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Published 13 February 2013 11:16, Updated 26 November 2013 18:35
Marketing custom-fit to individual customers is replacing traditional offers at huge retailers like Woolworths and Tesco Image: Bryan Cook
Print advertising, catalogues and television campaigns have been the favoured spruiking tools for Australian supermarkets for an eternity, but Woolworths insists the future lies in personalised, targeted marketing.Customisation is high on the agenda given the supermarket has access to an abundance of shopper data from its reinvigorated loyalty program, Everyday Rewards. Woolworths chief executive Grant O’Brien says the brand has stepped back from mass marketing in favour of using its own loyalty data to get closer to shoppers with customised offers based on their buying history.
Over Christmas, the company reallocated what it would typically spend on responding to competitor offers towards rewarding customer behaviour. The result was a significantly improved return on marketing spend. “We’re now closer to our customers than we’ve ever been before and these targeted offers have really worked for us in the first-half,” O’Brien told The Australian Financial Review after releasing the company’s half-year results in January.
“One of the features of the Australian grocery market is the level of cross-shopping that occurs. Simply by seeking out a higher level of loyalty, you can significantly improve your sales base and we . . . are setting sail after that pretty aggressively.“The outcome of that, if you follow it through to its logical end, is that there will be more of it, and less of the traditional shotgun approach to marketing.”Analysts agree that the latest earnings results prove that Woolworths has been reaping the benefits of personalising its marketing offers that give shoppers specific deals based on their buying habits. Latest sales figures show Woolworths has grown food and liquor sales by 4.7 per cent to $20.48 billion to December 30 2012, compared to the same period last year.
Basket analysis can be a powerful tool for supermarkets, says Dr Steve Ogden-Barnes, a lecturer in marketing at Deakin University Graduate School of Business.“If supermarkets can’t sell to more customers, they will try to sell more to existing customers. But who can be bothered wading through 50 sheets of coupons to find one that appeals? In a confused marketing world, some tailored marketing is welcome relief.”Customising an offer requires sophisticated collection and analysis of data, including merging data from multiple sources, says University of Melbourne’s Associate Professor Colin McLeod.
“If a customer regularly buys nappies and baby formula, they might get information about vitamin supplements for new mothers,” says McLeod, a senior fellow and executive at the university’s Graduate School of Business and Economics. He says globally, Tesco has one of the best customised programs, built around a loyalty card called the Tesco ClubCard. Tesco tracks about 13 million British families and has about 4 million variations of a quarterly newsletter or catalogue, sent to cardholders, illustrating the very high degree of personalisation it pursues.But the scheme costs Tesco around $100 million a year, proving customisation is not cheap.“Even then, there is no guarantee of success. Many more fail than succeed, but Tesco is a very significant success story,” McLeod says.
Part of the problem with programs like this in Australia is that consumers are already inundated with offers.“Some estimates suggest the average Australian household has 18 loyalty cards, and many of these are providing offers that are data driven, so the ability for Woolworths to offer truly customised offers . . . rather than just spam, will be a bit of a challenge.”
And while customised marketing has been important for Woolworths, the grocery giant has also been carefully examining its store layouts.Individual stores are stocked based on local customer preferences, under the broad brush-stroke of ‘budget stores’, ‘mainstream stores’ and ‘affluent stores’, says Macquarie University’s Dr Chris Baumann.“While Coke is still Coke and roast beef is still roast beef, there is no point marketing organic produce when you walk in the door when the majority of shoppers fill their basket with oven-bake chips and icecream in that particular part of town,” says Baumann, from the university’s business and economics faculty.
The march toward more focused marketing will become even more sophisticated this year as supermarkets gain increasing confidence mining basket data from their loyalty programs, predicts Retail Doctor Group chief executive Brian Walker.The growth in the number of digital channels is also putting increased power into the hands of marketers, Walker says.
The next trick will be for loyalty data to be used to predict what individuals buy next.
“Google already uses its algorithm to work out what our top five online searches are and predict what we are searching for, and that’s what we are likely to see next from the supermarkets,” Walker says.
“Or, if the supermarket picks up that a shopper purchased an item after a long hiatus, a special offer or discount will be sent to them.”
But while Woolworths is riding high on its customised marketing efforts, Coles ditched its highly publicised my5 program late last year, with experts suggesting it failed because it was too complicated. The program offered discounts of 10 per cent on five products of the customer’s choice when they spent $50 or more in one transaction. Coles insists my5 was only intended as a short-term offer to run alongside the FlyBuys program during its relaunch.
“We wanted to keep FlyBuys new, exciting and rewarding for our customers,” a Coles spokesman says.
Coles uses other forms of customised marketing, including coupons mailed out four times a year, that offer partner deals, bonus points, fuel discounts and discounts off each grocery shop.
“We make sure offers such as fuel and grocery discounts are relevant and achievable for customers, based on their in-store spending patterns,” the spokesman says.
“We also communicate with members through other channels such as email and SMS, depending on customer preference.”