Woolworths details 3-year strategy to become customer centric

Supermarket giant will focus on data utilisation, product innovation, better customer service and value but isn't forgetting about price

Woolworths has detailed a three-year strategy which it claims will transform the organisation into a customer-first business and help neutralise its competitors.

Announced at the same time as the supermarket giant’s Q3 financial results, the three-year strategy will focus on three key areas: Improving the core offer; innovating products and services to better meet customer needs; and initiating new efficiencies through Woolworths’ ‘Lean Retail’ model to improve customer service and value.

“What is clear is that while lower prices are essential, the true battleground is the overall customer experience,” said Woolworths Food Group managing director, Brad Banducci. “We are placing the customer at the start of everything we do. This strategy will result in lower prices, more compelling offers and greater innovation.”

A notable component to this new strategy is how employees will be measured in terms of performance. Banducci said a simplified, customer-first system will be introduced for measuring the in-store teams, with a new 8-metric scorecard replacing its former 20-metric system. This will put customer metrics at the top of the rankings, the company said.

Woolworth has also brought on an additional 58,000 work hours per week to lift customer service levels in-store, and will add a further 63,000 in the next financial year. To support this, the Australia and New Zealand food businesses have been brought into one division under Banducci. The change in his role comes just three months after he was appointed MD of Australian Food and Liquor.

In addition, the retailer flagged a revised and improved loyalty system is on the cards, with more targeted customer offers. This will be supported by the recently launched customer insights tool, Checkout, which is being fuelled by data and smarts from Woolworths’ investment into data consultancy, Quantium.

“Woolworths is leveraging unique data assets to drive new insights and competitive advantage not available to other retailers,” commented Woolworths CEO, Grant O’Brien. “Ultimately, this will drive our focus on the customer by making all decisions across the business starting from the customer perspective, using data on their actual needs and behaviour rather than surveys and stated behaviour.”

With regards to product innovation, the company is establishing a new division, called Woolworths FoodCo, which will have responsibility for developing new product categories, improving fresh meat supply and processing, and improving sourcing partner relationships, the company stated. As part of this, the retailer has struck a 12-year partnership with food manufacturer, Beak and Johnston, to deliver a dedicated facility to produce ready-to-cook and ready-to-heat meals.

But price isn’t to be forgotten. Banducci noted the first wave of the strategy and investment program had already resulted in $125 million of price reductions for customers since January. The retailer also admitted the new pricing and value strategy was about neutralising Coles and containing Aldi’s impact on sales.

“So we will not be beaten on price, and we will provide better convenience, superior freshness and a more appealing range, and a focus on innovation,” Banducci said.

Online is another a key pillar in winning over customers and a growing component of Woolworths’ revenue. As well as matching online pricing with store pricing, the retailer is opening up 250 click-and-collect locations in the next two years, including drive-through collection points for online shoppers, taking the total network to 1000 stores.

Read more: Woolworths plots national beacons rollout for click-and-collect

To support the investment, Woolworths is developing what it calls a ‘Lean Retail’ operating model, expected to generate more than $500m in cost reductions in the next financial year. The program of work kicked off last July in non-customer facing operations and saw more than 400 jobs shed as part of supply chain and back-office process changes.

“We have 14.6 million regular customers and 500,000 online customers, and they are visiting us more frequently than ever before, but they are also getting fewer of their needs exclusively from us,” Banducci said.

“Put simply, we need to gain customer trust and a greater share of their shopping basket, and we have a clear plan and the investment capacity to do so. By getting customers to put us first, we can regain the sustainable sales momentum we need to extend our leadership.”

According to its Q3 results, Australian food and liquor sales were worth $10.6 billion, an increase of 2.3 per cent year-on-year.

Follow CMO on Twitter: @CMOAustralia, take part in the CMO Australia conversation on LinkedIn: CMO Australia, join us on Facebook: https://www.facebook.com/CMOAustralia, or check us out on Google+: google.com/+CmoAu

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