At a time when consumers are exposed to more price-cuts, offers and opportunities each and every day, loyalty is increasingly hard to come by.
Supermarkets in particular find themselves locked into constant battle to win over consumers, and with shoppers so spoilt for choice all over the country, how much is a loyalty scheme still worth?
To understand loyalty, we first need to understand what drives us in-store in the first place. This used to be simple in the UK market, where the difference between up-scale, budget and convenience stores was clear. However, with the rise of discounters like Aldi and Lidl stealing market share across the board, the ‘big four’ and other supermarkets need to continue to explore ways in which they can incentivise customers to spend with them.
In any case, with the recent announcement that Sainsbury’s is due to merge with Asda, the highly competitive ‘big four’ looks like it’ll become a ‘big three’. The merger will mean that nearly £1 in every £3 will be spent at the giant, and, with chief executive Mike Coupe promising no store closures, it’ll take the total to 2,800, closing in on Tesco’s 3,400, but tipping market share to 31.4% (v. Tesco’s 27.6%).
With the newly merged mega-supermarket vowing to cut costs too, soon, value will no longer be a big enough hook to keep consumers loyal.
The value challenge is also compounded by the familiarity and expectation challenge. In a recent Nielsen study, 89% of Britons admitted to being members of a loyalty scheme. Yet in spite of this, only 51% of those surveyed said they would choose a retailer with such a scheme over one without. Consumers expect more from retailers and brands, and supermarkets are no exception.
For Tesco, the main reason for updating the Clubcard was to modernise the consumer experience, introducing contactless and pay+. This has been cited as one of the reasons it has seen an improvement in overall NPS score.
Sainsbury’s, meanwhile, has taken a different tack. It has not only modernised its scheme but also changed the way customers are rewarded, no longer focusing purely on spend but incorporating frequency of shop as well.
Between these scheme changes and the merger, the priority for supermarkets is to maintain interest among customers – us Brits over-index by 20% when it comes to being recognised as a valued customer. But with competition on the high street being so high, and with digital retailers existing in every pocket, questions remain over whether loyalty will ever overcome value.