A pricing controversy has emerged in the supermarket business, centring on the loyalty programme strategies of retail giants Tesco and Sainsbury’s. This scenario prompts a closer examination of the challenges and controversies associated with loyalty pricing strategies. As we explore this landscape, we’ll uncover the nuanced dynamics that have led to concerns and shed light on the intricate interplay between profitability, transparency, and consumer value. 


>Download Now: Free PDF How FMCG Can Generate Profitable Growth Faster


Many businesses, particularly supermarkets, grapple with a critical challenge — striking a delicate balance between profitability and consumer value. In this complex terrain, the pursuit of profits can inadvertently trigger transparency issues, raising valid concerns about consumer trust. Navigating this delicate equilibrium requires thoughtful strategies that harmonise financial success with the delivery of genuine value to customers, fostering a relationship built on trust and satisfaction.


In this article, we will discuss loyalty programme creation and pricing strategy in a supermarket. First, we present the current challenges faced by businesses, especially supermarkets, in maintaining fairness and profitability. Then, we delve into potential positive outcomes and steps for improvement in loyalty pricing approaches. We argue that transparent communication, ethical pricing, and personalised incentives are crucial for successful and sustainable loyalty programmes.


At Taylor Wells, we believe that a supermarket can enhance its loyalty programme strategies and foster enduring customer relationships through pricing. By the end, you will know practical steps to address challenges, align pricing with consumer expectations, and fortify loyalty programmes for long-term success in the dynamic market landscape.



Are Customers Receiving The Full Value Of Their Supermarket Loyalty Programme Cards?


The case of Tesco and Sainsbury’s provides a pertinent illustration of current loyalty pricing trends. These supermarket giants, amid allegations of pricing manipulations within their loyalty programmes, exemplify the challenges faced by businesses in maintaining customer loyalty while adapting to evolving trends.


The controversy surrounding Tesco and Sainsbury’s supermarket loyalty programme emphasises the delicate balance businesses must strike between profitability and consumer value. For instance, both supermarkets have been accused of inflating prices on everyday items only to subsequently offer discounts exclusively to loyalty card members. This two-tier pricing approach raises concerns about transparency and fairness in loyalty programmes.


The case also highlights loyalty programmes’ significant role in supermarkets’ financial landscape. Tesco and Sainsbury’s boast millions of members in their loyalty programmes, generating substantial revenue through the sale of anonymised customer data. However, the controversy prompts a reassessment of the cost-effectiveness of loyalty programmes for consumers and their broader implications within the supermarket industry.



As supermarkets grapple with this challenge, the evolving trends in loyalty pricing strategies take centre stage. The emphasis on personalised incentives and technology integration becomes particularly relevant. Supermarkets can learn from this case, recognising the need for transparent communication, gradual implementation, and the careful balance of profitability and consumer trust in loyalty initiatives.


Tesco and Sainsbury’s case serves as a real-world example of the complexities inherent in loyalty pricing. As businesses navigate these challenges, a strategic and adaptive approach is essential to not only address current controversies but also to position loyalty programmes as valuable and trustworthy components of their overall business strategy.


Importance Of Ethical Pricing And Transparent Communication When Implementing A Supermarket Loyalty Programme


Amidst the current controversy, businesses, notably supermarkets, face an urgent call to enhance their strategies. Swift action is imperative to restore consumer trust and ensure the enduring effectiveness of loyalty programmes. Adapting approaches promptly will not only address immediate concerns but also fortify long-term viability in an ever-evolving market.


loyalty program supermarket


How can a supermarket improve its loyalty programme strategies?


The steps outlined below underscore the significance of fairness and consumer value, emphasising transparency, ethical pricing, and customer-centric strategies.


1. Transparent Communication 


Transparent communication is paramount in loyalty programmes’ effectiveness. Businesses, particularly supermarkets, must take decisive steps to articulate programme benefits to customers clearly. For instance, providing a comprehensive breakdown of how loyalty points translate into tangible savings or exclusive perks is pivotal. This transparency not only builds trust but also ensures customers fully comprehend and appreciate the genuine value they receive, fostering a sense of reliability and satisfaction in the loyalty programme.


2. Ethical Pricing Practices


Incorporating ethical pricing practices is imperative for loyalty programmes to resonate positively with customers. Businesses, especially supermarkets, should actively adopt pricing strategies that prioritise fairness for all customers. By steering clear of practices such as inflating prices before offering discounts, a straightforward pricing approach is established. This not only builds a foundation of trust but also ensures consistency, aligning with ethical standards and reinforcing a sense of integrity within the loyalty programme.


3. Data Security Measures


Enhancing data security measures is a critical stride for businesses, particularly supermarkets, to fortify their loyalty programmes. By investing in advanced encryption technologies, they can effectively safeguard the confidentiality of customer data. Beyond addressing privacy concerns, this strategic move contributes to the overall integrity of the loyalty programme, fostering a secure environment that instils confidence among customers and further solidifies the foundation of trust in the business-consumer relationship.


