Will a rewards program help or hurt Whole Foods?

Discussion
Sep 17, 2014

As a Bloomberg News report points out, Whole Foods Market has never used a loyalty program since its founding on Sept. 20, 1980. News that the natural grocery chain is planning to launch a program came to light on the company’s third quarter earnings call when co-CEO Walter Robb said a regional test was imminent. Now, as it turns out, Whole Foods is testing an "affinity" program at its store in Princeton, NJ with plans to expand the pilot to Philadelphia later this year.

On the earnings call, Mr. Robb said Whole Foods had created "a unique program that we believe will deepen our connection with existing customers and appeal to new customers as well." He also said Whole Foods was looking to expand the program chain-wide in the U.S. by the end of the 2015 holiday season.

One criticism of loyalty programs is that ultimately they add costs that retailers must pass on to customers. At a time when Whole Foods has been going to some lengths, including the launch of a national marketing campaign, to move beyond its "Whole Paycheck" label, the choice is curious.

Earlier this year, during the company’s second quarter earnings call, Whole Foods’ other co-CEO, John Mackey, said, "We’re going to be investing more aggressively in price going forward while continuing to take our expenses down and continuing to innovate and differentiate."

Is Whole Foods a good candidate for a loyalty program? What will make the difference between success and failure for the natural foods chain as it rolls the program out?

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21 Comments on "Will a rewards program help or hurt Whole Foods?"


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David Biernbaum
Guest
7 years 8 months ago

Whole Foods might benefit from a loyalty program, as the retailer now has significant competition from other similar retail chains, many which are regional, and also because Whole Foods could benefit from collecting data about its core shoppers and then execute on the data appropriately.

Dick Seesel
Guest
7 years 8 months ago

Too many retailers equate “loyalty programs” with price offerings, overlapping discounts and so forth. There is very little brand-building (or imagination) involved here. In the case of Whole Foods, it seems like a natural candidate to leverage the pre-existing brand loyalty of its customers, who do not equate “value” with the lowest price. Using data collection to discern shopping patterns and preferences will allow Whole Foods to provide targeted messaging to its most committed “foodie” customers without having to lean too heavily on pricing messages.

Max Goldberg
Guest
7 years 8 months ago

Consumers who regularly shop at Whole Foods are aware of the differences between it and other grocers and are already loyal. Why add the expense of launching and tracking a rewards program at the very moment that Whole Foods is fighting its Whole Paycheck image? It does not make sense.

Lee Peterson
Guest
7 years 8 months ago

That’s a tough one. Because in my opinion you’re either a Whole Foodie or you’re not. It’s not a very gray decision. Subsequently, I believe Whole Foods will just be giving the ‘I’m never shopping anywhere else” fan base a discount or some perks. Which is unnecessary.

My family personally benefited from a program Whole Foods discontinued in my area called “Mucho,” where they gave us points for every dollar we spent. We would’ve spent those bucks at Whole Foods anyway, but we wound up with a new TV because of Mucho. Thanks, Whole Foods! The program did not come back, unfortunately for us.

So the question is, would Whole Foods convert more traditional shoppers due to the program? Doubt it. But it’s definitely worth a try, and I like the idea of a two-district test. Go ahead and find out. Or, you know, check and see what happened with Mucho.

Frank Riso
Guest
7 years 8 months ago

While I think Whole Foods is a good candidate for a loyalty program, I do not think it will mean the difference between success and failure. Loyalty programs are as much a part of retail as Wednesday food store ads in the local papers. Shoppers expect them and know they are included in the prices they pay, but who does not like a reward? Today, the majority of food retailers use loyalty cards as a way to offer their sales program and/or to offer a lower gas price. And who does not like lower gas prices? So let’s see what the program is before we judge its success.

Ian Percy
Guest
7 years 8 months ago

These mis-named “loyalty” programs are like marrying someone for their money and calling it “love.” Is it just me or does it seem like very few retailers are worth being “loyal” to these days just for their service, products and genuine love of the customer?

