of the problem-plagued loyalty scheme since
October -- will now allow 2000 points to be converted into $10 of Woolworths dollars.
It is unclear how the new scheme, set to start from August 31 according to the leaked memo, will affect
Woolworths' deal with Qantas whereby 10 Woolworths dollars can be turned into 870 Qantas points.
For Woolworths, the continued confusion, speculation and uncertainty over its loyalty scheme comes as it is
fighting a losing battle with Coles for shoppers while also leaking customers to German discounter Aldi and US
warehouse store Costco.
The Woolworths loyalty scheme was first overhauled in October where, to the anger of many shoppers, the
retailer ditched its Qantas frequent-flyer points-based program and replaced it with the new rewards scheme,
which triggered loyalty points only when certain products tagged with an orange ticket were bought.
There was an immediate backlash from customers over the offer, especially on social media, as points were no
longer earned on any basket of more than $30 value, but rather hard-to-find orange-ticketed groceries, while
Qantas frequent-flyer points were slated to be dumped.
Suppliers were similarly unhappy and many refused to participate in the new scheme, claiming the orange
ticketing system was too costly and only served to benefit Woolworths, rather than support their marketing
and sales programs.
By December, Woolworths was forced to restructure its rewards scheme, allowing shoppers to convert
Woolworths dollars into Qantas points at a conversion rate of 870 Qantas points for every 10 Woolworths
dollars.
The minimum $30 outlay to earn Qantas points was removed.
But the orange ticketing system was kept, although that now looks set for the scrap heap as shoppers continue
to rebel against being forced into buying a limited number of grocery brands to trigger points on their cards.
A spokeswoman for Woolworths declined to comment on the leaked memo that details the new rewards
program.
Questions
1. Marketing research can provide insights for a company on their customers. It would appear that
Woolworths either did not conduct customer research into the potential impact of the initial changes
to its loyalty program or had issues with the research they did conduct.
Describe the research that Woolworths could have conducted before introducing the changes to their
loyalty scheme. Outline and justify the overall research design (exploratory, descriptive, causal or a
combination of these) and identify and justify the specific methods and sampling recommended
within the chosen design.
2. Loyalty schemes provide a means for companies to attract and retain customers and build a
relationship with their customers. How and why do loyalty schemes influence a consumers decision
making process when selecting a supermarket? What characteristics do consumers value in loyalty
schemes?
3. To compete more effectively, many companies adopt segmentation, targeting and positioning to focus
on those consumers they have the greatest chance of satisfying. Woolworths and Coles both use
loyalty schemes as part of their marketing strategy. Aldi positions itself as a price discounter and does
not offer a loyalty program. Costco promotes itself on a cost basis, with customers paying a
membership fee to be able to shop at Costco.
Discuss how the target markets and positioning for the 4 companies mentioned above differ.
4. Woolworths changes to its loyalty program involved removing the ability to accumulate Qantas
Frequent Flyer points (for which Woolworths paid Qantas) to a scheme where customers accumulated
money savings by buying selected products. The initial scheme accumulated rewards for every
purchase over $30, while the revised scheme only accumulated rewards for specific items, that is, you
could spend several thousand dollars for no reward.
The basic goal of any business should be to deliver customer value at a profit. Discuss this statement
by comparing and contrasting the initial and changed customer loyalty schemes in relation to
customer value and profit.