Waitrose marketing boss: Promotions persuade people to be disloyal to the brands they like
Waitrose is looking to change customers’ relationship with promotions with the launch of its personalised offers scheme after marketing director Rupert Thomas admitted the current system causes people to be disloyal to brands.
The upmarket supermarket’s ‘Pick your own offers’ promotion lets myWaitrose customers choose 10 items from a list of almost 1,000 to receive a 20% discount on. The will still get that discount even if the item is part of another offer, such as two for one, or has been price-matched with Tesco or Sainsbury’s.
Speaking to Marketing Week at an event today (17 June), Waitrose marketing director Rupert Thomas said people do not trust promotions and said rather than promoting loyalty they actually persuade people to be disloyal.
“One month Ariel is on offer, the next month Persil and customers just switch between the two. There is no brand loyalty they just buy what is on offer.
“Promotions persuade people to be disloyal to the brands they like.”
Rupert Thomas, Waitrose marketing director
Waitrose managing director Mark Price said its new model will “reward loyalty not encourage customers to swap”.
“When it comes to promotions the customer hasn’t had a choice. Even around data and loyalty cards its been retailers and suppliers working together to say ‘at the moment you buy KitKats we’ll work to offer you Whispa’. The genius of ‘Pick your own’ is that customers get 20% off the lines they really want, that they buy every week. It’s giving for the very first time customers the power over pricing,” he explained.
Price said suppliers are “very keen” on the scheme. He believes it could change the “whole mindset” around how promotions work because it will be about customer retention rather than acquisition.
“This is a cost of 20% to keep someone loyal not 50% or 33% as promotions are now,” he added. He suggested some brands might even look to offer 50% discounts under the scheme in the future.
Clive Black, analyst at Shore Capital, believes the new programme “genuinely empowers shoppers”.
“Many shoppers have mistrusted the pricing and promotional strategies of the ‘Big Four’ superstore groups and other industry participants for many years. Such an outcome has been very damaging to the reputations of the major players, to a great extent reflecting how supplier driven they had become.
“This mistrust has been a meaningful factor as to why discounters have been so effective, with their clear single low unit pricing and similarly measured promotional participation,” said Black.
The changing face of loyalty
The introduction of ‘Pick your own offers’ also continues Waitrose’s “history of looking after the customer” said Thomas. Customers don’t want points and coupons they want tangible rewards hence the success of its myWaitrose card, he claimed.
myWaitrose now has 5.8 million members, is adding around 100,000 per month and is used for 70% of sales.
“The simple truth is customers like to be thanked for shopping,” he said.
Many other supermarkets and loyalty schemes are now following Waitrose’s lead. Sainsbury’s Nectar scheme recently cut its rewards by 50% while Black expects Tesco CEO Dave Lewis to “simplify” Clubcard and Morrisons CEO David Potts is understood to be reviewing its Match & More programme.
Many loyalty programmes have spoken about wanting to introduce more personalised offers and discounts but Waitrose has gone the furthest by letting people choose their own deals.
Black says: “We will be interested to see if this degree of personalisation introduced by Waitrose filters into the broader retail scene. There has been much spoken about personalisation from supermarkets with card based loyalty schemes for some time, but none have the magnitude or degree of interaction evident with this Waitrose programme in our view. Indeed, in a market that is moving to lower and simplified pricing and easing of promotional participation, the role of personalisation is also perhaps under re-appraisal.”
It is great to see a retailer focus promotions on its best customers rather than indiscriminately chasing price switchers. We all know the famous Pareto principle that roughly 80% of your profits come from 20% of your customers. But too many brands and retailers throw away margin chasing disloyal customers who will just go to their competitor for a discount next week. We emphasized this point in our recent blog post http://blog.buyapowa.com/wean-customers-and-marketers-off-discount-codes
It is also interesting to see that this does touch a little on co-creation, by letting customers choose the products for which they want discounts. There is a cost to the retailer for doing this as these are products that probably would have bought anyway, rather than a promotion on items that would not have been purchased and which would probably have been financed by the brand e.g. as part of a product launch. But it is a rebate for loyalty.
It is perhaps a shame that the scheme does not go further and incentivise those loyal customers to go out and get their friends and family to buy. In this way what is a reward to loyal customers could be turned into a customer acquisition channel where your best customers get other loyal customers. This could be done by adding concepts like smart rewards, gamification and communal targets for example ‘Here are the products you chose to get a discount on, you can get a discount on more products if you refer friends and can win a great prize if you refer more friends than anyone else’.
Is it easy enough for the consumer, though? I was in Waitrose two days ago, and become extremely frustrated on how I had to log in a website to choose offers before going in the supermarket. Do we really have that much time to invest in those choices? They have consumers shopping history, so why don’t send customized vouchers as Tesco did? Way simpler and more effective in my opinion… Not sure if this is exactly what consumers will want…