Woolworths is giving its loyalty program a makeover

Photo: Quinn Rooney/ Getty Images.

Eight months after rolling out its $500 million, new-look loyalty scheme, Woolworths is giving the program a makeover, including revisions to make it more attractive to grocery suppliers.

It’s understood this latest version of the loyalty program will be unveiled in coming months and it’s expected to broaden the range of products customers can earn "Woolworths dollars" from and potentially reduce the cost impost for suppliers.

One influential supplier said the cost of the present scheme did not stack up next to the cost of regular promotions, and as a result he did not participate.

"We haven’t ever really participated in Woolworths loyalty schemes and the changes to the program last year didn’t improve things," he said.

"It’s really costly and my financial team showed me some modelling that demonstrated we were better off with normal promotions.

"But we would absolutely get involved if it was something that was relevant to our brands and our customers."

Woolworths insiders report customers hit the phones after the launch of the revamped loyalty scheme in October to complain it was too hard to earn Woolworths dollars, which amount to deductions on future shops.

Shoppers lashed Australia’s biggest supermarket chain for the small number of grocery lines featuring the orange Rewards tickets, the only purchases you can earn Woolworths dollars from.

Analysts claim the scheme is too complicated and shoppers get irritated that they can spend hundreds of dollars but if their trolley doesn’t include any orange-ticketed items they don’t earn any "dollars."

But by far the biggest issue for the scheme is the lack of supplier support, according to one retail analyst.

"The current program hasn’t got sufficient supplier support," the analyst said, "and it’s just not generating a lift in sales."

Retail analyst Brian Walker said Woolworths’ loyalty scheme was not producing the return on investment that many suppliers needed to make it work.

"The problem is it’s basically another discounting program, it should reward repeat visitation and loyalty to the Woolworths brand," Mr Walker said.

"This is only rewarding people who buy certain products that are discounted over and above, and it doesn’t have any correlation to the supermarket brand."

Sources close to the supermarket chain suggest Woolworths is working hard to improve its Rewards scheme but there is no sense these latest changes will amount to a total overhaul of the program, more an "evolution".

Australia’s biggest supermarket chain should use the data it collects through the rewards program to personalise its messaging to customers and drive sales through strategic offers, according to Retail Oasis’ Steve Kulmar.

"These schemes always seem to get back to asking the suppliers to chip in," Mr Kulmar said.

"Price is the easiest things for retailers to focus on, particularly when you can get the suppliers to fund it."

Woolworths chief Brad Banducci outlined plans in May to invest $150 million fixing its eight-month-old loyalty scheme as well as investing in reducing prices and boosting service levels at its stores.

Suppliers reacted by questioning whether the investment were enough for Woolworths to win back market share from rivals Coles, Aldi and the independent chains in what is a fiercely competitive sector.

Woolworths rolled out its revamped Rewards program in October, unleashing a customer backlash over revelations it had cut ties with the Qantas frequent flyer scheme, a decision it was forced to reverse.

The supermarket said it always planned to "closely track" the progress of the program and was "making improvements in response to feedback".

"Every loyalty program evolves over time. We are just eight months into a new program and we will continue to make refinements," a Woolworths spokesman said.

This story was originally published on The Sydney Morning Herald’s BusinessDay. Read it here or follow BusinessDay on Facebook.

NOW WATCH: Briefing videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.