Kevin Stirtz, author of “More Loyal Customers”, wrote: “Know what your customers want most, and what your company does best. Focus on where those two meet”.
It’s amazing how many retail loyalty programs are designed without that focus, relegating customers’ needs to a lesser priority. Which is odd given that loyalty programs are meant to reward customers.
In an age of information overload, mass marketing doesn’t work anymore. We’re becoming more selective about the brands we invite into our lives and the programs we’re willing to partake in. We expect personalised experiences, instant gratification and automatic rewards.
When it comes to loyalty, there’s growing ‘points fatigue’. There are more programs than ever and deciphering their value is often impossible, given varying redemption rates for the same points depending on how they are used.
While the loyal customer expects to be rewarded over the casual shopper, many customers signed up to points programs confess to not using them.
Woolworths-commissioned research suggests around one third of supermarket loyalty members actively linked to points programs have never redeemed points; not for flights, holidays, coffee makers, nothing at all.
For most, the length of time it takes to accumulate points is a frustration, for some, the level of spend required to get a reward is too great, while others feel making a redemption is simply too much hassle.
The issuing of points that are never redeemed is known in the loyalty trade as ‘breakage’. It’s part of the business model for loyalty program operators that sell points to third parties.
But this model works as a result of members failing to get value from your program. It is necessarily at cross-purposes with the needs of the customer.
So when Woolworths decided to revitalise its customer loyalty program, we started with a blank sheet of paper and asked ourselves what program would we design if we put our customers first.
We asked our customers what they wanted from a loyalty program, and designed it around their needs. We consciously abandoned the opportunity to create a loyalty business with a revenue goal, trusting that if we gave customers what they wanted, more would choose to be loyal to their local Woolworths supermarket.
Our research was definitive: For a clear majority of customers – 68% – money off their normal supermarket shopping is the preferred option versus only nine per cent who prefer a points-based scheme.
This was not always the case, so what’s changed? No doubt cost of living pressures are having an impact. But it seems certain that ‘points fatigue’ and a confused customer loyalty journey are also significant factors.
The solution? Give customers money off their shopping, quickly and automatically. The customer simply scans at the checkout and the rewards take care of themselves. No admin required. That’s why we’ve introduced Woolworths Dollars. Customers earn Woolworths Dollars in the course of their regular shop, and once their balance reaches $10, we take that amount off their next shop.
By simplifying the program and redirecting all of our investment straight to customers, Monash Business School analysis demonstrates our core program delivers $10 of value to the customer twice as fast as in our major competitor’s scheme. Crucially, customers will achieve that result without having to change their shopping patterns and there is no ‘breakage’.
We have also made a major investment to ensure our targeting of offers via loyalty is as personalised as possible. Customers want choice, and range is a key driver of the decision on where to shop. But, as Sheena Iyengar says in The Art of Choosing, many are drowning in a sea of irrelevant choices.
I know this from my own experience. As a mother of four-year old twins, I’m extremely time poor, so I don’t want to receive generic e-mails advertising products that have no relevance to me. But I am interested in receiving offers on products I already buy, or am likely to want to try.
Our new approach allows a much more sophisticated understanding of the individual needs of our customers. In this sense, quality loyalty programs will revive the bricks and mortar days when your local store manager would know to mention to you: “we’ve got some of your favourite lovely asparagus”.
By no means are we done – our strategy does contemplate partnerships with other product and service providers, but in such a way that it doesn’t dilute our core value-add or compromise the quality of the customer experience.
Gaining loyalty has always been the result of consistently meeting and exceeding someone’s expectations. You can’t do that without putting the customer first.
* Ingrid Maes is the director of loyalty and customer data at Woolworths Ltd.
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