Authentic, tangible benefits and rewards for being loyal to a business should be reciprocated and valued above all else in the corporate world. Even with growing consumer choice, personalised marketing communications and diverse offerings, brand loyalty is as important for customers as brands.

Recent research undertaken by Rare: Consulting highlights that 99% of the UK population believe that brand loyalty exists suggesting that loyalty is not a mechanism or a card, it is a part of reality that is embedded in the overall experience a customer has with a brand.

Even with the rise and popularity of Netflix, Amazon Prime and other subscription based services, 71% of the UK population have a loyalty scheme in the grocery sector compared to just 32% of the UK who have loyalty incentives with entertainment services. Some may argue that shopping for groceries is driven by necessity. However, with shoppers able to visit supermarkets, grocery stores, local farm shops and markets for their groceries, there is plenty of choice when it comes to a consumer's weekly shop.

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Source: Rare: Consulting. UK adults 18+ years old. Data collected 7th-24th May 2021 (N=854).
Q10 - Which of the following sectors do you have a loyalty incentive with? N=854.

Loyalty is much more than a points based reward system, with the ever-increasing popularity in grocery loyalty schemes as opposed to that seen in other sectors. 38% of people reported that they are genuinely loyal to brands in the grocery sector despite not having any loyalty incentives with them.

When looking at who has loyalty incentives in the grocery sector, there are differences between both genders and generations. Loyalty incentives are appealing to both genders with a majority reporting they have a loyalty incentive in the grocery sector. However, there is a difference seen with 14% more women (78%) than men (64%) having a loyalty incentive within the grocery sector.

Not only are there differences seen with gender, there are incremental increases in the number of people who have loyalty incentives in the grocery sector by age. 84% of Baby Boomers have a loyalty incentive within the grocery sector compared to less than half of Gen Z shoppers (42%). Therefore, creating innovative ways to encourage more younger shoppers to have a loyalty incentive within this sector is a logical step to further increase loyalty.

Let’s take a look at some prime examples of customer retention in the grocery sector. The supermarket chain, Tesco, has grown exponentially and is now the world’s third largest retailer. According to one source more than 17 million people in the UK had a Tesco Clubcard in 2018 - almost one third of the adult population.

Whilst many brands cut marketing spend during the pandemic, Tesco continued its activity throughout the year, launching new iterations of its ‘Food Love Stories’ creative and publishing its Clubcard proposition through the ‘The Power to Lower Prices’ campaign. For Tesco, Clubcard prices act as a way to reward customers for their loyalty, with value for money becoming increasingly important to the everyday consumer. Tesco is focusing on offering simple, low prices for everyday items. Hence, the Clubcard is manifesting into a powerful money-saving wand.

Source: Rare: Consulting: UK adults 18+ years old. Data collected 7th-24th May 2021 (N=854). Q9 - When thinking about loyalty, which of the following are the most important aspects for staying loyal to a brand? Strongly/Somewhat agree (N=854).

Research conducted by Rare: found that 75% of the UK population agreed that discounts are an important aspect of brand loyalty. Co-op Food took initiative by providing its members a rebate of 5% on own-label products purchased with a further 1% donation to local charities chosen by each individual customer. This has been successfully implemented by Co-op to make the rewards for members more meaningful and community focused.

Why are customer loyalty programmes more important than ever in grocery?

The benefit of loyalty programmes for grocers is clear and ultimately helps the grocer to drive sales among existing customers. They provide access to customer data, shopping patterns and a direct line to the consumer. 80% of customers wish to receive special treatment that isn’t available to everyone, which is why loyalty schemes have become so successful in the grocery sector by offering experiential rewards that are memorable.
Research conducted by Rare: found that initial offers for subscription models aren’t as effective for loyalty in the long run. However, traditional B2C retailers can do so with additional extras. For example, the multinational supermarket chain, Whole Foods joined forces with Amazon with a grocery discount exclusively for members with Amazon Prime, customers receive 5% off all purchases. Along with a free 30 day trial for Amazon Prime, which allows everyone to taste the benefits without any commitment.

Whilst it may seem that brands are failing to appeal to younger people in this area, with only 61% of 18 to 24 year olds belonging to a loyalty scheme - brands must rethink their loyalty models to resonate more with Gen Z’s wants and needs. Brands can guarantee customer retention by focusing on three major aspects:

Freedom of choice - so consumers can select the rewards they want from a wide list of incentives.
Make members work harder for the most attractive and valuable rewards.
Being omnichannel is no longer an advantage, but rather a necessity to offer the same experience on all platforms.

Whilst it may seem that brands are failing to appeal to younger people in this area, with only 61% of 18 to 24 year olds belonging to a loyalty scheme - the real power will come over time from building up customer data to better understand who the most loyal and frequent customers are, ensuring that brands can communicate to them and offer value-added incentives. It is evident that loyalty programmes in the grocery sector are here to stay either wholly or in part, it is clear from research that they can drive significant growth, however attention should be given around acquisition costs and retention abilities for all age groups.