Member pricing: taking loyalty to the next level

Over the past few years, member pricing — the practice of offering exclusive promotions or discounts to loyalty scheme members — has become one of the defining features of the UK’s grocery market. Walk into a British grocery store today, and you’re likely to find thousands of products that now have two different prices shown at the shelf: the standard RRP for non-members, and a discounted alternative for loyalty card holders.

While it’s an almost ubiquitous element of grocery retail in the UK, of course, member pricing isn’t exclusive to these shores. Retailers across Australia, the US, France, Germany, and more have also embraced the practice. And member pricing is only likely to become more pervasive; while inflation may no longer be peaking, shoppers are still on the hunt for ways to lower the cost of their shop.

This creates a significant opportunity for retailers looking to stand out from the crowd. By offering price-based benefits, retailers can make the value offered by their loyalty programmes abundantly clear. At the same time, however, member pricing isn’t the easiest thing to get right — logistically, operationally, and even in terms of customer perceptions.

With that in mind, let’s look at the key benefits that member pricing offers, alongside the challenges that retailers will need to overcome if they’re to unlock them.

Why member pricing matters

I’d like to start with a general analysis of member pricing’s appeal. To me, there are three primary reasons that member pricing works so well:

1. It delivers on changing consumer needs — and boosts value perception in the process

Today, shoppers are trending more and more towards the idea of instant savings. A survey conducted by The Grocer, for instance, shows that “instant discounts” are the main reason that someone decides to join a loyalty scheme¹. Member pricing offers a clear solution to that need, going some way to explaining why three-quarters of shoppers feel “positive” or “very positive” about the idea².

In turn, member pricing can have a demonstrable impact on value perception. Covering price, promotions, and personalised offers all at once, member pricing tackles three core value perception “pillars”, giving retailers a (comparatively) simple way to enhance their proposition to customers.

2. It boosts loyalty — and gives retailers more data to work with

Linking at-shelf discounts directly to a loyalty programme tends to have a significant impact on membership. When Tesco launched Clubcard Prices in the UK, for instance, it gained 3.5 million new Clubcard members in just 18 months. Shoppers will actively change their behaviours if it means being given access to exclusive discounts, it seems.

There are two key advantages to having a bigger membership base. Firstly, loyal customers tend to be more “valuable” overall. They shop more frequently, and they come away with bigger baskets when they do. On average, existing customers tend to spend 31% more than new ones, for instance³.

The other consideration here is data. The more members that a loyalty programme has, the more data that retailers have to work with — and that’s critically important in today’s world. Used effectively, customer data can power everything from insights monetisation through to enhanced decision making, adding another string to the member pricing bow.

3. It helps to maximise return on investment (ROI)

Retailers are under constant pressure to maximise ROI when it comes to promotions and loyalty. So are consumer packaged goods (CPG) brands. Member pricing has proven to be an exceptionally effective tactic, giving both parties the opportunity to run fewer — but far more efficient — promotions.

Clearly, then, there are plenty of reasons for retailers to offer member pricing — but not all are. So just what is it that’s holding them back?

Important considerations for a successful member pricing programme

To make member pricing truly effective, retailers need to think strategically from the outset – an area that dunnhumby can bring in-depth experience. Key considerations include:

• Defining the right balance of promotions

Determine what proportion of your total promotional activity should be member-exclusive. Too few, and the programme may feel underpowered; too many, and you risk alienating non-members.

• Keep pricing communication clear and simple

At-shelf messaging should be easy to understand at a glance. Avoid clutter, inconsistencies, or complex mechanics that might confuse customers and dilute the impact.

• Agree clear success metrics from day one

Establish KPIs that reflect both customer and commercial impact — such as loyalty scheme sign-ups, changes in average basket size, or uplift in member participation — so you can track and optimise performance over time.

The challenges retailers can face

As impactful as member pricing can be, it comes with its challenges too. To deliver a programme that’s truly effective, retailers will need to overcome issues including:

• Customer scepticism

Generally, customers like the idea of member pricing — but they’re not entirely convinced. 55% believe that non-member prices have been inflated in order to make member prices appear more attractive⁴.

• The risk of exclusion

No matter how attractive you make a loyalty programme, there will always be some people who don’t want to sign up. This can heighten the risk of “insult pricing” — where non-members take offence at the full price and refuse to buy.

• Balancing costs and benefits

Promotions typically come about through a structured, multi-step process that involves the input of category managers, buyers, suppliers, and more. If that kind of rigour isn’t used in the member pricing process, it can quickly put a strain on retailers’ profit margins.

• Setting the vision

Thinking about your roll-out plan in advance is crucial: will all channels and all product categories eventually be included? And what’s the timeline to achieve this? We typically recommend that retailers go all in — but achieving this quickly takes preparation.

• Logistical complexity

Member Prices can cover a variety of different mechanics, price cuts, multibuys, link-save, deferred discounts, and more included. Some of these can be more challenging to manage than others, and planning for that before launch is imperative.

How dunnhumby can help you move forward

Member pricing isn’t as simple as it might seem on the surface. Even if the majority of retailers in your market are offering member pricing incentives, it’s still important to understand how such a programme could work for you.

At dunnhumby, we can help you find the right way forward. Whether you need to understand the right percentage of promotions to shift into a member pricing programme, find the sweet spot on discount levels, or simply keep things simple for customers when it comes to at-shelf pricing, we can assist.

Good for retailers, good for their suppliers, and good for customers, member pricing is a proven success. Find out more — get in touch via dunnhumby contact us page.

1 Why are supermarkets jumping on the member prices bandwagon? – Retail Gazette, 18^th July 2023
2 Loyalty prices preferred to vouchers and price-matching and more loyalty insights – The Grocer, 24^th May 2024
3 The Value Of Investing In Loyal Customers – Forbes, 29^th January 2020
4 Loyalty Schemes and Member-only Price Promotions – Which, 18^th October 2024