Loyalty schemes used to be about collecting points. Now they're about paying a lower price at the till if you're a member. It has transformed sign-up rates. Whether it has made anyone more loyal is another question.
From points to instant prices
Did anyone really understand the old points schemes? How many points for spending what, and what were they worth? It took an age to earn a reward that felt meaningful.
Member pricing changed that. The benefit is instant and easy to explain: scan your card, pay less. Tesco led the way with Clubcard Prices and others followed.
Why retailers love it
- Sign-ups and card use soar. When the lower price needs a card, customers get a card.
- Data. More baskets linked to a customer means better insight for ranging, pricing and promotions.
- Supplier income. That data, and the profile member prices give a brand, can be funded by suppliers. Higher volume compensates them for a lower margin.
Where it backfires
- Standard prices start to look expensive. I've walked out of a convenience store feeling the core pricing was poor value, purely because of the gap between the normal price and the member price.
- Non-members feel shut out, or pushed into signing up for something that benefits the company more than them.
- Trust is at risk. In 2024 the consumer group Which? questioned whether some "normal" prices used for comparison were genuine. If the saving isn't real, customers notice.
- It doesn't stop shopping around. Most shoppers now use two or more supermarkets, and the discounters keep growing with a simple promise of low prices every day.
High card penetration is not the same thing as loyalty. If everyone has every card, nobody is loyal.
What makes a scheme worth joining
For a loyalty scheme to work, there has to be a real value exchange for the customer:
- Genuine offers, compared with a price that was really charged.
- Exclusive benefits that non-members can't get.
- Relevant offers based on what that customer actually buys.
- Frequent enough to keep people engaged.
- Simple to understand, with a clear cash value.
Loyalty is more than price
Price matters, especially now. But customers increasingly judge value in the round: trust, convenience, quality and how the experience makes them feel. As one customer said to me in a focus group, "I want to feel like a somebody, not a nobody."
The retailers who earn real loyalty know their customers across every channel and use that knowledge to be helpful. Inviting a valued customer in for a personal shopping session, with items already chosen in their size, will do more than any points balance.
For smaller retailers
You don't need a full loyalty platform to reward loyalty. A coupon at the till for the next visit, a simple stamp scheme, or recognising your regulars by name all work. Start with the behaviour you want, usually one more visit or one more item, and reward exactly that.