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NewsMaking Supermarket Loyalty Programs Work For You

Making Supermarket Loyalty Programs Work For You

When the Flybuys reward program launched onto the scene in 1994 it was hugely popular. More than a million Aussie households joined up in the first 6 weeks. Mind you, at the time airfares were a lot more expensive than they are now so the idea of getting free travel was very appealing. 

It didn’t take long for most of us to work out that you would need to spend thousands to redeem a flight worth a few hundred… or something like that. The savings for redeeming points on groceries these days are equally as disappointing.

Currently, you can redeem 2,000 Flybuy points for $10 off your shop at Coles, Liquorland or Kmart Tyre and Auto Services. So, while you’ll have to spend $2,000 Coles (or other Flybuys partners) to earn 2,000 Flybuy points, this only equates to a $10 discount. So, in this instance, your 2,000 points are worth $0.005 each.

The new-look Woolworths Everyday Rewards program, launched in 2016, enables customers to earn one point per dollar spent. Once a customer has accumulated 2,000 points, they automatically receive $10 off next time they shop at Woolies. This equates to a return of 0.5% on your spend. Sound familiar?

It's worth remembering that the retail giants collect huge volumes of data on everything you buy and use this data to try and sell you more stuff. This is called data-mining.

The key is to outsmart the algorithm Woolworths and Coles use for their respective reward programs. This is surprisingly easy to do once you understand how these algorithms work and what their ultimate purpose is, according to Michael Ginsburg (pictured), founder of Spending Hacker

We spoke to Michael on the Daily Drive show and he shared some of the following tips gleaned from a combination of his own experience and those of his members:

Be Disloyal Rather Than Loyal

The outcome both Coles and Woolworths are trying to achieve is pretty simple and straightforward: They want to encourage you to spend more money in their (rather than their competitors’) stores and do that more often. If you are a regular shopper, they want you to increase your average basket size with them.

This all makes perfect sense from the supermarket’s perspective but the thing is that the two majors both didn’t do the best job designing their reward programs and as a result, they are often achieving the exact opposite outcome of what they are after.

FACT: If you diligently shop at Woolworths or Coles each week and swipe your reward card, it is extremely unlikely you will get any lucrative BONUS OFFERS.

These Bonus Offers are the ‘secret sauce’ and how consumers can really ‘hack’ those programs and make them work for their benefit (and not just the retailer’s).

How to get more Bonus Points Offers

The premise is pretty simple: instead of the normal earn rate of 1 point per $1 spent, you get a certain amount of bonus points if you spend over a certain amount in a set period of time.

Say you are getting 500 FlyBuy bonus points for spending $50 in-store. This means that now you only need to spend a total of $1,550 ($50 for 500 points + 1,500 points at the normal earn rate) to reach 2000 FlyBuy points which you can then redeem for $10 in store credit.

Your effective cashback rate has just increased from 0.5% to 0.65%. This is the power of bonus points!

However, 0.65% effective cashback is still nothing to write home about, right? Well, you can do much much (much!) better than this if you ‘play the system’.

The way you do that is you signal by your behaviour to the FlyBuys or Woolworths Rewards computer that you will not shop with them unless they entice you with lucrative offers for bonus points.

You can do this in one of the following two ways:

  1. Don’t shop with the particular retailer until they start sending you bonus points offers that are attractive enough; or

  2. Shop but do not swipe your reward card at the checkout so that the rewards program computer isn’t aware you spent money with them. Sure, you will lose some base points this way but you will also significantly increase the likelihood of getting attractive bonus points offers.

When you do either #1 or #2 above at Coles or Woolworths, the respective rewards program computer will determine that you are a customer who is ‘slipping away’ and they need to do something quickly to make you come back and continue spending money.

These offers usually come in the form of “Spend a minimum X amount per week over a set period of weeks (usually 3 or 4) and get a Y amount of bonus points”. The amount of minimum spend will be determined based on your previous average basket size and will aim to slightly increase it as the whole point of the rewards program is to get you to spend more money, and do that on a more regular basis.

If you want to get lower minimum spend requirements, don’t take up the offers that require you to spend above what you are currently spending and even try to ‘hide’ some of your current spend from the rewards program computer by not swiping your card on the full transaction.

Hiding extra spend above a certain amount is very easy. Here’s how you do that:

  • Get the checkout operator to start scanning your items (or do it yourself if you are using a self-serve checkout).

  • Once the transaction value reaches around $10-$15 below the minimum purchase amount you are aiming for, scan your reward card, finalise the transaction and pay.

  • Continue scanning the rest of your items and then pay but this time without scanning your rewards card.

Soon enough, you will start getting bonus points offers that may be worth your while. For example: Spend a minimum of $50 a week over 4 weeks and get $50 store credit. This is effectively 25% reward (50/200). Spend a minimum of $100 a week over 3 weeks and get $100 store credit. This is effectively 33.33% reward (100/300).

Understand Targets

Targets are the amount you need to spend before you can claim your store credit.

As explained previously, your goal is to get a low minimum weekly spend requirement with a high reward rate (in percentage terms).

If you spend less per shop, the supermarkets will try and entice you with low targets to encourage you to spend more. For example, if you get a targeted offer for $50, don’t spend any more than this (and least as far as the reward program computer is aware).

If you need more groceries, ‘hide’ any additional spend by splitting a single transaction into two and don’t scan your reward card with the second one.

Some quick tips to finish off with:

  • Shop between Thursday and Sunday.  This is because it’s the time most people do their weekly shop and therefore this is when both FlyBuys and Woolworths Everyday Rewards send out their best bonus points offers

  • Both Coles and Woolworths offer home and car insurance policies that offer points for signing up. The trick here is to check first whether you are getting a better deal on your insurances than you would be with your current provider and read the fine print to make sure you’re covered for what you need.

  • Redeem your points as quickly as possible. Do NOT stockpile them or you risk them being devalued by the provider when they move the goalposts. This can happen at any time and usually with little to no advance warning (case in point: Qantas).

  • Supermarkets value your feedback and they are prepared to reward you for it. If you complete a Tell Coles survey online you can get 500 points per month.  If you spend over $100 on a regular basis at Coles you can opt for a $5 voucher for doing the survey.  By having 2 Flybuy accounts that equals $10 a month in return for a few minutes of your time.

Have you managed to work the supermarket loyalty system? Let us know below

Click here to see the Fiftyup Club's Car Insurance offer with Woolworths Insurance 
Click here to see the Fiftyup Club's Home Insurance offer with Woolworths Insurance
Click here to listen to the interview with Michael Ginsburg from Spending Hacker

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Making Supermarket Loyalty Programs Work For You

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Peter
Peter from VIC commented:

I only shop at Coles as I prefer their flybuys points programme. Interesting that you advise not to stockpile points as I do. I maximise points whenever I can, for example: today's shop 3000 bonus points plus item points. I save up my points for Chtistmas, so far I have $400 to spend on my Christmas shop. This money will buy my ham and seafood plus extras. Last year I had over $500 to spend. Am I happy, yes very as takes the pressure off Christmas shop. 

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