Loyalty Truth reported in September 2016 that the rumor mill was churning about coalition loyalty operator Plenti landing a grocery partner. Earlier this week, the announcement was made that Winn Dixie had pulled out of the Fuel Rewards Network and was joining Plenti. The announcement has clear benefits for Winn Dixie, while highlighting key insights about the future of fuel rewards.
First the benefits:
- Joining Plenti opens up a strong customer acquisition channel for Winn Dixie. This is important as Winn Dixie operates in the highly competitive market Florida market and is struggling to win consumer attention and market share. In the Florida grocery landscape, Publix dominates with about 40% share and competitors Walmart, Costco, Aldi, Trader Joe’s, and Whole Foods have been steadily chipping away to gain share. Winn Dixie needs to give shoppers a reason to come in the store and Plenti could be that reason.
- Winn Dixie customers will benefit through and expanded value proposition and more choice in how they can use their points for redemption. Fuel Rewards Network offered a “cents off the gallon” reward model which has lost luster as fuel prices have decreased over the past few years. Being able to accumulate points and redeem them at multiple partners should give Winn Dixie customer more reason to shop in its stores.
- Winn Dixie should also benefit from the significant national marketing budget of Plenti. Winn Dixie has experienced financial challenges over the past decade and being able to leverage millions of consumer impressions through cooperative Plenti advertising will help to recharge the brand.
While there are plenty of benefits for Winn Dixie in this announcement, we have to openly wonder is the grocer is prepared for to participate in the coalition for the long term. The financial burden of some coalition models can challenge long-term sustainability. With American Express as the parent of the Plenti group and brands ATT, Chilis, Rite Aid, brand compatibility is another issue to consider. Over the long term, would Trader Joes, Publix, or Wegmans have been a better fit for Plenti?
The macro story to absorb through this announcement is that Plenti won not just one grocer, but the entire brand group operated by Southeastern Grocers. Going forward, BiLo, Harveys, Fresco y Mas, will join Winn Dixie in the Plenti program. The potential is to build coverage of up to 730 grocery stores, liquor stores and in-store pharmacies throughout the 7 southeastern states of Alabama, Florida, Georgia, Louisiana, Mississippi, North Carolina, South Carolina.
The announcement may also be a leading indicator of the future of “fuel only” rewards program. Some in our industry say that “fuel is the ultimate reward”. I tend to disagree. Fuel is a compelling reward, but its attractiveness as a stand-alone tool to influence customer behavior over an extended period of time is in question due to 2 key factors:
- Fuel is a commodity and the fuel buying experience has utility-like characteristics. Consumers buy gas, electricity, heating oil, they pay for homeowner and liability insurance. While there is a choice among providers for these products, there is little choice in whether to make the purchase or not. According to Barry Kirk’s 4 Dimensionsal Approach to Customer Loyalty, fuel purchases fall mostly in the Interial loyalty quadrant.
- As referred to above and endorsed by Ian McLeod, SE Grocer CEO, fuel is more attractive as a reward when prices are higher. Consumers have short memories when it comes to fuel prices. As consumers have become accustomed to lower fuel prices over the last 24 months, big trucks have been flying off dealer lots and fuel has been diminished as a reward option with high perceived value in the minds of consumers.