Most disruptions and innovations in customer loyalty programs have occurred as small niche efforts scattered through the ecosystem, which eventually grow and cause a tectonic shift. Author William Gibson famously said, “The future is already here – it’s just not very evenly distributed”.

For loyalty in New Zealand, the future is already here, and it’s not only not distributed; it’s highly concentrated and all in the new Woolworths Everyday Rewards. 

Woolworths is our disruption

In February, New Zealand’s loyalty disruption arrived in the form of Woolworths’ Everyday Rewards supermarket loyalty program. It’s a transplant of perhaps Australia’s most successful loyalty program into the New Zealand loyalty ecosystem. 

It brings five loyalty disruptions we should expect other retailers to adopt or create competitive responses to.

The end of outsourced loyalty and ascent of loyalty owner-operators

The launch of Everyday Rewards signalled the death of our long-running and successful New Zealand invention AA Smartfuel, which closed the day prior. Their outsourced model had several companies, including bp and Contact, together with the then Countdown, outsourcing some or all of their loyalty program activity to an agency. In the early 2000s, agencies like this dominated loyalty globally and managed a billion members between them.

Nowadays, Woolworths runs its own loyalty program in the same way Kathmandu, Mercury, Farmers and Life Pharmacy do. It’s also one of the new breed of loyalty program operators that brings enterprise-scaled retail partners in. (In Woolworths’ case, bp and ASB).

Member-based pricing  

With the Everyday Rewards launch, we also got member-based pricing. This means loyalty program members get all the usual loyalty benefits, such as points and rewards. In addition, they also get steep discounts on the products they buy at Woolworths. 

New Zealand already has something like this in the form of Countdown’s Onesmart, but not on this scale. UK supermarket Tesco pioneered the strategy in 2019 and has since been followed by all its competitors (Sainsbury’s, Co-op, Morrisons and Marks and Spencer). Indeed, member-based pricing has become so widespread that the UK regulator is considering whether using the loyalty program as a gateway to discounts is unfair.

The UK experience is that every other player in the category follows suit. In Australia, member-based pricing has also been trialled by competitor Coles using its loyalty program Flybuys. We can expect more member-based pricing inside loyalty programs from more Kiwi and Australian retailers.

Every business becoming an advertising business

The benefits of member-based pricing are immediately evident at the till. More customers are more likely to swipe their Everyday Rewards card (a digital one), thereby driving up the tag rate (the number of transactions tied to a customer).

The higher the tag rate, the better Woolworths understands its customers. The better Woolworths understands its customers, the more it earns from advertisers through its Retail Media Network business, Cartology. (Advertisers use the data collected from Woolworths’ shoppers to target ads to those shopping in-store or online.)

Last year, Woolworths made $550 million from Cartology across Australia and New Zealand.

Kiwi retailers Foodstuffs and The Warehouse also have Retail Media Networks. It’s the highest margin, lowest cost, and fastest-growing category for any retailer. Walmart made $4.5 billion from it in 2022, with 30% growth quarter over quarter.

Expect more and more retailers to launch loyalty programs to get better access to customer data. Expect the bigger ones to use their loyalty program as a foundation for their Retail Media Networks.

Better credit card rewards

Credit cards and the rewards they deliver are roughly half of all the money in New Zealand’s loyalty ecosystem. Or they were until the regulator changed how they work and cut that value almost in half recently. That’s an unfortunate impact for banks offering Airpoints. It’s something approaching an existential threat for a bank offering toasters and TVs as rewards.   

Woolworths has partnered with ASB. ASB customers can now either earn the True Rewards currency on their credit cards (as they have for nearly 20 years) or automatically earn the new Woolworth’s Everyday Rewards currency.

It’s the next best thing and perhaps even a better thing than being able to automatically earn Airpoints. It also helps ASB escape the race to the bottom on toasters and TV rewards. It’s an admission that Woolworth’s currency is better for some ASB customers than the currency built into True Rewards for the last 20 years.

Recent events have lifted ASB True Rewards value, and the spending and tenure on ASB rewards credit cards have increased. (We can expect competitor credit card loyalty programs to react.)

More sophisticated loyalty engines

Everyday Rewards is an imported program from Woolworths Australia. However, the real disruption driving our market is the loyalty engine underneath Everyday Rewards, provided by Eagle Eye.

Eagle Eye is led by Tim Mason, who launched the Tesco Clubcard in 1995. Jonathan Reeve, another former Tesco high-flyer, is Eagle Eye’s APAC Vice President.

Eagle Eye leads in supermarket loyalty and is also driving a raft of other disruptions inside and outside supermarkets in markets that are much larger and more complex than New Zealand’s.

Woolworths Australia’s Everyday Rewards program now has the Everyday Extras grocery subscription. The most recently published numbers show it has 230,000 subscribers out of a total base of 15 million Everyday Rewards members. These members pay $70 a year to get double points all the time and 10% off one shop a month. We’ll no doubt see something similar in New Zealand soon as local retailers launch their own ‘Everyday Extras’ offers or seek to neutralise the threat of their competitors doing so.

Digital transformation is a journey, not a destination

In addition to spending over six years in senior roles at Tesco, Jonathan Reeve has worked for Goldman Sachs, Aussie Farmers Direct, and Coles. Given the results the likes of Tesco and Woolworths have achieved with their innovative loyalty programs, he’s surprised that so many businesses haven’t progressed much from the open-an-account-and-get-a-transistor-radio era.

“There’s the tech part of the puzzle but, in some ways, that’s the easy part,” Reeve told me. “I worry that retailers, and many other businesses, still don’t fully understand how the behaviour of consumers, especially younger, digitally native consumers, has shifted. If a company understands a growing proportion of its customers now expect impressive CX and won’t hesitate to look elsewhere if their expectations aren’t met, it shouldn’t have much trouble sourcing the tools it needs to deliver the expected CX.

“I believe Eagle Eye’s loyalty platform has proven popular in many countries because, among other things, it facilitates CX that makes rewards programs rewarding in real-time for consumers. To take just one relevant example, traditional loyalty programs involve accruing points over weeks or months.

“In contrast, Eagle Eye’s loyalty engine operates in real time. To put things in plain English that means businesses can offer personalised discounts to customers when they make a purchase. At a time when many shoppers are feeling financially stretched, allowing them to see an immediate financial benefit can give a business quite the competitive edge.” 

Simon Rowles is New Zealand partner at Ellipsis & Company.