Pick n Pay launches Smart Shopper scheme
In South Africa, the supermarket retail chain Pick n Pay has launched a new loyalty programme called 'Smart Shopper' following a capital investment of R140 million (approx. US$20 million), with the aim of building stronger relationships with its customers.
Following the programme's development alongside Pick n Pay's strategic implementation partner, 5one, the Smart Shopper programme has signed up six initial CPG supplier partners: Coca-Cola, Kimberley-Clark, Nestle, Tiger, Unilever and Vodacom, and a number of other national suppliers will be added in the near future.
Programme rules From the member's point of view, the programme's rules are relatively simple:
- Anyone can become a smart shopper.
- For every R1 spent, members earn 1 smart point (which provides an effective earning/redemption rate of 1% of spending).
- Smart Points are credited to the member's Smart Shopper account within five days of each purchase.
- After earning 1,000 Smart Points, members can 'switch' (redeem) them for cash-back on their card, which can then be spent in-store.
- Various special offers, including regular Smart Shopping Sprees, are made available to members year-round.
- No points are issued without presenting a Smart Shopper card at the time of purchase. Points can't be awarded after a purchase is made.
- The only in-store till transactions that can't earn smart points are third party payments, and a limited number of in-store products and services such as coffee shops, household service bills, traffic fines, tobacco products, PnP gift cards, Lotto, money transfers, financial services, fuel and prescription drugs.
- Points are deducted for refunds where points were earned on the original purchase.
- Accounts not used for 24 months will be closed.
- The shopper's name, mobile phone number and/or email address are required for registration.
- The member's South African ID Number (which is the equivalent to a US Social Security Number) or their passport number (for non-SA citizens) is required whenever they switch points, change their details, or manage their card.
Smart Shopper was designed as a simple three-step process of signing up, swiping the card at the checkout, and switching points to spend or share Rands once cardholders have collected 1,000 points.
In keeping with Pick n Pay's sustainability focus, when switching (redeeming) their points, members will soon also be able to donate their earnings to a charity or environmental cause.
While Pick n Pay funds the base points (equivalent to 1% of customer spending), the CPG/manufacturer partners will fund additional bonus points from various product-specific special offers throughout the year.
Time to reap the benefits "We've been researching consumer appetite for loyalty cards in South Africa for a number of years, and what is clear is that a loyalty scheme does not create loyalty in itself," said Pick n Pay CEO, Nick Badminton.
Pick n Pay considered launching a loyalty programme a few years ago, but felt at the time that the technology was not sufficiently advanced. However, advances in technology will now allow the company to talk directly to its customers and understand their needs, according to Badminton. The company has spent several years investing in global and local research, and concluded that there are numerous benefits to a well-run loyalty programme, among which are:
- Significantly increased value to the customer;
- Benefits of employing customer-centric retailing strategies across pricing, promotions and ranging;
- Improved trade through very targeted marketing and responding directly to customers' needs;
- An increase in asset value from taking more customer-centric informed business decisions regarding site acquisition;
- Store re-fits and format planning;
- Roll-out of new services and ranges;
- Successful joint ventures with suppliers.
Loyalty strategy Pick n Pay has launched a number of new business strategies over the past three years, including creating a more streamlined supply chain. The efficiencies and successes achieved in its R628 million distribution centre in Longmeadow, Gauteng, will be followed by the rapid roll-out of four distribution centres around the country within the next three years. In addition, the roll-out of the retailing solution SAP meets all of Pick n Pay's requirements for comprehensive information.
"Loyalty programmes are not new to South Africa, but to date there has been no dominant grocery loyalty scheme that allows customers to benefit from rewards on almost every item in their basket. We felt we needed to develop a programme that was not 'just another card'. It had to be simple and easy to use, while incorporating our values, and card-swiping, points, cash back and coupons are all familiar and attractive concepts for our customers," said Badminton.
Including its Franchise operations, Pick n Pay currently handles more than 50 million transactions per month, which will translate into a vast number of opportunities for programme members to feel the benefit of their spending in stores, according to Pick n Pay marketing director Bronwen Rohland:
Analysis According to Deon Olivier, local loyalty expert and CEO of Woodstock Loyalty Marketing, "This is without doubt one of the most exciting things to happen in the South African loyalty landscape over the past five years. For many years, the country's grocery retailers have merely 'dipped their toes into the loyalty pond', mostly by way of partnerships with other organisations - such as Spar and Momentum Multiply, and Pick n Pay and Discovery Vitality, Checkers and Absa Rewards - all rewarding only the small subset of customers who also had a relationship with the partner programme."
In late 2010, Woolworths launched its Woolworths Rewards offering, providing all of its customers 10% back on a range of products. The Pick n Pay proposition to customers is attractive, even at a 1% base rate, because of the ability to extract value from CPGs to fund bonus earn rates, which boosts member earning velocity. The model is well established in other developed markets and relies heavily on:
- Rich consumer insights into purchasing patterns;
- Alliances with CPGs and product manufacturers, which co-fund the initiative;
- Sophisticated IT platforms and enabling technologies;
- A clear strategic roadmap.
According to Olivier, the South African loyalty market will be worth watching for the next year or two for a variety of reasons, such as:
- A whole suite of new tactical executions;
- The impact of this initiative on PnP's market share;
- The response from competitors, which can either play a waiting game or look at ways to emulate the Smart Shopper value proposition, by either launching a closed-loop proprietary model or through strengthening their alliances with existing programmes (such as eBucks, Absa Rewards, or Momentum Multiply).