At a time when consumers are being struck with soaring costs and price rises, it is vital that retailers maintain high levels of customer satisfaction if they want to ensure the loyalty of their shoppers.
One way for retailers to do this effectively is through rewards, offers and discounts presented as part of a supermarket loyalty scheme.
Despite consumers hoping to find the best deals to cope with the cost-of-living crisis, Sainsbury’s and Lidl announced changes to their loyalty schemes last week, which essentially will see rewards still able to be earned but at a higher price for customers.
With shoppers dissatisfied, can retailers justify their actions and maintain customer loyalty or will competitors rewards be too tempting to refuse?
How are retailers cutting back?
For customers signed up to the Lidl Plus loyalty scheme via the discount retailer’s app, its latest update will see customers having to spend at least £50 more each month for a 10% discount.
However, speaking of the new scheme, a spokesperson for Lidl said: “The new 10% off coupon has been introduced for a £250 monthly spend milestone, which increases the potential discount for shoppers to a maximum of £20.
“Since the app first launched our discounts and reward offers have continued to evolve and the latest update also includes an additional free item for £150 monthly spend, allowing more customers to get more rewards, more often.”
For the 1.8 million Sainsbury’s customers who use its Nectar points system, big changes can be expected from November with each transaction seeing points slashed by 75%.
The shake-up to the scheme will require shoppers to spend £2 at Sainsbury’s, Argos, Habitat or Tu clothing to earn one Nectar point, instead of earning two points for every £1 spent as set out in the original offer.
A Sainsbury’s spokesperson said: “With costs going up, we are working hard to keep prices low. We regularly review our offers to ensure we are making the biggest difference to the most customers and are writing to customers to explain that our Sainsbury’s Bank Credit Card points promotion is changing, for new and existing customers.
“While we understand this offer is popular with card holders, we are certain that all customers will continue to find great value and to save money with Sainsbury’s through our low-priced food, competitive financial services and affordable Argos and Habitat brands.”
Are other retailers likely to hop on the trend?
Despite retailers looking to mitigate the costs that rising inflation has ensued, cutting back loyalty scheme rewards isn’t currently on the agenda for many other major supermarket chains.
For Big 4 grocer Asda, its loyalty scheme, Asda Rewards remains a fairly new concept, having only launched nationwide in August. Featuring savings on ‘Back to School’ items, fruit and vegetables and on over 400 own-brand and branded products, it has confirmed that there are currently no immediate plans in place to change its scheme.
The My Morrisons loyalty rewards scheme saw an update in July. However, this change looked to help shoppers save, with its previous discounted products swapped for items such as meat, dairy and impulse which were most sought after at a lower price by its shoppers.
For Waitrose, a spokesperson said: “We aren’t planning major changes but we do constantly look at our benefits package to ensure it continues to delight our customers.
“MyWaitrose continues to remain popular with our customers. In addition to the personalised myWaitrose offers, which all myWaitrose customers receive online and through the waitrose app every single week, all myWaitrose members also benefit from discounts exclusive to myWaitrose customers, that include 20% off fish counter on a Friday and meat counter offers.”
Similarly, for the UK’s leading retailer Tesco, its Clubcard which offers exclusive prices on select products as well as discounts on entertainment and activities to its over 20 million users, has also confirmed that there are no current plans to change its scheme.
The impact on retailers and consumers
According to marketing growth coach, Danny Denhard, slashing the rewards on retailers’ loyalty schemes will “be a damaging move for many supermarket chains”.
He says, “Supermarkets had the opportunity to connect to their customers and reward their loyalty at the time that customers needed it most. Unfortunately, most have not taken this opportunity and took the view to put their revenue first.”
Speaking of the significance of loyalty schemes to shoppers, GlobalData senior consumer analyst, Nidhi Chauhan says: “Discounts are the most appealing reward to people when shopping at retailers. The rising inflation is squeezing consumers’ budgets, and many are choosing to shop at supermarkets perceived as the best value for money.”
At a sensitive time when choosing to save or splurge isn’t an option for many UK households, Denhard says the coming weeks will see the UK’s leading retailers having to “decide whether their short-term revenue is more important than long-term shopper loyalty”.
“Retaining and re-engaging customers is going to become a significantly increased cost to many supermarket marketing departments, driving more messaging and more activities to customer inboxes,” he adds.
However, he also says that loyalty rewards schemes aren’t the be-all and end-all of consumer supermarket savings, pointing out that: “We are seeing the rise of the savviest shopper, many will continue to go from supermarket to supermarket to gain the best deals and reduce their spending and hope to actually save money.”
According to Denhard, this type of shopping will only continue to increase as we draw nearer to Christmas when essential spending will no longer be the only priority.
Despite this, he acknowledges the importance of these schemes to consumers and predicts that, “without being rewarded, supermarket loyalty will ultimately reduce”, something that Sainsbury’s, Lidl and other retailers who might look to slash rewards will have to address.
Chauhan agrees: “As most supermarkets in the UK offer a loyalty scheme, grocers must create a differentiation such as the ability to exchange points for discounts or money off activities.
“Some supermarkets have also introduced gamification and coupons to be exchanged for specific products. These rewards could appeal to those whose spend on leisure is being squeezed due to the cost-of-living crisis.
“The benefits and offers provided need to be compelling and differentiated to ensure shoppers choose a particular retailer or offer as even with growing consumer choice, personalised marketing communications and diverse offerings, brand loyalty is as important for consumers as brands.”
With consumer loyalty unlikely to stand strong against the pressures of current price rises, it is a bold move indeed for any retailer to take the plunge and reduce loyalty incentives during such an uncertain period.
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Is Boots going to reduce the value of their points card if so when