PicknPay loyalty programme

PIck n Pay launches loyalty programme

Pick n Pay, SA’s second largest retailer by market capitalisation, has launched a customer loyalty scheme in a bid to win back market share and boost slow growing turnover. The looming arrival of Walmart on SA’s shores was also a call to action.

The scheme, which has been three years in the making, has cost PnP R140m to develop and implement. The company retained the services of customer relationship specialist 5one, the brains behind the hugely successful Tesco programme, to help develop and implement the programme.

Annual liabilities, in the form of cash back rewards, could be in the region of R26m. But the potential returns dwarf this amount. The company is hoping the scheme will help it generate an additional 5% in turnover. For instance on the current annual turnover of R40bn, this would translate into an additional R2bn in sales. In the UK In 1996 Tesco lay third or fourth in the UK supermarket game. Today it’s the UK’s largest retailer with 31% market share.

This is before it begins to exploit the data that it gathers on consumer shopping behaviour in SA. “We will have a window into the shopping behaviour of millions of shoppers on a daily basis,” says PnP marketing director Bronwen Rohland.  “We plan to put this to use to improve trade through very targeted marketing programmes.” For instance, she says, imagine the value of knowing who buys Skip and who buys Omo and being able to reach her directly. Or, being able to target the customer who is clearly not buying her health & beauty products at PnP.

Customers will earn one loyalty point for every R1 spent at PnP and 1 000 points will equate to R10. The rewards will apply to virtually every product the retailer sells – from general merchandise to fresh produce. The exceptions include tobacco, petrol (from PnP filling stations) and pharmaceuticals. Infant milk formula will earn ordinary “base points” but suppliers will not be able to promote sales in this category – it is against the law. In other categories they will be able to enhance the appeal of their products by offering bonus points over and above the base points.

Initially just six suppliers will be able to offer top up points – Unilever, Nestle, Coca Cola, Kimberly-Clark, Tiger Brands and Vodacom. They will be liable for the cost of the top up points, while PnP will incur the cost of the base points. Other suppliers will come on board after the loyalty scheme goes live – which is imminent PnP says.

The beauty for PnP is that it will use the scheme to drive shoppers towards the high margin areas it wants to promote, such as general merchandise and health & beauty.

The retailer has been flirting with a loyalty programme for years, but did not have sufficiently robust technology to manage the data collected from 50m transactions a month, and convert it into meaningful information. But in the past three years the company has gotten its ducks in a row. It invested over R1bn in revamping its brand, centralising its distribution and implementing the retail system SAP. “With the SAP architecture in place, we have future-proofed our business,” says chairman Gareth Ackerman.

What he means is that the SAP architecture has enabled the company to centralise and simplify its operations. “We ran what can best be described as a loose coalition of stores,” says Ackerman. “Where store managers operated independently of head office. SAP has enabled us to create one process for functions like distribution and ordering, where we had multiple.”

As a result store managers have been freed up to do what they are meant to do – engage with customers on the shop floor.

“We know that a scheme like this will not foster blind loyalty,” says Rohland. “This is no silver bullet, but it is one more arrow.”

PnP has the first mover advantage in the grocery space. Global research suggests that this loyalty scheme will almost certainly provide a short-term boost to turnover. But sustainable success and growth depends on how well the company exploits the mine of data it will have at its disposal. And on how well its staff manages the basics of good retailing.

Tesco discovered this to its cost. After the huge success of its programme it took its eye of the ball and two years ago was forced to spend about £200m to double the points on all purchases across the store in a bid to ward off faster growing competitors.

Source: Moneyweb