Join Our Club – Are Loyalty Cards Leading Consumers to Store?

With food inflation showing no sign of decreasing (currently sitting at 19.1% in the 12 months to March 2023), consumers are under pressure to try and control the price of their weekly shops. Consumers are now shopping less often but spending more, with an increased focus on own-label products to control the cost.

The rise of the discounter brands alongside the current cost-of-living crisis has pushed the traditionally big grocery retailers to think about their strategies. Their solution looks to be Loyalty Schemes, which focus on offering an everyday, more consistent level of saving for its subscribers.

Below we give an overview of how the loyalty schemes compare across the big retailers and the benefits consumers receive day-to-day.

Tesco Clubcard

Until 2019, the Tesco Clubcard was primarily used to earn points, which could be transferred into vouchers to be used at Tesco or with Clubcard partners. They have since introduced 'Clubcard prices', offering discounted prices to cardholders.

Tesco also offers a Clubcard Plus subscription service costing ￡7.99 a month, giving shoppers 10% off two shops in-store every month and 10% off their F&F clothing range.

Members get one point for every ￡1 they spend on groceries at Tesco, either in-store or online. From 14th June 2023, customers will receive one point for every 2L of petrol purchased at Tesco petrol stations.

Each Clubcard point is worth 1p, so to get ￡1 to put towards a shop, 100 points would have to be accumulated through spending ￡100.

Sainsbury's Nectar Card

In April 2023, Sainsbury's launched Nectar Prices, rivalling Tesco's Clubcard Prices, offering discounts and personalised offers on products in-store and online.

You collect 1 point per ￡1 on all qualifying spends at Sainsbury's supermarkets and sainsburys.co.uk. You can also collect 1 point for every 1L of fuel when you fill up at Sainsbury's petrol stations.

Asda Rewards App

Asda has a slightly different approach to its loyalty scheme with the Asda Rewards App. Shoppers earn 'Asda Pounds' by buying star products and receiving 10% or more of the products' price back in Asda pounds.

Co-Op Membership

Similarly, a Co-Op Membership offers exclusive member-only discounted prices. You can select which offers you want each week, allowing you to choose where you save money.

A Co-Op membership will cost you ￡1 to join and grants you 2p for every ￡1 spent on own-brand products.

My Waitrose Loyalty Card

Fancy a free Caffe Nero coffee? My Waitrose may be the loyalty card for you. Their loyalty card system amounts to a freebie with any in-store purchase instead of accruing points. The best part is that there is no minimum spend… if you bring your own reusable cup. They also include discounted offers for meat and fish on selected days.

They also offer exclusive vouchers, which are personalised to the shopper and updated weekly. However, they do not operate a points system, meaning you cannot build up points to gain discounts off future shops.

Morrisons More Loyalty Card

Morrisons have recently converted their loyalty card from 'My Morrisons' back to 'Morrisons More', offering membership prices and a points system. They have also brought back the 'Morrisons Fiver' giving ￡5 vouchers to spend in-store for every 5,000 points earned.

How the Loyalty Schemes compare

Using data from our Panoramic Pricing service, we have taken a detailed look at the loyalty schemes of Tesco, Sainsbury's and Asda to understand the number of products included, the categories covered and whether different mechanics are being used within the schemes.

The below chart shows the total number of products offered under each loyalty scheme vs the total number of products sold at each retailer.

Tesco is leading the way with 6,303 (26%) of their products included in the Clubcard Price offer; Sainsbury's is next with 1,800 products (6.5%) included in their Nectar Price offer, and Asda is currently the lowest of the three with 389 products (1.34%) included in their Asda Rewards offer.

Given that the Tesco Clubcard is more mature in its current form than the other loyalty schemes, it is understandable that the number of products included is the highest.

However, the total number of products included by Sainsbury's and Asda is expected to grow quickly in the short term.

Using our own category hierarchy, the below image gives you a view of the categories each retailer covers within their loyalty offers.

There is consistency across the group, with all three retailers including the key FMCG categories. This also underlines the strategy of offering consumers consistently good value with their weekly shops as opposed to spikes of savings through standard promotional offers.

With Asda's scheme differing from Tesco & Sainsbury's through a 'points = money off your shop' system, below we look at the comparable schemes of Tesco and Sainsbury's to see if different mechanics are used within their schemes.

Tesco uses multi-buy and price reductions, whereas Sainsbury's focuses solely on price reductions. Again, this could be attributed to the maturity of the Tesco Clubcard offer. It would not be surprising to see Sainsbury's introduce more variety to their scheme throughout the next 12 months.

Even with Tesco having more variety in terms of offer types within their Clubcard scheme, we can see that the strength of saving being passed back to the consumer vs Sainsbury's Nectar Price is very similar.

Looking at average, lowest, highest and mode savings vs base price, although Tesco is slightly ahead and across a larger number of products, the overall model and strategy are aligned. Both give back to the consumer an average price reduction of 26-27% in return for their profile and loyalty.

Grocery retailers are continually aware of consumer behaviour, and whilst attempting to stand out from the crowd within a very competitive landscape, winning formulas tend to become the social norm. Loyalty schemes seem perfectly positioned for the current climate; others will likely follow suit to keep up in due course. Watch this space!

If your business is interested in pricing data and share of space activity in-store, contact us here - https://www.esa-retail.co.uk/contact-esa-retail-insights/??