Knowledge Is Power

By: Ali Eghbaljoo

Student ID:213189082

The first question that I am always asked at the self-checkout station at Coles or Woolworths is “Please Scan Your Everyday Rewards or FlyBuys Card”. Do they really care about me and don’t want me to lose my benefits? But by reminding me to scan my card, they have to give me points that I can transfer them to money or service and it comes at a cost for them. For example, everyday rewards program costs up to $500 million per year for Woolworths.  But why they are really keen?

The war between giant supermarkets is nothing new as the market is extremely attractive. Each week, every one of us; man, woman, or child spend $100 at Coles or Woolworths outlets (approximately $120B a year), which can be groceries, petrol, hardware, booze or any other things in the market that is owned by either of them. Woolies and Coles respectively own 39 and 33.5 percent of Australian grocery market.

woolies and coles market share

Behind all these nice gestures by supermarkets that give us rewards, there are companies that their expertise is to gather these data, analyse them and translate them to useful information for decision making and other marketing products. For example, Quantium is the one that does Woolworths data analysis. Not only are these data used to forecast demand or observe the customer responses to marketing mix activities (Iacobucci, 2014, p206), but also it is used for other products in other markets that they have their foot on. For example, Woolworths recently said that it had used Everyday Rewards information and its insurance company’s car crash data to reveal which consumers are better to target for car insurance. For instance, if they purchase spirits and fill up the tank at night are risky car insurance customer and on the other hand if they buy pasta and red meat they are good risk insurance, so Woolworths can target good risk insurance individuals. Firms with these big data, also sell these data to others who are interested, said managing director of Pulse Marketing, Lauren Fried, on ABC’s Gruen Planet. For instance, Woolworths’ de-identified customer data, taken from its services such as loyalty, debit and credit cards, will be processed and sold to clients including eBay, IAG, Telstra and Qantas by Quantium. A study on the US retail sector found that using big data to target customers could increase retailers’ operating margins by as much as 60 percent. What it means to retailers is to make the targeted recommendation much easier. For example, Amazon, reported that about 30 percent of sales is coming from its recommendation engine that is fed by big data.

Where the advancement in technology is going to take us? As we improve marketing research tools and techniques, we can offer more tailored product to our customer. At the end, technology will enable marketers to create the smallest possible segment which is each individual. Therefore, whoever has more information about the individual consumption behaviour, will be in a better position to win them over by offering what they exactly want. So, knowledge is really power! Previous generations of marketing research tools and techniques, especially in retail sector, is almost retired and is no longer in use. You will never see a teenager with a checklist at Coles, Woolies, or Myers to ask you questions about your preferences!

Next step of this battle that is already started in the US is to steal each other’s customers at the checkout or while shopping at your competitor. Davis, Woolworth’s data analyst firm Quantium director, that is partially own by Woolworths, outlined what WalMart started doing it by having customers to agree to let it track them. Walmart can track your location and if you are at the competitor, based on their data about your consumption behaviour, it can send you offers via mobile phone as you stand in check-out line.

The end result of this war is going to be in favour of consumers, as they will get what they want, and the seller will offer them the best deal. However, for small businesses that are not able to compete, it might be very challenging. Maybe in the near future, rarely we would be able to find a small business to do our shopping from!

Reference list:

Baxter, A  2014, ‘Perks and perils of loyalty programs from green stamps to MYER One‘, The Australian, 16 January 2014, retrieved 14 August 2016,  http://www.theaustralian.com.au/business/the-deal-magazine/perks-and-perils-of-loyalty-programs-from-green-stamps-to-myer-one/story-e6frgabx-1226915994284

‘Coles beware: Woolworths-owned Quantium on how supermarkets are stealing customers at the checkout’ AdNews, 1 August 2014, retrieved 14 August 2016, http://www.adnews.com.au/news/coles-beware-woolworths-owned-quantium-on-how-supermarkets-are-stealing-customers-at-the-checkout#33wAAoUgJYTxweUv.99

Iacobucci, D 2014, Marketing Management (MM4): Student Edition, South-Western: Cengage Learning, Mason

Knox, M 2015, ‘Supermarket monsters: How Coles and Woolworths suffocate us‘, NEWS.com.au, 18 June 2015, retrieved 14 August 2016,  http://www.news.com.au/finance/business/retail/supermarket-monsters-how-coles-and-woolworths-suffocate-us/news-story/c901feb4f6c255d3a6b613140cbea30c

Kollmorgen, A 2015, ‘Customers ask: where’s the reward?’ , Choice, 15 December 2015, retrieved 14 August 2016, https://www.choice.com.au/shopping/everyday-shopping/supermarkets/articles/woolworths-backflips-on-frequent-flyer-points-after-social-media-outrage-151215

Quantium 2016,’ our partners’ ,retrieved 14 August 2016, https://www.quantium.com/who-we-work-with/

Wallace, N 2013, ‘Supermarket spies: big retail has you in its sights‘ The Sydney Morning Herald, 16 September 2013, retrieved 14 August 2016, http://www.smh.com.au/digital-life/consumer-security/supermarket-spies-big-retail-has-you-in-its-sights-20130914-2trko.html

Woolworths invests $20m in data analytics‘ The Australian, 2 May 2013, retrieved 14 August 2016, http://www.theaustralian.com.au/business/business-spectator/woolworths-invests-20m-in-data-analytics/news-story/eec6c312cedda9b32060592ac434c2ea

 

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