Key takeaways:
- UK grocery loyalty schemes are underperforming. Despite pioneering card-based programmes, most UK supermarkets still reply on basic points-for-spend models that fail to meaningfully change customer behaviour.
- Personalisation beats blanket rewards. Data-driven incentives – like discounts on frequently purchased products or offers on new categories – drive engagement and incremental spend.
- Technology is the missing link. Even the best personalisation strategies fall flat without the right infrastructure to deliver offers effectively. Retailers need robust systems to surface individual-level recommendations at the right time and place, transforming loyalty from a cost centre into a growth driver.
The birthplace of modern loyalty.
The UK grocery market is credited as the birthplace of the card-based loyalty schemes we know and love (or tolerate, depending on the scheme!).
Everyone buys groceries – and almost everyone has an opinion about the UK’s biggest supermarkets. Whether it’s a penchant for the discounters or a preference for the quality and experience of M&S and Waitrose. People have a clear sense of what the major players stand for, and even the ‘typical shopper’ each attracts.
The sector is also home to some of the best-known loyalty schemes in the country. A Tesco Clubcard may be the most common card in the country, while Sainsbury’s Nectar has partners across almost every industry imaginable. More recently, Morrisons and Asda have pushed their own loyalty programmes, with the former joining Tesco and Sainsbury’s on member pricing – a move that hasn’t always landed well in the media.
Standard loyalty schemes in a digital age.
Given this head start, you might expect grocery to be imaginative when it comes to engaging loyalty members. In reality, most schemes are fairly standard. Tesco’s model returns about 1% to Clubcard holders, while Sainsbury’s offers roughly half that, topped up by promotions with selected products and partner brands. The result is much of the value handed back doesn’t actually change customer behaviour. Which raises the obvious question: what’s the real purpose of a loyalty scheme?
The answer depends on who you ask. For a CFO, it’s about incremental spend. For a CCO, it’s about customer satisfaction and NPS. For data teams, it’s about building a usable customer identifier. In truth, any effective scheme has to balance all these priorities. That means making sure the value returned to customers feels genuinely rewarding whilst still driving business outcomes.
To get there, grocers need to move beyond simple point-builders – essentially the supermarket version of a stamp card – and start using data to power personalised offers. Instead of giving Debbie £10 for spending £1,000, why not offer small, achievable rewards that feel tangible and motivating? Think discounts on products she buys regularly, or compelling incentives to explore new categories. Layer in supplier funding to share the cost and you have a model that delivers stronger customer engagement, as well as better supplier relationships.
Why new entrants have the edge.
Of course, the challenge is customers now expect an always-on level of reward. Dialling that down risks backlash, which is why newer entrants often have the edge.
Take Asda Rewards. When it launched, customers could build up a cash pot by hitting spend-based ‘missions’ that refreshed monthly and were tailored to their historic behaviour. It still delivered meaningful rewards, but crucially nudged customers to either maintain or slightly grow their spend – rewarding loyalty without simply giving away blanket discounts. Due to wider business performance issues this has taken a back seat under new management as they concentrate their efforts on winning back their price perception crown – however, they were on the right track!
The infrastructure gap.
There are two main blockers to delivering truly personalised offers:
- One-to-one personalisation requires deep customer understanding
- Retailers are restricted by the technology available to them
At HyperFinity, we generate personalised recommendations right down to the individual customer and product level, powered by our decision engine. However, if there isn’t an effective way of surfacing those offers to customers, the value is lost.
To get the most out of a loyalty scheme, the right infrastructure has to be in place. Without it, you end up with a programme that claims to be personalised, but in reality feels generic.
Making loyalty work harder.
Grocery retailers have the foundations to be amongst the UK’s most powerful loyalty schemes. However, too often these programmes are left to tick over rather than being used as real levers for growth. The winners will be those who move beyond blanket discounts and points-for-spend, and instead use customer data creatively to build personalised, rewarding and commercially sustainable schemes.
Loyalty should be more than a thank you; it should be a driver of behaviour change, customer connection and long-term profitability.
Ready to transform your customer loyalty scheme from a cost gentre to a commercial growth engine? Get in touch.
