Aldi in Australia has launched a marketing campaign challenging its rivals’ “pointless” loyalty schemes. The memorable ad is winning lots of attention, although the campaign was selective, focusing on only the base earn element of programs such as flybuys, e.g. “receive one point for every dollar you spend”.

The reality is that retail loyalty is rapidly evolving away from this type of undifferentiated reward as technology enables personalised programs which also improve customer experience. Coles and Woolworths are already moving in this direction and a leading example, which Aldi did not highlight, is Amazon Prime.

Prime has flipped the traditional loyalty model on its head, with customers paying to join and receiving no points or monetary reward. Prime’s long-term goal is a completely new retail proposition in which it uses data to predict and deliver what customers need, potentially before they are even aware themselves. Shopping for staple products will become almost effortless.

To illustrate the challenge for a retailer like Aldi, let’s compare what data Amazon and Aldi hold about my own shopping habits (I’m a member of Amazon Prime and also enjoy shopping at my local Aldi).

Most retailers with loyalty programs are moving in the same direction as Amazon, leveraging the program to build personalised connections with customers. To take a few examples:

Coles and Woolworths both run bonus points promotions on products across the entire range. Coles is piloting flybuys max, a subscription service which includes free shipping on online orders, discounted produce and even movie streaming.
Sainsbury’s in the UK is piloting a new version of its Nectar loyalty program in which “base earn” is turned off and customers choose the offers that earn Nectar points.
The 14 million members of Loblaw’s PC Optimum scheme in Canada now receive a set of weekly offers in which both the products and the rewards are personalised, resulting in over 125 million personalisations each week.

The journey to digital personalisation in retail is already underway. I anticipate that within a few years even Aldi will have changed course and be connecting digitally with individual customers. The interesting challenge will be finding ways to do this that are consistent with Aldi’s everyday low-price strategy.