At best such initiatives should be regarded as “Customer Appreciation” programs. The term “loyalty” puts the focus and benefit on the retailer. The term “appreciation” puts the focus and benefit on the customer. Guess which one the customer wants.

Furthermore experimental psychology taught us decades ago that the strongest reinforcements of a behavior are intermittent rather than predictable and consistent. The trick is to time each appreciation surprise in such a way as to maintain the anticipation.

Tony Orlando
Guest
7 years 8 months ago

Why not. Whole Foods can offer more than a coupon if they want to, and they should. There are endless ways to communicate with your customers these days, and Whole Foods should look at this opportunity to be really different. Tie in a charitable donation to your favorite charity with a purchase of a fresh turkey, or offer a complete meal for the holiday, with so many points you can earn. I can think of endless ideas for them, but hey, that is what their marketing folks are for. So get to work, and make it different in a good way.

Don Uselmann
Guest
Don Uselmann
7 years 8 months ago

Value is about more than just price. If they can develop a program that enhances the shopping experience and makes it more convenient, something more than just discounts, it can be effective. They could toy with special lines for top-tier customers (a la early boarding), perhaps maintain cupboard inventories so customers know if they have all ingredients on hand, offer recipes with a shopping list minus what is already in the cupboard, and develop personalized special offers (“we know you like wild salmon, and …”). Another ordinary rewards program will provide little lift. It needs to be unique to their target market’s needs.

Gordon Arnold
Guest
7 years 8 months ago

Candidacy for “me too” marketing simply requires existence. A close look at the implementation of “me too” sales and marketing will almost always find a company that is losing momentum and/or market share.

Taking a corporate plan beyond the level of perceived saturation is an opportunity to create all over again, with success as the foundation. A company’s inability to address this need is a clear indicator that leadership can not do the required multitasking, as in: Run the business, plan for the future and grow the business. Understanding the problems and meeting the needs head on is how Ford Motor sailed through the pressures from foreign competition and the dreadful economic collapse we still have today. Good ideas may not need to come from the top, but they must be supported and implemented from the top of a company that desires to engage the market and grow the business.

Shep Hyken
Guest
7 years 8 months ago

If Whole Foods creates a loyalty program, I’ll bet it is a true loyalty program. Many brands confuse a loyalty program with a marketing program. No doubt loyalty programs can promote even deeper loyalty, but the true test is if there wasn’t a loyalty program, would the consumer still be loyal to the company? In the case of Whole Foods, I think so. Whole Foods has differentiated themselves from many other players in their industry. Based on what I know about them, I bet their loyalty program will reward their loyal customers, who in turn will appreciate the perks and have an even deeper connection with the store.

Richard J. George, Ph.D.
Guest
7 years 8 months ago

Whole Foods, given its positioning and target market, is a good candidate for such a program. However, as stated in previous postings I am not a fan of referring to these programs as loyalty programs. Instead, I think the term continuity of purchase (less sexy, admittedly) is a better descriptor. Customers need to be loyal to their families, country, church, etc. Loyalty to a retailer makes no sense. Instead, Whole Foods can be loyal to its customers by delivering a little more than it promises.

The key to whatever options Whole Foods offers is to add real value to its shoppers, beyond the traditional price discounts. Perhaps EZ Pass lanes for frequent shoppers, customized offerings or invitations to special events, e.g., cooking demonstrations, flower arranging, etc., for those customers who visit often and spend accordingly.

Jerry Gelsomino
Guest
7 years 8 months ago

Yes, Whole Foods is a good candidate, but it is important that the program has transparency—what’s in it for the customer, the suppliers, the employees and the executives?

David Livingston
Guest
7 years 8 months ago

A rewards program? Thats usually what the sterile plain vanilla stores do to mask the fact they have a lot of shortcomings. Whole Foods is doing just fine. Most grocers would love to have the financial results Whole Foods has, which Wall Street wasn’t impressed by. Whole Foods did not get to be one of the top sales per square foot performers because people didn’t like their high priced format. Consumers know high prices mean good service, good quality, and a better class of customer.

