Albert Heijn Premium: Hit or Miss?

(Originally published on Marketingfacts (in Dutch))

This week, Dutch supermarkt Albert Heijn (AH) launched its Premium loyalty program, a new addition to their bonus loyalty card program. What is new is that customers have to pay a (small) fee, €12 per year. In return, they get a number of additional benefits, on top of the regular bonus card program.

The benefits:

  • 10% discount on the complete organic range
  • Twice as many stamps in all loyalty programs (paid and unpaid)
  • 10 specific bonus offers every week
  • discounts on subscriptions with third parties (including Bol.com Select, AH delivery bundle)

Particularly the first benefit is interesting from a sustainability perspective. Because it may help to close the price gap that keeps Dutch consumers from buying organic food.

What will Albert Heijn gain?

To answer that question, first we have to look at what the purpose of Albert Heijn could be. In a general sense, this could be either attracting more customers, or increasing the share of wallet of existing customers (i.e. buying more often and more from Albert Heijn) or making it’s current customers more loyal in the long term. Secondary goals could be to collect more data about individual purchasing behavior (so that eventually offers can be more personalized and that should lead to the aforementioned goals). Other possible goals are to realize cross-selling within the sister companies Etos, Gall & Gall and Bol.com and to stimulate the sale of organic products.

In order to get a first idea of whether or not the program will be succesful, we conducted a poll among the members of our Food Forum. About 60 members gave their opinion. The conclusion: the program mainly seems to cost AH money.

Benefits not convincing

About two-thirds of the participants see no point in joining the program. For the most part, these are the ones who do not or hardly ever shop at Albert Heijn (and are not convinced by the program to do more). Their arguments at a glance:

  • The benefits are not relevant to them, because they buy little from AH or they buy few organic products. About the latter, a number of participants say that the price difference is often more than 10% (and apparently narrowing the price difference doesn’t convince them).
  • People do not want a paid subscription and are afraid of being stuck with it (for a long time). The principle of paying for to get a discount is far from accepted.
  • The necessity of having an (extra) app.

“I like to receive bonus box offers, but to pay for them goes too far.”

“I’m not very enthousiastic. I don’t take out paid subscriptions anyway if I can prevent it. I don’t want to be tied down to it and I don’t want it to renew automatically. The benefits you get often also cost money (such as a subscription to Bol.com Select). Organic products are often more than 10 percent more expensive, so the discount won’t help you much.”

“Another program you can join. I don’t participate in that. I also think it’s meager what you actually get for it. I wouldn’t participate.

“Nice addition for people who do all their shopping at AH and also buy a lot of organic. I myself only do a very small part of my shopping at AH and buy little organic then it is not interesting.”

Another striking fact. None of the participants mentions the collection of personal data as an objection. Apparently this is not an issue and people are completely used to it. The willingness to give personal data in exchange for a discount is high among Dutch consumers.

Calculating

A third of the participants is enthousiastic about the program. They view the program with a calculating mindset. If you regularly buy organic products at Albert Heijn and/or participate in the paid stamps program, you will have earned back those 12 euros in no time. What is interesting is that they calculate the 12 euros back to 1 euro per month. And set off the possible benefits of the program against that (small) monthly amount.

“Since we already do most of our shopping at A.H. I think it’s an attractive offer. The price of € 12 is no problem for us.”

“If I look at what you get in return, you will have earned back that € 12,– in no time.”

“Because I do almost all my shopping at AH, I will make use of this, especially the collection of twice as much stamps appeals to me. With this you quickly earn back that 1 euro per month in addition to the other benefits that are offered. The 10% discount on organic products is a nice bonus and will therefore buy this variant faster. I say: Great!”

The program seems to bring Albert Heijn few new customers, or customers who are going to buy more or more often from Albert Heijn. But they do give an extra discount to customers who already buy at Albert Heijn and also on products that those customers already buy. Overall, AH therefore loses margin, is our prediction based on this exploratory study. And if the goal is cross-selling with Etos or Bol.com or stimulating the sale of organic products, there are more effective and cheaper ways to do this.

Effects on organic range

A recent study commissioned by the Dutch Consumer Authority (ACM) revealed that for supermarkets margins on organic products are already lower than for regular products. In some instances supermarkets even make a loss, despite the higher retail price. This is caused by higher loss, lower turnover rate, and lower efficiency in distribution, purchasing, and sales compared to regular products. We wonder how giving a 10% discount to a selected group of  already loyal customers will be benificial for Albert Heijn in the long run.

 

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