4. Personalised Incentives


Tailoring incentives to individual customer preferences, such as offering personalised discounts based on purchase history, enhances the perceived value for customers. This not only fosters a sense of exclusivity but also encourages continued engagement with the loyalty programme. By recognising and catering to individual preferences, businesses can create a more rewarding and personalised experience for their customers, ultimately strengthening loyalty.


5. Technology Integration


Strategic technology integration is instrumental in optimising loyalty programmes, especially for supermarkets. For example, by developing a user-friendly mobile app, businesses enable customers to seamlessly engage with the loyalty programme.


This technological advancement not only enhances the user experience but also showcases adaptability to modern consumer expectations. The app’s features, such as tracking rewards and viewing personalised offers, streamline programme management, contributing to a more efficient and customer-centric loyalty experience that aligns with contemporary technological trends.



What are the positive outcomes of improving a supermarket loyalty programme?


Implementing improved pricing strategies holds the promise of various positive outcomes for businesses. Foremost, such strategies can act as a catalyst in rebuilding consumer trust, a critical element in fostering lasting customer relationships. By aligning pricing with genuine consumer value, businesses can cultivate increased customer loyalty, as customers perceive tangible benefits from their purchases.


Sustained profitability emerges as a consequential advantage, as satisfied and loyal customers are more likely to make repeat purchases. This virtuous cycle of trust, loyalty, and profitability showcases the potential for businesses to thrive when pricing strategies prioritise transparency, fairness, and delivering authentic value to the consumer.


What are the challenges posed by revamping a loyalty scheme?


Reforming pricing and loyalty programmes can present businesses with certain challenges that require strategic consideration. Firstly, resistance from existing customers may arise if changes disrupt their accustomed experience. Transitioning to transparent pricing models may demand additional resources for system upgrades and staff training, posing logistical challenges.


Furthermore, competitors may react dynamically to pricing reforms, impacting market dynamics. For instance, if a supermarket reduces prices, competitors might engage in price wars. Lastly, businesses must navigate potential financial implications, balancing the short-term costs of reforms with the anticipated long-term benefits. Acknowledging and proactively addressing these challenges is crucial for a successful and smooth transformation in pricing and loyalty strategies.



Overcoming The Challenges Of Supermarket Loyalty Scheme Transformation


To overcome challenges in enhancing loyalty schemes for fair pricing, businesses must first address consumer concerns and uphold ethical pricing practices. A crucial step is establishing high-performing pricing teams, ensuring adept management of pricing strategies. These teams play a pivotal role in crafting transparent and consumer-friendly approaches.


Our findings show that with the right set-up and pricing team in place, incremental earnings gains can begin to occur in less than 12 weeks. After 6 months, the team can capture at least 1.0-3.25% more margin using better price management processes. After 9-12 months, businesses often generate between 7-11% additional margin each year as they identify more complex and previously unrealised opportunities, efficiencies, and risks.


Moreover, advocating for the embedding of commercial capability across organisations is vital. Integrating commercial expertise ensures the success and sustainability of loyalty programmes. A robust commercial foundation enables businesses to align strategies with market dynamics, fostering adaptability and resilience.


By emphasising ethical practices, fostering high-performing teams, and embedding commercial capability, businesses can not only address challenges but also fortify their loyalty programmes for long-term success in the dynamic marketplace.


Our findings show that when a business builds and embeds commercial capability across the business; bolstering its internal pricing skills and capabilities to build a sustainable pricing system, it can generate at least 3-10% additional margin each year while protecting hard-earned revenue and volume. This is at least a 30-60% profit improvement straight to the bottom line.


〉〉〉 Get Your FREE Pricing Audit  〉〉〉


Bottom Line


Businesses encounter challenges in navigating the delicate balance between profitability and fairness within a loyalty programme, particularly amid evolving trends. To address these challenges effectively, businesses must implement strategic improvements.


These include transparent communication of the supermarket loyalty programme benefits, the adoption of ethical pricing practices, and the integration of personalised incentives. The key takeaways underscore the critical importance of transparency, consumer value, and ethical pricing in the construction of successful and sustainable loyalty programmes.


Embracing these principles not only addresses current challenges but positions businesses for enduring success. By aligning with customer expectations, businesses can create loyalty programmes that not only weather current market dynamics but also thrive in the evolving landscape of pricing strategies, ensuring lasting customer trust and satisfaction.


For a comprehensive view of maximising growth in your company, Download a complimentary whitepaper on How FMCG Can Generate Profitable Growth Faster.


Are you a business in need of help aligning your pricing strategy, people and operations to deliver an immediate impact on profit?

If so, please call (+61) 2 9000 1115.

You can also email us at team@taylorwells.com.au if you have any further questions.

Make your pricing world-class!