What Aussie retailers can learn from Tesco’s highly successful loyalty program

I’m an Aussie who has been living in the UK for several months and there are some simple yet extremely effective product-marketing tactics that the British seem to have mastered but are yet to cross over onto Aussie soil.

I’ve been traipsing through England, visiting cities from Liverpool and Manchester, to Cambridge and Norwich, to Chelmsford and Canterbury. Whilst living here, there are a few things I’ve quickly come to learn: Living in England is expensive; as a result, the Brits know how to create a cracking loyalty program.

Every week, I place a click-and-collect order from Tesco, a multinational-operating grocery and general merchandise retailer that was founded in 1919 and now dominates the largest market share (27.4 per cent) for grocery retailers in the UK. One of my favourite things to do is to join the loyalty programs of major retailers, because the Brits do loyalty programs like no other.

I take advantage of the Tesco Club Card loyalty program weekly, which includes discounted Club Card pricing on everyday essentials such as milk, vegetables, and household cleaning products. These Club Card discounts save me roughly £4-8 per shop. That’s A$8-16 every week! Because of this amazing loyalty pricing strategy, I’m very much devoted to the supermarket chain. It also helps that Tesco has over 4100 stores in the UK, so there appears to be a Tesco or Tesco Express whenever I need one.

With such compelling loyalty offers and such a large store footprint, shoppers have the confidence to know they will always save with Tesco regardless of when they shop. Tesco Club Card pricing was launched in 2020 and has made a world of difference to the loyalty program and its membership growth. At the time of launch, Tesco had around 14 million Club Card members and has grown by 50 per cent to over 21 million. The most obvious benefit to members is the value that Club Card pricing offers its customers at checkout – every single time they shop. There’s no waiting to earn points or hold out for special promotions. The benefits are available with each transaction. And they’re consistently made bold and clear for good visibility throughout the customer journey. Brilliant.

Once Tesco launched its Club Card pricing strategy, many additional retailers followed suit. Another English brand that I love and shop with regularly is Boots UK, which has the same loyalty pricing strategy as Tesco. For those who don’t know, Boots is the equivalent of Australia’s Priceline. A health store/pharmacy and beauty retailer that runs over 2500 stores across three countries (UK, Thailand, Ireland). Statista states that, this April 2024, Boots was the most visited beauty and cosmetics website in the UK. That month, over 15 million users visited the retailer’s website.

Another pricing strategy that both Boots and Tesco share is 3-for-2 offers across different product categories and brands. So no more needing to buy three of the same item or from the same brand just to save; you can buy three different products over various categories and brands and save on the third item. Genius. This strategy not only entices customers to join the loyalty program, but also it helps increase basket size without adding barriers to purchase. Don’t get me wrong, 3-for-2 offers are great in the land down under, but the number of people who use these offers on one singular product or brand reduces the impact the offer has.

The last little British gem is the competitive pricing power that private-label brands have in the UK. Aside from its venture brands portfolio, Tesco’s own private-label brands dominate the grocery store aisles. And I should know, with 95 per cent of my weekly groceries labelled with Tesco’s familiar logo. Boots UK has several private-label brands as well and the pricing strategies for each brand mean both Tesco and Boots often become a preferred option for price-sensitive customers. And in today’s current economic climate, that group of customers is only growing.

In August last year, Tesco replaced more than 50 everyday products, including toothpaste, pasta and rice stocked in Tesco Express stores with cheaper alternatives from its private-label brands. Some offer savings of up to 50 per cent. Tesco said it had made the change after a review of its internal shopping data had shown consumers were “increasingly turning to own-brand products to get great value” during the cost-of-living crisis.

The power of private labels in the UK is like nothing I’ve seen before. Consumers regularly and proudly shop private label. Whereas, in Australia, we appear to be more conscious of purchasing these products from brand labels that are perceived to be of better quality. Something to ponder.

Whilst I’m now armed with real customer insights from some of the world’s greatest retail brands, rest assured, Australia’s upbeat culture and seasonal weather still have a special place in my little Aussie heart. But perhaps it’s time to review your retail strategy?

Further reading: What Myer’s new CEO says about the importance of customer loyalty in retail

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