Monday Morning Insight - 17th April 2023

Written by Tom Peace

Sainsbury's have announced that their Nectar members can access savings on hundreds of goods when they scan their Nectar card for membership pricing. Customers will benefit from cheaper costs on a number of products as a result of the Sainsbury's restructuring and the membership discounts are significant.

For example, cardholders will pay £4 for Nescafe Gold Blend instant coffee as opposed to £8.10, a better than half-price saving.

This new membership pricing is comparable to the Tesco Clubcard programme, which grants cardholders discounts and gives them the opportunity to accumulate points that may be exchanged for prizes or vouchers. Sainsbury's also follow Boots who announced a similar strategy a few weeks ago.

So why are UK retailers making these dramatic changes to their established loyalty programs?

1) Membership penetration is down! Members have stopped engaging with loyalty programs and the retailers are using this strategy to get customers back into the habit of using their loyalty cards.

2) The cost of living crisis is real and retailers must act to compete on price.

3) Members behaviours have changed. As consumers, we are looking for instant rewards, rather than long-term accumulation of points, as well as gamification and immediate gratification. Membership offers enables a blended strategy of short and long term rewards.

We think this is a strong strategy, giving customers strong discounts in these tough times and providing instant rewards for loyalty members, which is an emerging trend in traditional points based programs. Well done Nectar and good luck.