Australia: Have Woolworths' troubles damaged customer loyalty?

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By: RickFerguson |

Posted on November 29, 2016

Australia's Mumbrella speculates that the recent troubles of retailer Woolworths - launching and then relaunching their loyalty program after customer and supplier complaints - may have negatively impacted Australian consumers' overall perception of customer loyalty programs. Are Woolworths' troubles a symptom of Australian disloyalty, or a root cause?

By Rick Ferguson

Mumbrella's question was prompted by a recent ICLP study that found Australians have one of the lowest "brand devotion" scores in the world - per the study, only 3 percent of Australian consumers show devotion to brands - three times lower than the global average of 9 percent. Simon Morgan, GM at ICLP Australia, thinks that Woolworths' loyalty program missteps - which included dropping its partnership with Qantas only to reinstate it, and then relaunching its new loyalty program after a customer and supplier backlash - may have had an impact. Money quote:

"[Morgan] said the [survey] result was, in part, driven by the perception by Australian consumers that many loyalty programs simply did not offer enough 'rewards' back to consumers. And he believes that anger over Woolworths' handling of changes to its loyalty scheme may have been a factor in Australian loyalty schemes getting a poor report card... 'I think there is a gap between what customers want and what they are getting,' Morgan told Mumbrella. 'There's no doubt that the spotlight's been shone very brightly on customer loyalty in a retail context in this market and as we know a large program has come up and been found wanting. There is no doubt about that."

It's true that Australian reward programs are generally viewed as stingier than their North American and European counterparts; as Morgan points out, 73 percent of Australians in the ICLP survey said they would buy more if they were rewarded more. That said, is it fair to blame Woolworths for the inability of Australian retailers in toto to garner more brand devotion? At a certain point, the fundamental drivers of product/service quality, price, customer service, and the overall customer experience must come into play.

Loyalty and reward programs on their own don't generate brand devotion; that's not their purpose. Loyalty programs are tools for brands to demonstrate loyalty to their own best customers through reward and recognition, and to leverage data and insight to provide a more personalized and relevant customer experience. Woolworths' may be a symptom of Australian consumer malaise, but it's very unlikely to be the sole cause.

Rick Ferguson is CEO and Editor in Chief of the Wise Marketer Group.