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July 2015

Grocery Loyalty

The Goal

New Zealand grocery operator Foodstuffs, which owns the 135-store New World brand, hoped to find a way to merge something old with something new – without giving it the blues. It wanted to create its own proprietary, highly customizable loyalty program, while still participating in the flybuys and Air New Zealand Airpoints rewards programs.

The flybuys and Airpoints programs were enjoyed by many New World customers, but the data was owned by those third-party operators, and the grocer wanted more flexibility and the ability to delve more deeply into its shopper data than those programs allowed. New World was hungry for deeper insights to eke out more profitability in the cut-throat world of grocery retail, where even a small percentage change in market share could equate to millions in profitability. To do so, the company determined that it needed to do two things in particular with the data dive that it could achieve with its own loyalty program: explore stretch spending with its VIP and loyalist shoppers, and disrupt the habits of “promiscuous” shoppers who frequented New World but also its competitors.

With those challenges in mind, New World invested heavily in changing its loyalty model and set out to create its own Clubcard. 

The Initiative

New World decided it would initially launch its Clubcard on New Zealand’s South Island and calculated a potential market of 400,000, of which 298,000 already had a flybuys or Airpoints card. It engaged a research agency, which surveyed 1,000 people and determined that flybuys wasn’t powerful enough to disrupt the shopping patterns of promiscuous shoppers. It also found that shoppers would demand from a new program immediate gratification via instant discounts and rewards in-store.

In late July 2014, the company launched the New World Clubcard, whose features included: choice of collecting flybuys or Airpoints, capability to convert those currencies to New World dollars to spend in-store, instant in-store discounts, discounts over and above store daily deals, sophisticated personalization features, and a strong New World brand identity.

The Clubcard was initially sent to 298,000 people, and another 28,000 customers signed up through aggressive in-store and online sign-up campaigns in the first two weeks. The launch was promoted in a variety of ways, including in-store events, posters, a direct mail campaign, billboards and in-store radio and TV promotions. 

The Results

The New World Clubcard has 375,000 members, representing a 93.5% total market penetration. The company set goals in a variety of areas and has met them all so far: It targeted a sales increase of 5%, for example, and has seen an increase of 11%. It set a goal of a 1:12 return on investment but recorded a 1:20 ROI in the first 12 weeks after the Clubcard launch – $20 return for every $1 invested. And its average basket size increased by 8% for Clubcard members over previous loyalty program benchmarks – compared to a goal of 5%.

New World also saw significant changes in shopper behaviors. It set a goal of a 10% increase in visit frequency, for example, but saw that outcome grow by 21%. And it targeted a 15% increase in the number of purchases accompanied by a card, from 56% to 71%. Instead, a full 82% of sales are now accompanied by a Clubcard.

Loyalty participation grew from 41% of shoppers to 51% in the quarter following the Clubcard launch. Because of the success of the Clubcard launch on New Zealand’s South Island, the New World stores on the North Island are accelerating IT upgrades in order to implement the launch there ahead of schedule.

Finally, New World estimates that higher levels of customer engagement since the launch of Clubcard drove $38 million in additional gross sales revenue in 12 weeks. And results and data so far show that New World is pushing stretch spending and engaging promiscuous shoppers more successfully than before.