Retailers 'must use loyalty data to boost CX or risk it all'

Retailers might be “going gangbusters” in their quest to get consumers to sign up to loyalty scheme member-only pricing but the industry must use this shopping data to boost personalisation and make customer experiences more compelling or risk the value exchange going tits-up.

That is according to a new study carried out by the Retail Technology Show, which quizzed more than 1,000 UK shoppers and reveals three quarters (73%) feel loyalty prices are an effective way to encourage them to sign-up as a member.

In fact, as household budgets remain squeezed by ongoing cost-of-living pressures, over half (54%) of those surveyed have started shopping with a retailer because of the significant discounts offered to card holders, while a quarter (23%) now say they will not shop with retailers not offering ‘dual-pricing’ for loyalty members.

Tesco was first out of the traps with Clubcard Prices, which launched in 2019 but has since been followed by Sainsbury’s, Morrisons, Boots, and the Co-op which have also set up similar offers available exclusively for loyalty club members. Other retail sectors, including household firm Robert Dyas and beauty and health giant Boots have also embraced the strategy.

And this adoption has seen sign-ups grow exponentially; since introducing Clubcard prices, Tesco has grown its loyalty programme from 14 million to 21 million users, while Sainsbury’s added an extra million Nectar members within three months of launching NectarPrices, to 16 million.

Consumers remain savvy that by opting into loyalty programmes, their data will be used by retailers; three quarters (73%) feel loyalty scheme prices are an effective way of growing marketing data.

However, almost inevitably, some shoppers do try to play the system; just over a quarter (28%) had taken a loyalty card to the checkout to get membership deals but then did not register the card afterwards.

And, last month, the Competition & Markets Authority officially launched its probe into supermarket loyalty pricing – first flagged up in November last year – as part of a wider programme to help tackle cost of living pressures in the groceries sector.

It seems consumers are also concerned; more than half (52%) feel retailers are significantly elevating regular, non-loyalty scheme prices to make more money.

A further 49% said that by offering such significant discounts to loyalty scheme members, regular shoppers who were not signed up to loyalty programmes risked being ripped off.

Retail Technology Show event director Matt Bradley said: “In general, shoppers don’t mind giving up their data, if there is a value exchange. With many cost-of-living shoppers trying to make squeezed household budgets work harder, the prospect of immediate discounts is a tangible benefit.

“However, shoppers are increasingly aware of just how valuable their data is to retailers. That means, in order to keep customers satisfied that the value exchange is sufficient, retailers need to think about how they can use that data to further personalise promotions to make loyalty experiences all the more compelling.”

The industry could learn valuable lessons from the issues now facing many online companies.

According to The Tipping Point report from Nano Interactive, published last year, soaring awareness of online privacy is causing consumers to question the assumed value exchange the entire advertising ecosystem is built upon – that free content is provided in return for sharing personal data – with the vast majority believing change is needed.

When asked if their personal data was a fair exchange for a free service, just as many respondents agreed as disagreed (30%) but the majority (60%) said advertisers should find a better way to make ads relevant that does not rely on collecting personal information.