Many grocery retailers maintain loyalty programs that offer discounts on certain items or cash back on related fuel purchases. But these programs—nearly identical in their structure and offers, providing undifferentiated discounts and benefits—often cost more to manage than they benefit the store in increased revenues. Research shows that they fail to achieve their basic, named objective, that is, to make customers more loyal. In turn, several chains have announced plans to do away with their loyalty programs and instead rely on the promise of an everyday low price approach to attract buyers.

Whole Foods has always been a little distinct from other grocers though, and its perspective on loyalty programs is no different. While others are shutting down or scaling back their programs, Whole Foods has just initiated its first program, though currently only as a pilot program. The rationale for launching the program may not seem surprising. As more competitors consider the benefits of stocking local produce or organic options, the competitive advantages that enabled Whole Foods to charge price premiums have started to collapse. Thus, it has needed to take steps to retain its competitive position.

With the introduction of its loyalty program, Whole Foods is looking to establish a new means to differentiate itself and justify its price points. The loyalty program goes well beyond coupons or free gifts. Instead, it features personalized rewards based on each shopper’s purchase history, including experience-based rewards. For example, it might offer meetings with a nutritionist to a shopper who prefers low calorie options or cooking classes with the sushi chef to a loyal buyer who buys raw fish once a week.

The program members can register their purchases by handing their identification card to the clerk or by downloading and using the mobile app. Both channels will integrate seamlessly with Apple Pay, reflecting Whole Foods’ predictions about the expansion of that convenient payment method.

Discussion Questions:

1. What is lacking in the typical grocery retailer’s loyalty program?
2. How will Whole Foods new program correct these deficiencies?

 

Source: Fred Thompson, Luxury Daily, December 8, 2014