Have The Supermarkets Got Loyalty Schemes Wrong?

In recent years, most of the major supermarkets have turned to loyalty schemes to try and capture more of the market. After the recent issues with the Waitrose Loyalty Card scheme,  we are going to have a look at where they have gone wrong, and how this could have been prevented.

April 15, 2024

Driving Employee Engagement

In recent years, most of the major supermarkets have turned to loyalty schemes to try and capture more of the market. After the recent issues with the Waitrose Loyalty Card scheme,  we are going to have a look at where they have gone wrong, and how this could have been prevented.

Let’s start with Tesco, who have the largest Market Share of all leading supermarkets in the UK . Tesco have offered a loyalty programme to its customers for over 29 years – the Tesco Clubcard. There are a predicted 20 million UK consumers that have a Clubcard, making it one of the largest Loyalty Schemes in the world.

Over the last few years, Tesco have changed the strategy with the Clubcard. Previously, you used to gain points on your spend, and could redeem these in return for flights, holidays, days out and many other things. Now, we have seen Tesco offer two tiered pricing points. A price for a consumer with a Clubcard, and one without. It’s not just Tesco who have done this, Sainsbury’s have also applied a similar method with their Nectar Card.

Ok, so what’s the issue?

If you’ve not been keeping a close eye on the news, you might be wondering what all the fuss is about. Well, it looks like both Tesco and Sainsbury’s might be in a spot of bother with the competition Watchdog. The supermarket giants have been accused of not offering genuine discounts with their Loyalty Scheme prices. One example that was highlighted by Which? was a 200g jar of Nescafé Gold Blend instant coffee sold at Sainsbury’s for £8.10 to non loyalty card holders or £6 for customers with a Nectar card. The supermarket’s regular price had been £6 until it rose to £8.10 just two days before the Nectar price was introduced, according to the report.

In December 2023, The Times reported that Sainsburys and Tesco make an estimated £300m per year from selling data on individual shopping habits. Where do they get this personal data? Through their loyalty schemes of course.

There are now guides on news outlets, such as the Big Issue, telling its readers how they protect themselves from the supermarkets using their data. So our questions now is, where did it all go wrong?

Well, we fancy ourselves to know a thing or two about Loyalty Schemes and we’d like to offer some advice to the big supermarkets that are currently giving loyalty a bad name!

Offer Real Value

We have already seen the example about Sainsburys changing prices two days before the Nectar Price was introduced. Supermarkets have all this data on their users but they’re forgetting one major thing. These users aren’t just a number. They are real people, with real shopping habits. If I have been buying Nescafe Gold Blend for a decade for £6, don’t put the price up to £8.10 and tell me that my £6 is now a special loyalty reward. People can spot a trick, especially when it concerns their wallets.

Offer your loyal customers real value. If you do this, they’re going to feel special (and probably spend more), and not like they have to be a part of a scheme just to pay the prices they already have been paying.

We’re guessing that the margins are very tight for supermarkets and sometimes, discounts may not be possible. Look at what M&S do with their Sparks Card – every shop you do at M&S where you scan your card gives you an opportunity to win your shopping for free.

Attract Customers For The Right Reasons

Do you really want a Loyalty Scheme where your customers feel forced into joining, so they can access the prices you charged everyone a couple of years ago? When a customer is signing up for a Clubcard or a Nectar Card, do you think they’re excited to be a part of the scheme or more relived that they won’t have to pay £8.10 for a jar of coffee they paid £6 for 2 days prior?

If we compare this to Boots who operate their Advantage Card, you can instantly see why there aren’t many reports of a competition watchdog looking at their loyalty scheme. In May 2023, Boots announced a revamp of its loyalty card, offering customers an instant 10% off its own brand products. In July 2023, it was reported that Boots had seen a 65% increase in sign ups for its loyalty scheme. (https://www.retail-week.com/health-and-beauty/boots-says-rewards-scheme-delivers-50m-savings-for-customers/7044195.article)

Boots CMO said Pete Markey said: “Boots Advantage Card is one of the largest and most rewarding loyalty programmes in the UK and part of why customers love shopping at Boots. After listening to our customers, we made changes to the scheme earlier this year to provide more instant savings, including a new always-on 10% discount for Advantage Card members across Boots’ own brand ranges, covering thousands of products across health, beauty, suncare and baby. “

So Boots have seen massive growth since extending discounts on products and offering an instant 10% off their own brand products. All this without the CMA getting involved too!

To summarise, we feel like supermarkets have gotten away from offering a real Loyalty Scheme and it feels very much like an obvious money making scheme instead. They have missed the basics – the first rule of a Loyalty Scheme is offer value to your loyal customers.

If you’d like to find out more about operating a successful loyalty scheme, speak to us today and find out how we can help your business attract loyal customers for the right reasons!

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Whether you’re looking for answers, would like to discuss our services, or just want to know a little bit more about how we have helped our other clients, simply get in touch and we’ll get back to you as soon as we can!

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