Woolworths Limited dumps Qantas Airways Limited in favour of new rewards program

Woolworths Limited (ASX:WOW) will end its relationship with Qantas Airways Limited's (ASX:QAN) Frequent Flyer in favour of a simpler discounted grocery option.

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After a week of speculation and a social media frenzy, Woolworths Limited's (ASX: WOW) Everyday Rewards program will axe its Qantas Airways Limited (ASX: QAN) Frequent Flyer offering by the end of 2015.

Woolworths' Food Group boss, Brad Banducci, said the new loyalty program will focus on a lower grocery bill for all members. The program allows customers to accrue 'dollars' and once they've generated $10 in savings, it'll automatically be deducted from their next shop.

"There was an absolute commitment to look at the business through the eyes of our customers and make decisions that benefited them," Mr Banducci was quoted as saying in Fairfax.

"It's a very simple program, which is part of our desire for simplicity and clarity in the way we communicate," Mr Banducci added.

Woolworths said its research suggested less than half its 9 million Rewards members used Frequent Flyers, yet it's believed it must pay Qantas for points up front. Woolworths also said just 9% of customers sought Frequent Flyers, yet 68% wanted cheaper prices.

While customers will continue to receive Qantas points until the end of the year, the new rewards program will roll out next week. Using orange stickers on items throughout supermarkets, Woolworths said it will display membership savings on its products.

"These items, on average will give them 15 per cent cash back, the moment their piggy bank reaches ten dollars it comes automatically off their next shop," Woolworths' director of loyalty and customer data, Ingrid Maes, was quoted as saying by The Sydney Morning Herald.

Foolish takeaway

As we wrote last week, Woolworths must be careful it does not shun loyal customers by radically overhauling its rewards programs, especially at a time when competition is heating up in the grocery market. However, from the company's perspective at least the new strategy appears more valuable to the majority of its customers. Moreover, customers could always earn Qantas points from their credit card providers.

Motley Fool contributor Owen Raskiewicz has a financial interest in Woolworths Limited. Owen welcomes your feedback on Google plus (see below), LinkedIn or you can follow him on Twitter @ASXinvest. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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