Key takeaways:
- Loyalty pricing is no longer niche – it’s reshaping how retailers drive value.
- It’s not personalised pricing. It’s exclusive prices for strategic customer segments.
- Done well, it drives retention, reactivation and long-term growth.
Loyalty pricing is everywhere. According to the UK Competition and Markets Authority, over 22% of grocery sales now happen through loyalty-only prices. That’s more than £5 billion in transactions influenced directly by member pricing.
But here’s the problem: for many retailers, it isn’t working.
They’re pouring money into loyalty pricing without knowing whether it’s driving incremental behaviour – or just discounting purchases that were going to happen anyway. Let’s unpack what loyalty pricing really is and how to use it without haemorrhaging value.
What loyalty pricing actually means.
Loyalty pricing – or member pricing – means personalised lower prices exclusively for loyalty programme members. These lower prices are often funded by suppliers. Think Cathedral City cheese or Tropicana orange juice – products most consumers would never pay full price for without the loyalty discount.
It’s not dynamic pricing, like airlines, where prices change based on demand or availability. Instead, it’s precision discounting. Targeted deals are offered to specific customer segments based on their shopping habits to drive behaviour changes.
When it’s data-driven, this approach can power basket growth, category switching, and churn prevention.
The three ways loyalty pricing leaks value.
Blanket discounting with no strategy.
If you’re giving the same discount to everyone who’s a member, you’re not using your data. That ‘£1 off’ might feel strategic, but if it’s going to people who were buying anyway, it’s just lost revenue.
Poor targeting and timing.
Offering discounts on products customers already buy regularly just gives away margin. Instead, focus on encouraging trials of new categories or reactivating lapsed customers with products they used to love.
No measurement of impact.
Without proper testing and control groups, you can’t tell whether your offers are driving incremental sales or just subsidising purchases that would’ve happened anyway.
Three types of loyalty pricing that actually work.
Cross-sell pricing.
Target customers with offers on products they don’t currently buy but are likely to want (based on affinity or lookalike shoppers). If someone buys premium wine, they might respond to cheese offers. If they shop for running gear, they might try hiking equipment.
Buy again pricing.
Encourage more frequent purchases of products customers already like. If someone buys New Balance trainers occasionally, offer them different colourways or new releases to increase purchase frequency.
Win back pricing.
Use targeted discounts to reactivate lapsed customers with offers on products they used to love. The key is relevance – show them you remember what they actually bought, not random promotions.
Real-world examples.
Start with clear commercial goals. Are you trying to increase basket size, drive more frequent visits or prevent churn? Then choose mechanics that support those goals.
The key is understanding customer segments:
- Who are you trying to influence?
- What behaviour do you want next?
- Why would this offer motivate them?
Personalisation matters, but it doesn’t have to be complex. Different customers respond to different incentives, so segment based on purchase behaviour, lifecycle stage and category preferences.
Measuring what actually matters.
Measuring the performance of your loyalty scheme is critical. Look beyond clicks and redemptions. Instead, focus on:
- Incremental revenue uplift
- Changes in customer lifetime value
- Profit margins after discount
- Behavioural shifts in purchase patterns
This requires proper testing with control groups. Without measurement, you’re just guessing whether loyalty pricing is working.
The tools you need.
Successful loyalty pricing relies on:
- Quality customer data and clear segmentation
- Testing capabilities to measure incrementality
- Real-time decisioning for relevant offers
- Clear performance dashboards
The difference between strategic loyalty pricing and expensive guesswork often comes down to having the right decision intelligence layer. This enables you to design tests, measure impact and scale only what works.
Moving beyond blanket discounts.
The smartest retailers aren’t abandoning loyalty pricing – they’re getting more precise with it. Instead of ‘10% off everything for members’, they’re offering ‘20% off hiking boots for customers who buy running gear but haven’t tried our outdoor range’.
It’s the difference between scatter gunning and precision targeting.
Ready to stop leaking value?
Loyalty pricing can be a powerful engine for growth, when used with strategic intent, behavioural insight and rigorous measurement. Without that, it’s just another cost line.
The future belongs to retailers who understand that loyalty pricing isn’t about rewarding customers for what they already do – it’s about influencing them to do more.
At HyperFinity, we help retailers design smarter loyalty strategies, including pricing that’s targeted, testable and proven to drive value. Want to see what you could unlock with the right approach? Get in touch at contact@hyperfinity.ai.
