Coles abandons My5 loyalty program – a key lesson for SMEs

Supermarket giant Coles will discontinue its My5 loyalty program introduced only six months ago – and it serves as a warning to SMEs on how to create a viable rewards program.

Experts say overly complicated systems like the My5 program are a recipe for turning customers away – even though program was met with initial praise in April.

“Simplicity is key when it comes to loyalty programs,” says Marketing Angels chief executive Michelle Gamble.

“I sign up to all the loyalty programs, because I’m in marketing and am curious about them all. And the Coles My5 loyalty program was just incredibly complicated.”

Coles was contacted this morning, but a reply was not available before publication.

However, a spokesperson has told The Australian Financial Review that after its initial six-month launch period, My5 would not be extended.

“My5 was always a short-term promotion to support the relaunch of FlyBuys,” the spokesperson said.

“Many consumers loved choosing their own specials but we are now moving to a much more targeted approach.”

The My5 program cast a wide net, allowing millions of people to eventually sign up to the FlyBuys program, with the new report claiming the system has expanded from five million to seven million users.

But experts point out that if the program had been successful, it may have been continued – but its complicated nature was its undoing.

The system offered discounts of 10% on five products of a customer’s choice, but only if they spent more than $50 in the one transaction.

The program was also damaged by Woolworths’ rival Extra Special Savings program.

Analysts have been unimpressed. In a note to investors earlier this year, JP Morgan analyst Shaun Cousins said the impact on earnings from the programs would be “somewhat modest”.

Gamble argues that SMEs need to learn that good loyalty programs – unlike the My5 program –shouldn’t take much effort on the part of the customer.

“Once I went through the process of signing up to the Coles program I forgot what the reward was – it was just too complicated.”

“If you delight customers with a reward, rather than shoehorn them into a complicated program, then it’s going to work out and then you’ll end up generating more loyalty in the process.”

Want to learn more? Read SmartCompany blogger Bri Williams’ post about botched loyalty programs.