Member-only pricing to continue acceleration – personalisation, retail media and the future shape of shopper loyalty.

The proliferation of loyalty pricing, or member-only pricing, shows no sign of abating with retailers around the world beginning to limit some or all of their promotions to members of their loyalty schemes.

One of the biggest first movers in this sphere was Tesco, which launched Clubcard Prices in the UK in 2020. Since the launch, the scheme has grown to encompass over 8,000 products and 50 million transactions per week and the penetration of Clubcard usage has rocketed to 80% of transactions across the group. Since Tesco’s innovation, virtually the entire UK market has followed suit, with various iterations of member-only pricing now seen from Sainsbury’s, Morrisons, the Co-op, Lidl, Waitrose, M&S, BP, Boots, Poundland, Superdrug and Iceland.

Sainsbury’s has been expanding its Nectar Prices initiative as well as introducing enhanced levels of personalisation. The scheme now covers 6,000 products and has led to three million shoppers adopting the Nectar app, taking the total of digital members to 14 million.

Globally, loyalty pricing is gathering pace with businesses such as Pick n Pay in South Africa and Woolworths in Australia providing loyalty members with exclusive prices and offers.

Of course, one quick observation of this trend is that as loyalty pricing becomes ubiquitous, will shoppers see differentiation between retailers?

Regardless, these endeavours are intended to deliver an enhanced sense of value for participants and it’s clear that loyalty members appreciate the ability to see their grocery bill tumble at the checkout when their loyalty card or app is used. Shopper research from IGD shows that the vast majority of loyalty scheme members (over 80%) see exclusive discounts as a key benefit of signing up. The research also shows that most shoppers are comfortable with the trade-off of membership: exchanging data for enhanced value.

This trade-off is an important point: shoppers are aware that loyalty schemes benefit retailers as much as they do shoppers. Indeed, some shoppers express frustration that, despite possessing reams of data about their preferences, many retailers spurn the opportunity to provide more appropriate or personalised promotions.

The move towards member-only pricing can be seen as a means to a very lucrative end from the retailer perspective. By driving loyalty card usage and withholding promotions from non-members, retailers are seeing loyalty card penetration intensify, creating a richer and more measurable ecosystem within which they can undertake retail media activities. The ability of retailers and brands to impact shopper behaviour is greatly enhanced by increasing loyalty penetration and the investments that brands are willing to make will become more significant over time.

While these developments are generally positive, it is vital that retailers remember that one of the key purposes of a loyalty scheme is to reward their best customers. For most grocers, winning on price will be a hard battle in the face of continuing discounter strength, so how do you create value beyond price and promotion?

In an age of virtually limitless choice, where switching costs close to zero, loyalty schemes should act as a ‘thank you’ to customers who demonstrate loyalty. Finding ways to reward shoppers in meaningful, tangible ways that improve the everyday and bring the more vibrant parts of a retailer’s strategy to life, remains a huge untapped opportunity.

Of course, shoppers want to know they are getting good value for money, but across the world they are also asking questions about how they can stop wasting food, worrying about how they get more healthy produce into their kids meals, or how to cook new and more inspiring meals on a budget. These are territories that retailers can build richer campaigns from, seamlessly integrated into their loyalty programmes.

So, while the allure of retail media will prompt more and more retailers to adopt loyalty pricing models, this important aspect of loyalty schemes should be remembered no matter what. ???

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