James Tenser
Guest
7 years 8 months ago

In the present post-loyalty era, Whole Foods may be an exception, IF it keeps its focus on perfecting the shopper experience, not on delivering discounts.

Whole Foodies’ traits may match up well against the mobile-savvy. Here’s where some creativity is in order.

Kai Clarke
Guest
7 years 8 months ago

Yes. Depending on how Whole Foods manages this program, presents it to their customers, and what it does in mining the data for future use, a great loyalty program can do wonders for any retailer. Not embracing potential opportunities to manage change, and the retailing dynamic would be a poor decision by Whole Foods.

Lee Kent
Guest
7 years 8 months ago

Those of you who read me know that I am all about currency. Retailers should look for currencies, monetary or preferably not, to buy shoppers’ attention, participation, advocacy and commitment.

Appropriate currencies offered as the shopper moves from point to point in the store can work to immerse them into the brand more than any loyalty program could. (short of giving away the farm) The brand can use touch, feel, and smell to reward and provide value every step of the way. This is the environment where loyalty truly has a shot.

With that said, IMHO, a loyalty program alone is not going to make a significant difference. How many consumers are just flat loyal to a brand? Not many! They shop a brand for a reason and if the brand has a loyalty program, they sign up for the perks. What’s really loyal about that?

And all that for my 2 cents!

Kelly Tackett
Guest
7 years 8 months ago

It’s worth noting that a loyalty program isn’t a predictor of a high performer or a weak performer…take consistently high performing Kroger and Publix, the former does great things around targeted marketing through mining its loyalty data via a relationship with dunnhumby while the latter’s service and quality account for its strong growth and great relationships with customers.

Graeme McVie
Guest
Graeme McVie
7 years 8 months ago
If you believe in the mantra that the retailers that best satisfy the needs of customers will win in the marketplace then you need a reliable mechanism that will allow you to understand customer needs and then take actions to satisfy those needs. A loyalty program is one mechanism that can be used to identify customers so a retailer can understand their customers’ needs. Traditional grocery loyalty programs revolved around a two tier price system which was not a great approach when trying to engender loyalty. In addition, most of the value from a loyalty program is generated by analyzing the data and making customer-centric decisions across the enterprise. Unfortunately not many retailers have managed to use the data outside of the marketing department which results in a high cost with a limited return, driving the program ROI down (and sometimes turning it negative). Inside and outside of retailing there are numerous examples of companies employing slightly more sophisticated “loyalty programs” which require much lower investments, engender much better loyalty and drive a much enhanced… Read more »
Dave Wendland
Guest
7 years 8 months ago

Yes and No.

Yes, IF the rewards program enhances the shopper experience and doesn’t distract from what makes Whole Foods special. And, yes, if Whole Foods thinks differently and considers partnering with non-competing service providers and companies that can truly benefit their shoppers.

No it’s not a good idea if Whole Foods’ rewards program ends up looking just like everybody else’s. A recent report cited that shoppers with loyalty cards actually made fewer trips to purchase CPG products than their non-loyalty card counterparts. Go figure.

Howard Schneider
Guest
Howard Schneider
7 years 8 months ago

Whole Foods is an excellent candidate—IF the program is designed to complement their well-established brand and appeal to their customer base. A me-too program like “ordinary” supermarkets tend to have would not cut it for Whole Foods. And a well-designed program should not add net cost, it should grow and protect revenue. If their test is successful and they roll out the program, this could be a wake-up call to Sprouts, New Seasons and other direct competitors.

Alexander Rink
Guest
7 years 7 months ago

Whole Foods sells a lifestyle more than anything. And just like Apple, we know that customers buying lifestyle are already loyal. I am generally in favor of loyalty programs, but I am curious as to how Whole Foods is going to drive more purchases from a seemingly already loyal customer base. Perhaps their intent is to broaden their appeal beyond their core customer set, though I would see this as risking the following they currently enjoy.

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