At the Wise Marketer, we've long attempted to deliver a consistent message to loyalty marketers: loyalty marketing isn't about bribing customers for their loyalty. Rather, it's a marketing discipline with tools and best practices that allow you, the brand, to demonstrate loyalty to your best customers. It's not loyalty marketing; it's marketing loyalty. A new report from Australia reveals that even the deepest of deep-discount chains aren't immune from the need to reward and recognize their best customers. Price matters, certainly - but so does a proactive demonstration of loyalty.
By Rick Ferguson
German deep discount grocery chain Aldi has penetrated the four corners of the globe through a simple but effective value proposition that consumers love. "You live without the premium brands and the customer service, and be willing to pay two bits for a shopping cart," Aldi says, "And we'll provide you the absolute lowest price on the staples you need the most." Delivering on that promise has made Aldi a distruptor in the grocery space from Europe to Australia and North America. However, a new study from ICLP suggests that, in Australia at least, Aldi may soon hit a market share ceiling unless they find a way to reward and recognize best customers.
The ICLP study of 750+ Australian consumers, which benchmarks key attitudes and perceptions about Australian grocery brands, reveals that Aldi fares quite well against rivals Coles and Woolworths on several key customer metrics, including honesty in pricing, product quality, and respect for personal information - all key fundamental drivers of loyalty. Where Aldi fell short in the survey was on shopper expectations of being rewarded for their loyalty - only 7 percent of shoppers survey said that the grocer met their expectations in this category. Money quote from ICLP general manager Simon Morgan quoted in Mumbrella:
"Obviously [Aldi] don't have a large scale [loyalty] initiative in place and they are relying on that kind of everyday bargain positioning to bring back customers. But I think also they are a challenger brand, they are not an incumbent and I think they are benefitting from there being lots of opportunity brought about by other players not meeting customer expectations and choosing to shop alternatively."There will come a time when their market share reaches a point where they're going to need to invest much more heavily in those sort of customer initiatives and providing people stronger reasons to return. Arguably that's something they should be looking at right now in preparation for the fact that at some point in the future they too will be become an incumbent in the market."
Morgan is right on the money. Aldi has staked its business model on everyday low price, and its ability to meet this brand promise consistently and across multiple geographies has helped the grocer export its German-style discounting model around the globe. Simon is right, however, in that there are natural limits to this model. Delivery has become shopper expectation, and now Aldi is just another grocer competing solely on price. Once they have captured the lion's share of customers who value price and discount brands above all else, where do they go to increase market share?
One sure way to do so is to increase the yield from current customers - to get their loyal shoppers to shift share-of-wallet. To do so, Aldi will need to find a way to increase those numbers of shoppers who feel rewarded by the brand for their loyalty. Is a classic points-based loyalty program the only way to do so? Not at all - but reward and recognition of some kind will become essential to shifting spend and building strong, sustainable customer relationships. Aldi in Australia may be the test case, but the reality is the same everywhere: customers expect their loyalty to be reciprocated. Fail to do so, and they'll find a new relationship.
Rick Ferguson is CEO and Editor in Chief of the Wise Marketer Group.