Last month Waitrose launched their new loyalty programme. We argue that despite mass participation loyalty offers like free coffee, so far they have never really “got” loyalty marketing, but the new programme could be the catalyst to address this.
There is now an app with a scannable barcode and the introduction of “personalised offers” plus discounts on purchases from the fresh counters. A smart move that underscores Waitrose’s commitment to counters when other major supermarkets have withdrawn them.
The introduction of personalised offers comes 20+ years after their introduction by Tesco and Sainsburys.
Making personalised offers successful is not straightforward. To start with, they have to be personal and to state the obvious, we all shop differently, are all at different life stages and all like different things. That requires having a lot of offers available as even the most popular products are typically only bought by a tiny % of shoppers. The alternative is to default to high-value category offers e.g. “25% off frozen food or beers wines and spirits”.
The complication with category offers is that they have to be retailer funded whereas individual brand offers can be paid for by suppliers who in addition to funding the discount, will also pay a media fee. If you go down the preferable supplier funded route, then you need a big offer bank and that requires significant resource. It also requires an offer optimisation “brain” like that from ciValue as well as a “central nervous system” that can execute at scale across all channels such as that from @eagle eye.
Insiders say that McKinsey advised Waitrose nearly 10 years ago that there was a £20m media income opportunity from personalised offers, but Waitrose never acted on the advice.
The introduction of an app is welcome, but the app will probably only appeal to 10-15% of highly committed customers, and many of those will find it too fiddly to open it up and scan at the point of sale. There is no ongoing incentive for shoppers to scan their app or card when they shop, and this means that “swiping” could be much lower than at those retailers that do give one e.g. Tesco, Boots, Sainsbury’s. This might in turn reduce the available data on which to target and measure personalised campaigns (unless Waitrose are linking card ID to a payment card behind the scenes).
It’s good that Waitrose has introduced a simple digital wallet pass that can be stored in the Apple or Google wallets. It could have been improved if there were links on the wallet pass to access available offers and access some of the app functionality. Also to enable automatic opening when the customer enters the store. Fobi are the leaders in these advanced wallet passes, with German supermarkets currently leading the way in combining them with apps.
The introduction of the barcode also enables the introduction of open banking payments. This allows the payment and offer redemption process to be combined, and it would save Waitrose c2% in card and payment gateway fees. A potentially ginormous saving if sufficient customers are persuadable to switch to paying in this way, which the loyalty programme is perfectly placed to assist with. It will be interesting to see if this has featured in Waitrose’s thinking.
This process could be enabled via a combination of @eagleeye who have connectivity to the POS and on whose system the loyalty programme runs e.g. payments start-up @loyalize.
It will be interesting to see the extent to which Waitrose take a strategic view to the marketing of their retail media estate. With the high-quality food and drink magazines, they have personalised offer capability, and we anticipate the introduction of sponsored advertising and display on Waitrose.com. There are some very powerful channels for food brand managers to reach their target audience with rich content.
We estimate that there is the potential for an additional £30m-£40m+ of commerce media income which gives a total retail media opportunity of £50-£60m. To realise it, Waitrose needs to ensure that they deploy leading adtech solutions such as those from @criteo that enable a wide range of advert format types (video, sponsored product etc.) to be shown in ways that add value for customers and which directly connect into the media agency partners of the major CPG brands. These are the decision-makers who will decide how much spending to switch from other publishers into the Waitrose world. And there is a wall of money ready to descend as media agencies are realising that advertising to shoppers who are about to make their spending choices is highly effective and generates a much higher ROAS than Google, Facebook and many other digital channels, as well as being much more targetable and measurable.
It’s important that someone with sufficient heft is appointed to lead a properly staffed retail media team. The trap that Waitrose could easily fall into would be to appoint relatively junior execs to sell each media stream independently of the other and to target the commercial teams of their key suppliers. This will not result in incremental spending but will simply shift funds from one commercial budget to another.
A big decision will be who owns retail media – could be the CMO, and this would enable it to be combined with Waitrose’s own media spending and to optimise off-site media sponsored by major brands, or it could be Trading which is logical but risky for the reasons mentioned above, or perhaps it could be folded into a centralised JLP/Waitrose entity which then brings with it governance, control and decision-making complications. Not straightforward.
The loyalty programme will generate lots of first-party data. This will be key to enable advertisers and brand owners to see that their investments in retail media are paying back – not just on a campaign-by-campaign basis but by looking at the long term shifts in behaviour of key customer segments over time and measured vs control groups. It also enables advertising to those customers when they are online outside of the Waitrose world. We would expect to see Waitrose deploy specialist tools like those from @civalue and @criteo that are built to enable this and for these to be deployed by the retail media team so they can be used internally and with advertisers.
Net, we believe the loyalty programme could be the catalyst for a revolution in the way Waitrose markets to its customers and uses data to make better marketing and trading decisions. It will be interesting to see how this plays out in the months.
