Georgia Wilkins
May 21, 2012
The Age
Customer loyalty incentives are often not what they seem.
AUSTRALIA’S big two supermarkets have stepped up their battle for shoppers’ hearts and wallets in the past month, with revamped loyalty cards designed to keep baskets full and customers faithful.
But as shoppers are greeted with the latest sales pitches, experts warn the super-sized rewards programs on offer at Coles and Woolworths are likely to benefit companies more than consumers.
Last month, Coles launched its new FlyBuys and my5 programs to help customers reduce their spending at the checkout.
The my5 program gives registered customers the option of picking five items for which they wish to receive a 10 per cent discount. Customers have to spend more than $50 to receive the discount.
Woolworths tried to one-up the offer last week, offering 20-40 per cent discounts on hundreds of specified items for users of its Everyday Rewards card – with no minimum spend.
”Australian customers tell us they want discounts on the products they buy the most,” Coles finance director Tony Buffin told BusinessDay. ”FlyBuys is now for the frequent buyer, not the frequent flyer.”
But analysts said that the programs took from customers as much as they ”gave back”, in terms of valuable information on their shopping habits. ”This is essentially just a new form of marketing,” Citigroup equities analyst Craig Woolford said. ”There are two globally perceived benefits – one is retaining your customer, and the other is developing insights into your customers’ shopping behaviours.”
So far Woolworths has 6.5 million rewards-card members, and Coles has 5 million.
Jason Pallant at Monash University’s Australian Centre for Retail Studies said getting customers to scan their cards more regularly was a way of linking personal information about customers with shopping behaviour.
”[The supermarkets] already get transactional information from the checkout. All the loyalty card does is allow them to match that up with basic demographic information.”
Analyst Michael Simotas at Deutsche Bank said it went beyond that, helping supermarkets gauge the staying power of certain labels.
”They can tell how loyal customers are to brands, and how they behave when brands are substituted,” he said. ”It gives them insight in terms of what they can and can’t do with their private labels.”
Woolworths admitted that rewards-card data gave it powerful new insights into customers.
”We’re seeing for the first time a pattern of customer decision making. So, you see things like the regularity with which customers buy certain products, or the degree to which they substitute one product with another,” said spokeswoman Clare Buchanan.
”All this is incredible information to us and it informs our decisions about what we put on the shelves.”
But Coles insisted its FlyBuys and my5 programs were not designed to cash in on personal data. ”It’s really not a marketing exercise,” Mr Buffin said. ”We’re trying to give value back to customers. It’s a ‘thank you’ for shopping with us.”
Consumer advocate Choice believed the programs did offer some savings for regular customers of the big chains, but said consumers should still shop around.
”If you are a regular shopper at Coles or Woolworths and you are happy to sign up to these programs and give them your personal information, then you might make some savings. But as a general rule, you are going to find greater savings if you are a savvy shopper and look for specials across the board,” said spokeswoman Ingrid Just.
Based on Coles’ own figures, Choice said the average shopper was likely to save only $3.84 a week, or $200 a year, with the new scheme.
”It’s very easy to think that these products and these programs will always give you the most affordable basket or trolley load, but the whole idea of these loyalty programs is to develop repeat behaviour, to build a loyal customer,” Ms Just said.
Mr Woolford said the success of loyalty programs was uncertain given that Australians were more likely to shop around. According to Roy Morgan data, only about 10 per cent of Australian shoppers were rusted on to one chain, he said.
”The goal [of the programs] is customer loyalty. But cross-shopping in Australia is very high, so it remains to be seen whether these programs will genuinely create loyalty or just reward shoppers.”
The my5 program is running until the end of October. Coles intends to continue the program if it is successful.
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