Spark illustration

Loyalty dance-off: how can big grocers outperform discounters?

Chris HeapCGO3 May 2023

Morrisons have joined the grocery promotional paywall party this month, relaunching their More loyalty card with exclusive price offers for members. Already at that party are Tesco, who’ve been dancing with member discounts since 2019, and Sainsbury’s and Co-op, copying their moves since earlier this year.

But with the floor getting crowded and the discounters still steadily gaining market share, how can the big grocers stand out from the crowd on price?

Competition on the dance floor

These are tough times for the big UK grocers. Sainsbury’s have reported a fall in annual pre-tax profits, Tesco profits have dropped by a dramatic 50% and Co-op has warned that inflation will affect its profit in future.

Big benefits of loyalty schemes

Reducing prices has become the go-to strategy for the big players. Tesco and Sainsbury’s offer Aldi price matching, and Morrisons has slashed prices after being overtaken by Aldi earlier this year.

Loyalty discounts have worked well for Tesco, and their rivals are reaping the benefits too.

This week, promotional sales at supermarkets rose to over 20%.

Standing out from the crowd

Now all the big grocers are offering similar schemes, there’s a pressing need to identify other factors in the shopping experience that customers care about that will help them stand out.

Crucially, grocers need data not just on their CX, but on their competitors, including discounters like Aldi and Lidl, so that they can compare the performance of their own CX.

With comparative data, retailers can improve customer experience strategy, doing more of the stuff that will influence customer choice, and less of the stuff that isn’t having an impact.

Friction risk?

Requiring a customer to do something extra (like sign up for a loyalty scheme) is a purchase friction. It may deter some customers, causing them to choose a competitor whose loyalty scheme they already belong to, or who does not require scheme membership to access low prices.

These are the key questions grocery retailers should consider:

  • Is the number of customers you lose due to the friction of loyalty paywalls outweighed by the number of customers attracted by lower loyalty prices?
  • Is your loyalty scheme actively stealing customers back from the discounters?
  • Is the friction debt of the scheme paid off by other benefits like increased customer data?

Why not just ask customers?

Traditional customer analytics metrics attempt to get at this insight by asking customers what they think of loyalty paywalls, and whether loyalty schemes influence their shopping choices. But there are serious flaws with these metrics:

  • Survey metrics tend to only collect data from your own customers and not from customers who have already been lost to a competitor.
  • Customers might say loyalty schemes influence their behaviour, but this may not be reflected in realty. Humans are poor at analysing the real factors influencing consumer behavior.
  • Surveys give little insight into what other elements of CX are important drivers of customer choice.

An alternative metric

Retailers need a metric that shows:

  • Competitive analysis – how does your CX compare to your competitors - the discounters and other loyalty schemes?
  • Customer experience analysis – what other areas of your CX influence customers to choose you over the discounters?
  • Impact of changes – how do changes to your loyalty scheme or customer experience affect customer behaviour?

As Aldi and Lidl continue to gain market share and the low-price paywall playing field is levelled, the other big grocers need CX data that reliability guides their next best moves.

By moving to a metric that objectively evaluates each aspect of CX, grocers can create tailored strategies that improve customer retention and generate growth. Without this insight, there is a risk that the discount party will start spitting out casualties.

Find out more about comparative customer experience analytics

Chat to Chris Heap about how Uncrowd can help:

Uncrowd is on a mission to improve every customer experience on the planet through a unique combination of CX observation, quantitative measurement and comparative results. Our data is objective, empirical, and always shows your next best action.