Can Whole Foods Attain Greater Differentiation Through Customer Loyalty?

Author: Guest Contributor, Jim Tierney
11 / 9 / 2016
Whole foods loyalty rewards program - Lenati

When Whole Foods launched a customer loyalty program pilot in the greater Philadelphia market in February 2015, Clay Walton-House, Principal and Lead of Lenati’s Customer Retention & Loyalty Practice, didn’t think it appeared too differentiated from other grocery rewards programs.

“Customers earn one point per dollar spent, and will receive offers and rewards based on their purchase patterns—hardly anything that loyalty marketers would count as innovative,” Walton-House wrote in a blog at the time. “Yet though the program structure and basic value proposition may be par for the course, one area where the program stands out next to other grocers is in the extent of digital integration achieved. Like best-in-class programs from other industries (i.e., My Starbucks Rewards, Hilton HHonors), the Whole Foods program is launching with significant mobile and online features, including a rewards app tied to the member’s account—and for a grocery chain, that is a significant step forward. But is it enough? Or, will this program like many others in the grocery space, be lost in the shuffle and fail to achieve significant ROI?”

Walton-House believes there are three reasons Whole Foods has a greater chance of succeeding where other grocers have struggled:

  1. Specialty – Whole Foods is a specialty grocer whose in-store experience, service, and prices reflect high quality. People who choose to shop there are making an intentional investment in the quality of food and other products they buy and are more likely to require advice or guidance from store staff. Customers who are invested in their experience (financially and emotionally) have a higher propensity to engage with a brand’s rewards program—something that many grocers do not experience with their own customers. How well Whole Foods uses their rewards program to bring their specialization to the fore may have a lot to do with how engaged their members become.
  2. Lifestyle– Whole Foods caters to deeply powerful life values of consumers. Whether consumers are health conscious, committed to consuming only organics, gluten-free, vegetarian, or foodies, Whole Foods presents an experience that is not rivaled by many large-scale grocery chains. The alignment of their brand and shopper experience with these values provides a platform for deep customer affinity and loyalty. If the rewards offered are personalized to the extent that shoppers feel their purchases align better to their desired lifestyle, Whole Foods will have a winning program on their hands.
  3. Diverse Experiences– Unlike most grocery stores, Whole Foods offers an array of different experiences to customers that extend beyond the basic in-store shopping. Events like cooking classes, wine and beer tastings, happy hours, value-added online content, and other educational offerings provide rich and personal connection points with Whole Foods, and offer great utility to a loyalty marketer looking to build relationships with customers via the rewards program.

Fast forward to the company’s fourth-quarter earnings results released on Nov. 2. Whole Foods has rolled out its loyalty program in the Dallas/Fort Worth area, with plans for a national rollout in 2017.

“The jury is still out on whether or not Whole Foods will seek to expand beyond the offer engine around which the current program is built,” Walton-House explained toLoyalty360. “Though offers and a basic earn structure can certainly be an effective way to drive incremental spend, it alone may miss the opportunity to use the rewards program as a means for further differentiating the company as a whole.”

With increased competition from online grocery companies like Amazon, Whole Foods might consider expansion of the rewards program to include features that offer real utility to customers, not just incentives, Walton-House said.

“Whole Foods has dabbled in partnership with Instacart, a grocery delivery service, but are yet to integrate that type of feature into the rewards experience for members,” he added. “Examples of leaders in the rewards-program-as-utility model include Starbucks and Hilton, who have invested largely in embedded tools and features that help elevate the core experience of the brand, from Starbucks’ mobile order feature, to Hilton’s integrated Uber ride scheduling and digital room keys—these rewards programs build loyalty through better experiences, not just incentives.”

With so many rich experiences and a strong, respected brand, it remains to be seen if Whole Foods will do more to leverage its advantages to offer a rewards experience that’s truly differentiated in grocery—or if the program will remain a better version of what already exists in many grocery chains—an engine for targeted offers, Walton-House noted.

“The company has a history of deep commitment to its brand values and offering a differentiated experience, so it would be foolish to rule out the possibility that deeper innovation is around the corner,” Walton-House added.

Whole Foods co-CEO John Mackey said during last week’s earnings call that as “our value, personalization, and marketing efforts gain traction and new sales-building initiatives roll out throughout the year, we expect our traffic trends to improve as well. We’re also pleased to share that our unified point-of-sale system, including EMV technology, is now up and running across all of our U.S. stores. This was a significant undertaking involving the conversion of more than 6,200 checkout lanes. This system provides the foundation to enhance our promotional capabilities, including more dynamic and personalized offers through our mobile app and rewards programs.”

Chirpify CEO Chris Teso told Loyalty360 that he maintains a degree of skepticism when it comes to Whole Foods’ national rollout of its loyalty program.

“While Whole Foods’ incremental steps are positive, they still lag far behind other brands that have modernized their loyalty programs by rewarding for engagement, not just spend,” Teso explained. “Customers today understand the value of not just the dollars they spend in the store, but also the value of their time and participation with the brand and expect to be rewarded for their engagement and advocacy. Without engagement as an integral component of the Whole Foods loyalty program, the grocer will certainly lose mind- and wallet-share to competitors who do actively create a value exchange through engagement loyalty across customer touch points.”

Meanwhile, Doug Sutherland, loyalty specialist, Dynamics, told Loyalty360 that he believes Whole Foods is on the right track to customer loyalty success.

“Whole Foods has undoubtedly embraced the role of consumer loyalty, consumer engagement as a key differentiator in its quest to remain relevant, in an increasingly competitive marketplace by delivering a world-class shopping experience,” Sutherland explained. “Perhaps the best lesson it can deliver to competitors and peers is the importance of investing in a unified point-of-sale system. Whole Foods is already improving its consumer engagement and driving loyalty through rewards with enhanced promotional capabilities, personalized offers, and new mobile app capabilities as a result of this important investment. Whole Foods already enjoys a leadership position, but one only needs to imagine the incredible gains available from having deeper insights of what’s in the consumer’s basket, shopping trends, buying patterns, and other consumer insights through new and better data. What a terrific beacon for the retail grocery market: Great sales, improved profits, and a solid value prop with the consumer dead center in its strategy.”

See original article on Loyalty360.org

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