Are paid loyalty programs sustainable?: Outrage over changes to Woolworths Everyday Rewards program
31 May 2023
Georgette Mikhael

Recently, Woolworths announced changes to their relatively new Everyday Extras program. A paid subscription layered atop the already popular Everyday Rewards program.

The program has been live for approximately one year, originally generating great interest and momentum among Everyday Rewards shoppers. For a low monthly payment of $7 or $59 per year, members earn points at an accelerated rate, qualify for higher discounts and have the opportunity to unlock free products.

Customers are fuming

Following a positive reception, Woolworths have recently announced changes to the Everyday Extra program effective from the 1st of July 2023. Some customers have described the changes as a “kick in the teeth for early supporters of the program”.

The Online delivery discount has also been canned, including Click & Collect and Direct to Boot orders. The modification is deemed particularly unfair and discriminatory by Australians who depend on online deliveries due to factors such as being immunocompromised, disabled, elderly, or residing in rural locations that are an hour or more away from their nearest supermarket.

Woolworths is essentially asking members to pay more for less benefits.

Comparison of the current and future Woolworths loyalty offering

What went wrong?

One may speculate that one or many of the below scenarios has occurred:

  • Woolworths realised that the cost of running the program was not commercially viable in the long term due to the provision of overly-generous points earn rate
  • The annual fee did not appear to cover the cost of benefits redeemed
  • The redemption of benefits was forecast at a much lower rate than what has actualised
  • The program has been so successful, that Woolworths suspected that they could get away with giving less and charging more
  • The test-and-learn strategy was carried out a little too overtly by going public with the program without adequately market testing, adjusting and commercially modelling the program prior to the nationwide rollout

Pitfalls of paid subscription programs

Paid loyalty programs, such as the Everyday Rewards Extra program, often face challenges in retaining customer loyalty over time. Initially, customers may be enticed to join a paid program due to the sunk cost bias, where they feel compelled to continue their membership to recoup their initial investment. However, if the program fails to consistently deliver value and meet customer expectations, renewal rates may decline, leading to dissatisfaction and potential cancellations. This scenario underscores the importance of continuously providing meaningful benefits to paid program members to ensure their long-term engagement and loyalty.

What can we expect to see from Woolworths from here?

Mitigating the damage caused by the backlash against changes to the Everyday Extras program would require Woolworths to take proactive steps to address customer concerns and rebuild trust.

Woolworths has allegedly already asked customers who will be significantly negatively impacted to reach out and have their individual circumstances reviewed and perhaps leniency provided in the level of benefits provided or subscription amount paid. There may also be compensation provided in certain circumstances.

Here are some other potential strategies Woolworths could consider:

  • Communicate Transparently: Woolworths should communicate openly and transparently with their customers about the reasons behind the changes to the Everyday Extras program. Providing clear explanations and demonstrating empathy can help customers understand the rationale behind the decision.
  • Acknowledge Customer Feedback: It is important for Woolworths to acknowledge the feedback and frustrations expressed by customers regarding the changes. Showing understanding and empathy can help validate their concerns and demonstrate a commitment to customer satisfaction.
  • Review and Adjust Program Benefits: Woolworths should consider reviewing the program benefits in light of customer feedback. Identifying areas where adjustments can be made to address customer concerns, such as restoring certain benefits or introducing new ones, can help alleviate dissatisfaction and rebuild loyalty.
  • Provide Value-Added Benefits: To regain customer confidence, Woolworths could consider introducing additional value-added benefits to the Everyday Extras program. This could include exclusive discounts, personalised offers, or enhanced rewards to enhance the overall value proposition for members.
  • Engage in Active Listening: Woolworths should actively listen to customer feedback and engage in ongoing dialogue to understand their needs and expectations. This can be done through various channels, such as social media, customer surveys, or dedicated customer support, to ensure that customer concerns are addressed and future changes are better aligned with customer preferences.
  • Customer Retention Incentives: To encourage customers to remain engaged with the Everyday Extras program, Woolworths could offer temporary incentives or rewards as a gesture of goodwill. This could include bonus points, exclusive promotions, or special offers to demonstrate their commitment to customer satisfaction.
  • Strengthen Customer Service: Improving the overall customer service experience can go a long way in mitigating damage and rebuilding trust. Woolworths should ensure that their customer service teams are well-trained, empowered to resolve issues, and equipped with the necessary resources to address customer concerns effectively.

Are paid subscription programs sustainable?

Woolworths’ Everyday Extra program has undergone changes that have elicited negative reactions from customers. While the free Everyday Rewards program continues to offer value and personalised benefits, the reductions in benefits and the increase in the annual fee of the paid Everyday Rewards Extra program have left many members dissatisfied. Customers are expressing their anger and considering cancelling their memberships, highlighting the challenges paid programs face in maintaining value and customer loyalty over time. Woolworths will need to address customer concerns and reassess the offerings of the Everyday Extra program to regain customer trust and ensure a sustainable loyalty program in the future.

For the program to be sustainable, the evolution of the program needs to be handled more delicately as a learning from the current PR deluge that Woolworths is experiencing.

This shows that bringing in the experts to do the right level of groundwork prior to implementation is worth the exercise.

<a href="" target="_self">Georgette Mikhael</a>

Georgette Mikhael

Georgette Mikhael is a Senior Strategy Consultant at Loyalty & Reward Co, the leading loyalty consultancy. Loyalty & Reward Co design the world’s best loyalty programs for the world’s best brands. She has worked in the loyalty and member benefits space for over ten years with brands across the financial services, legal, travel, retail, automotive, hospitality, philanthropy and technology industries with brands such as Mastercard and the Westpac Group. Georgette has particular interest and expertise in commercial sales, strategic partnerships, business development and customer engagement successfully conceptualising, implementing and overseeing innovative strategies & campaigns for account and business growth.

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