In recent years, UK supermarkets have introduced a bold strategy: exclusive pricing reserved for loyalty programme members.
With the widespread adoption of dual pricing – one for loyalty card holders and another for everyone else – questions arise regarding the true impact on consumers and whether it genuinely cultivates customer loyalty.
Members-only pricing is not a new concept. Tesco introduced Clubcard pricing in 2019, followed by Sainsbury’s Nectar Prices, Morrisons’ More Card discounts, and similar strategies by non-food retailers such as Boots and Superdrug. While seemingly a response to an economy marked by rising prices, the true motivation for these strategies is a treasure trove for retailers: customer data.
Loyalty programmes have become a catalyst for transforming customer data into strategic tools. The more data supermarkets collect, the more influence they can have over consumer behaviour. So much so, in fact, that Tesco Clubcard members now account for over 80% of Tesco’s total sales. Even occasional shoppers are attracted by the lower price promise, expanding supermarket databases even further.
Most customers understand the data exchange involved in these programmes, and willingly share their information in return for value – whether it be lower prices or personalised incentives.
But does members-only pricing create real customer loyalty?
As costs rise, it becomes challenging for consumers to discern if they are truly saving money or simply trading their data to access affordable prices. This uncertainty prompts questions about the tangible value of loyalty card membership. Plus, many businesses have recently devalued their rewards programme, further raising concerns about how beneficial these schemes actually are.
Non-members who only visit certain stores occasionally may also be frustrated by this strategy as they are forced to pay higher prices. This can result in negative perceptions of loyalty pricing, especially during periods of financial strain.
The solution to keeping consumers happy and loyal lies in addressing their frustrations by streamlining the sign-up process so that occasional shoppers can register on the spot to access affordable prices, and offering genuine value through rewards that align with customer expectations.
Retailers must offer sufficient value in exchange for customer data and loyalty, through discounts, personalised experiences, and generous rewards.
By delivering tangible value, retailers can foster stronger bonds with their customers.
When it comes to customer loyalty, the true currency is a seamless exchange of value, where both consumers and retailers emerge as winners.
White Label Loyalty featured on our MarTech 50 ranking in 2023