Thursday, May 30, 2024

Loyalty cards have traction for many

Shoppers are attracted to loyalty schemes and promotions but find petrol offers less relevant in the new age of supermarket retailing.

By David Burton and Colmar Brunton.

This ‘new age of supermarket retailing’ started in December 2013 when the Australian Consumer and Competition Commission accepted voluntary enforceable undertakings from Coles and Woolworths regarding the size of their shopper dockets fuel discounts. This made competition for the grocery dollar a little more competitive.

Prior to December 2013, discounts had risen to the heady heights of up to 45¢ a litre for Coles and Woolworths loyalty card holders, meaning that independents were losing sales in the face of high fuel discounts off record high prices at the bowser.

Last year, the reduction to a basic 4¢ discount on supermarket shopper dockets – even though the discount could to be topped to up to14¢ a litre by buying goods – saw Coles and Woolworths lose volume.

So it was with interest that I received the Colmar Brunton Shopper Pulse for April, which surveyed consumer attitudes to promotions and fuel and loyalty offers. On a personal note, while I found the 25¢ to 40¢ offers very useful I have stopped using the dockets and now shop for fuel at three different sites. I have now joined the 11 per cent of shoppers that receive the rewards and don’t claim them.

I have become a keen student of how many flybuys points I have and started to watch out for Woolworths’ Everyday Rewards Offers to find the bargains.

With young grandchildren it has become necessary to spend more of the grocery budget at Woolworths because their latest craze, Domino Stars, has kids, and parents, out to collect the entire set of 44 dominos before the promotion ends.

Loyalty cards are the chains’ major weapon 

Close to 60 per cent of shoppers take advantage of their rewards cards every time they purchase groceries and they are of the belief that it adds value to their shopping. What seems odd is the 30 per cent who use the cards but don’t feel it adds value to their shop. An obvious question comes to mind: Why keep on handing over the card?

My personal experience is that using the card for things I am going to purchase anyway, and then flashing the rewards card, is a no brainer. I earn points and would spend the same amount of money anyway. Coles flybuys points can be converted to a dollar amount to spend on groceries, so what’s not to like?

That’s my two bobs’ worth. However, comments from the research are illuminating for retailers, suppliers and those looking to complement the way promotions work in the grocery segment.

One respondent listed the attraction of bonus offers: spend $100 a week for three weeks and receive a $50 gift card. It is free money if the weekly shopping bill usually comes to more than a $100, and consumers aren’t being led into buying things they don’t need.

On the battle of the big two supermarket chains, a Shopper Pulse panellist said, “Personally, I think flybuys has a better reward system than Woolworths’ reward card. I don’t clock up enough points with Woolworths as I tend to purchase in small quantities, but more frequently.

“There is no strategy for the rewards cards I use. If I am offered a special discount for a particular product and if I don’t need it, I don’t buy it to justify the reward. The reward is usually not a big enough incentive for me to purchase something, unless I already have a need for the item.”

Both retailers are heavily involved in making sure their loyalty cards are working overtime to keep the majority of customers spending and to minimise leakage to the opposition. The other target they have is to ‘pantry load’ based on their offer.

So, while one panellist is wary of deals that do not fit current needs, another had this to say: “If there are bonus point promotions on things I’d buy anyway, I might purchase extra to stock up if they’re also on special. Usually the triple points offers or bonus 1,000 points offers are the best.”

It is a fair bet that many of those with rewards cards have both the Coles and Woolworths versions. With BIG W offering targeted offers to Everyday Rewards card holders and Target having special limited offers, sometimes extended if sales are down, the cards have broad appeal for those that like to collect points or just obtain an extra discount.

What is happening on the petrol forecourts?

The use of petrol offers has changed little, in spite of the massive change in volumes offered. The segment of shoppers that use them every time and see value in doing so have remained steady at 38, 35 and 36 per cent over the past three years.

Fewer shoppers say they are not taking advantage of the petrol offers compared to a year ago. This was an eight point decline in usage. Panellists are generally not interested in 4¢ a litre off their petrol, but will combine the offer with shopping at a fuel site convenience store to increase the discount. One respondent filled two vehicles at the same bowser at a 144¢ a litre saving.

Both Coles and Woolworths, in their latest financial results briefing, cited the capping of fuel discounts as a major contributor to decline in volumes pumped through their sites. This is exactly what the independents wanted.

Better than half price, and cheap and down too 

Soon there will be a need to train grocery shoppers: tips on how to maximise the many offers on half-price promotions, bonus sizes, extra points when you buy certain brands. ‘Spend with us for three weeks for your really big reward’ will continue to be rolled out at certain times, or to targeted customers that have gone missing.

For retailers, it is simple because of the sophistication of the software that drives the scan data used to keeps tabs on our spend. Our allegiance is measured in terms of loyal, more loyal and absolutely tied to the chain.

In the case of suppliers, the trick is to be part of the tailored promotions to build loyalty for brands while, at the same time, Coles and Woolworths are concerned about foot traffic in-store and additional margin.

It is because of this sophisticated offer that our abovementioned panellist was chuffed to spend $100 a week for three weeks and receive a $50 gift card. Yet someone else in the same survey sang the praises of Woolworths because, “Woolworths is due to give me a $40 gift card because I shopped three weeks in row and spent more than $135 each time. I think that’s valuable, because I was going to spend the $135 each week anyway.”

So where is the equity in these offers? No matter. They are working anyway for a large proportion of grocery shoppers wedded to the chains.

There is a future without loyalty cards

ALDI and Metcash are the two most obvious alternatives for grocery shopping. ALDI breeds loyalty through its prices: lower prices on a “comparable basket” they claim frequently.

The retort from chains is they are not exactly comparable with known brands, but this has limited effect, as ALDI keeps rolling out stores and picking up market share and was recently announced as Roy Morgan Research’s ‘Best Supermarket 2014’.

Metcash, which has its IGA-owned banner independents but also supplies FoodWorks, is encouraging its independents, particularly its flagship IGA, to sell more fresh products and to raise store standards. This is called ‘Project Diamond’ and stores that reach the ‘Diamond’ standard will be a pleasure to shop in. There are already a number that have met this standard and Metcash has said the sales lifts are substantial.

Improving the standard of independent stores will be a boon for the segment, but many good independents are already thriving based on customer service and a wider range of branded products. IGA stores have their own form of loyalty card with Community Chest, which allocates a percentage of its customers’ spend to a range of charities that each customer can nominate. So while shoppers at the chains are driven by self-reward, the ones at IGA are helping out worthy causes.

ALDI, on the other hand, is simply on a long-term drive to make the cost of managing the household budget cheaper. Its drive encompasses low prices, not just on groceries but all types of general merchandise under its special buys promotions. Back to school, winter clothing and many more categories appear annually, or in some cases more frequently, on their special promotions on Wednesday and Saturday each week.

The everyday reward for shopping at ALDI is generally a lower price on an ALDI special brand product that competes directly with products from major brands that the chain mostly doesn’t stock. So while the big chiefs at Coles and Woolworths continue to improve their loyalty cards to bring in more partners, ALDI is moving into two greenfields states next year.

ALDI will surely tempt the flybuys and Everday Rewards cards holders in SA and WA with its unique style of retailing, which is completely different to what most shoppers in those states have experienced. For consumers in WA and SA it will be a cracker year for tailored, extra special offers on loyalty cards in 2016.

Related Articles

Stay Connected

533FansLike
944FollowersFollow
699FollowersFollow

Subscribe to our newsletter

To be updated with all the latest news, offers and special announcements.