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Case Study

It is not surprising that the Coles Group has been Australia’s top advertiser for the last few years, spending about A$200 million annually (Nielsen, 2006). The Coles Group comprises Coles supermarkets, Coles Express fuel-retail network, Coles Online grocery shopping, Bi-Lo supermarkets, 1st Choice Liquor Superstore, Liquorland, Liquorland Hotel Group, Target department stores, K-mart discount department store, Kmart Tyre and Auto Service, Vintage Cellars, Officeworks office supplies, Harris Technology IT products and services, Pharmacy Direct, and Shopfast online grocery (Coles Group, 2007). The Coles Group used to own the Myer department store until 2006, when it was sold to Newbridge Capital for A$1.4 billion so that the corporation could focus on its supermarket business (Fenner & Choudbury, 2006).

The diverse collection of companies poses a challenge for maintaining the loyalty of millions of customers throughout 2, 900 stores in Australia and New Zealand. Coles has a comprehensive loyalty program that includes the FlyBuys card, the Coles Group Source MasterCard, and the Coles Express fuel discount offer, all with the purpose of delighting customers through everyday value.

Loyalty Pacific, a joint venture between the Coles Group and the National Australia Bank, operates FlyBuys (2007). Since there are no fees or charges, FlyBuys has nearly three million members earning two points for every A$5 spent at Coles Myer stores plus the National Australia Bank, Pick N Pay, and JetSet and Travelworld travel centers.

FlyBuys points vary at different participating companies – one point for each A$1 spent at Best Western hotels and motels in Australia, two points for each A$1 spent at Budget Car Rental, and one point for every A$5 spent at the EziBuy mail-order clothing and homeware company. From time to time, participating outlets offer bonus offers to enable members to collect points faster.

Members can also purchase a FlyBuys Gift Card for use in Coles, Target, Kmart, Officeworks, Liquorland, Vintage Cellars, and 1st Choice Liquor Superstore. A $20 Gift Card earns 2, 500 FlyBuys points, $50 collects 6, 250 points, and $100 receives 12, 500 points.

While visiting the FlyBuys website, members can check their points balance or transaction history, bid in the FlyBuys Online Auction, or redeem their points for accommodation, attractions, flights, gift cards, and vouchers. Redemption categories also include home and garden, kids products, entertainment and reading, sports and leisure, dining and wine, treats, personal items, indulgence and luxury items.

There are also opportunities for FlyBuys members to donate blocks of 10, 000 points to The Cancer Council Australia, The Cancer Council Victoria, Ovarian Cancer Research Fund, and the Australian Red Cross. FlyBuys converts the points as donations to the charities.

The Coles Group Source MasterCard (CGSM) launched in 2003 centralises the overall loyalty program. Previously, there were the Coles Group Card, Target Card, and the Kmart Card but once the various card members upgraded to the CGSM, their old cards were no longer valid. CGSM serves as a dual card – a store card in any Coles Group outlet and a credit card in any global or local MasterCard network of 23 million locations, which includes Coles Group stores.

When customers use both the CGSM and FlyBuys cards, they receive four FlyBuys points for every A$5 spent on eligible purchases at participating Coles Myer stores. Members receive a 4 cent Fuel Discount Receipt with a single A$30 transaction at Coles, Bi-Lo or Liquorland.

Members who charge their A$30 transaction on their CGSM also receive a four cent Fuel Saver Voucher. When the receipt and voucher are combined, members save eight cents per litre on petrol at any of 584 Shell Coles Express outlets in Australia.

The Coles Group is not alone in having broad relationship marketing programs. Rival Woolworths, which has 40% market share compared to Coles’ 35% share in the food and liquor segments (Fenner, 2006) despite spending 50% less on advertising (Nielsen, 2006), has invested in various programs such as an EveryDay Rewards program in New South Wales, a frequent shopper card in Tasmania, and a loyalty program in New Zealand (Howarth, 2007).

Woolworths also has an alliance with Caltex, where shoppers with dockets of A$30 or above single transactions can save four cents off every litre for fuel purchases at any of 400 Woolworths-Caltex service stations (, 2004). Woolworths customers save an extra four cents per litre if they spend A$5 on items at a Caltex Woolworths or Caltex Safeway outlet when fuelling with their discount docket (Woolworths, 2007).

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