Evidence that Woolworths Rewards has damaged the brand

Brand loyalty program

One year on, evidence that Woolworths Rewards has caused brand damage and impacted the bottom line.

When Woolworths relaunched their rewards programme in 2015, we commented that had the potential to alienate loyal customers and cause brand damage. Now, a Fairfax media report shows how negatively the new loyalty programme has impacted the grocery giant.

Apart from the overwhelming backlash through social media, Fairfax Media claims Woolworths Rewards has had a direct impact on negative sales. Woolworths is now looking to drastically cut shelf prices and wind back the rewards changes to win customers back.

The report suggests Woolworths Rewards has been responsible weak same-store sales growth and market-share losses across its supermarkets and liquor stores. Based on same-store sales, Woolworths figures are down for the third consecutive quarter.

Woolworths has failed to convince their customers the new programme makes it easier and quicker to be rewarded with cash back. The main frustrations have been the removal of the ability to earn Qantas points and the way points are earned.

A Woolworths spokesmen said “we will continue to listen to our customers and adapt the program to ensure our customers enjoy rewards on products they know and love or are likely to want to try.” The option to convert Woolworths Rewards points into Qantas Frequent Flyer points is also now being reintroduced.

However, if they really want to appease their customers, rewarding them for all purchases, not just the very selected ‘orange’ ticket items also needs to be considered. Analysts also noted that customers are being more savvy towards rewards programmes. Regardless of the promised reward, low prices are far more attractive to most customers.

In reality, the actual difference in the reward provided by the new vs the old programme may be negligible. It is the perceived value from customers that really matters and this is where Woolies has a huge disconnect with its audience.

It’s baffling that it’s taken Woolworths twelve months to understand what their customers want – especially those who are the most engaged and loyal to the brand. While they may be able to claw some of these brand fans back, it is likely that many have been lost for good.

Years of brand value has been lost. The true financial impact of this on the company is beginning to show in its sales results and finally the company is starting to take notice.

While this is a painful lesson for Woolworths, it’s something that can provide a great case study if you’re a brand manager fighting to save your customer loyalty programme.

Michael Hughes
Managing Partner, Strategy


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