Talk about national embarrassment, Woolworths have only just released their new loyalty programme when it once again gets dropped like a lead balloon. So badly so that they are now having to reconsider their entire stance. The latest iteration of their loyalty program cost the company €500 million to deploy and so far its looking like a huge waste of money.
Woolworths is now planning to give the scheme a makeover including revisions on how to make it more attractive to grocery suppliers in efforts to slow it's struggles. As I currently understand things, over the coming months Woolies will broaden the ranges of products to customers so that they can earn more ‘Woolworths Dollars’. But how exactly will this benefit you?
We can expect to see these ranges of products within the scheme being broadened out and as a result the cost to suppliers will be reduced. The reason this is such a hot topic is because the current rewards scheme doesn’t stack up next to the cost of regular promotions and as a result many suppliers didn’t want to contribute. This is a key hurdle that the supermarket needs to tackle in order to get more suppliers onboard and in return attract more customers.
What is even worse is that some suppliers have looked at the pricing models for the new scheme and calculated that they are actually better off not participating in it. This would indicate a complete disregard by Woolworths of its suppliers and in return, to its own demise, they're only able to offer half a scheme to its customers.
This was evident from customers since the launch of the new ‘Woolworths Loyalty Program’, because immediately after launching they appeared to reach for the phone to complain. Their biggest gripe, which I covered in a previous article, centred around customers feeling that their orange ‘Rewards’ scheme didn’t reward them enough and also took far too long for them to earn any dollars (even over an extended period of time).
The tipping point for many was the realisation that after implementing the new scheme, customers were actually worse off than before. It was found that you could spend hundreds of dollars but if your trolley wasn’t filled with orange ‘Rewards’ items, you wouldn’t save anything.
A retail analyst named Brian Walker said that the current Woolworths loyalty scheme was not producing the return on investment required to entice and keep suppliers committed. The fact that Woolworths got it so badly wrong will most likely mean that an entire overhaul will be scheduled for the program. This will hopefully lead to customers being given more opportunities to save money. It almost appears that the largest supermarket chain in Australia has missed a massive opportunity to collect data through their rewards programs, so it can personalise messages to its customers and drive sales through strategic offers. Instead they have simply pushed out a standard discounting program and expected the suppliers to fund it. On top of this, the supermarket dropped the Qantas points part of its scheme, only to have it reinstated again after a huge uproar from customers.
Woolworths CEO Brad Banducci in May outlined plans for the chain to spend $150 million fixing the eight-month old rewards scheme, by trying to reduce prices and boosting service levels in stores. Lets only hope that it’s not too late for the supermarket giant, because competition is ramping up from ALDI not to mention market share gains being made by Coles.