Customer loyalty cards have become a staple in the retail landscape, with a staggering 93% of UK consumers surveyed owning at least one. This level of adoption highlights their significant role in consumer shopping habits and the competitive strategies of retailers. Our research findings reveal both the strengths and challenges associated with loyalty card programs.

This article is based on the findings of online research conducted in November 2024 on the TLF Panel. The online survey about shopping habits and loyalty cards received 2,466 responses from UK consumers.

Dominance of Major Players

The survey data reveals that Tesco Clubcard is the most widely owned loyalty card, with 73% of respondents possessing one. This is followed by the Nectar Card (62%) and the Boots Advantage Card (59%). These figures underscore the dominance of major retail players in the loyalty card market. The Nectar Card's association with multiple retailers, including Sainsbury's and eBay, increases its attractiveness. The Boots Advantage Card appeals to consumers focused on health and personal care.

Motivations for Signing Up

The primary motivations for signing up for loyalty cards are to receive loyalty points or rewards (51%) and to obtain discounted prices (33%). This indicates that consumers are largely driven by tangible financial benefits. Loyalty points offer a form of delayed gratification that can enhance the shopping experience over time, while immediate discounts provide instant value. Retailers, therefore, benefit from offering a mix of both to cater to different consumer preferences.

Love them and only purchase stuff on offer or with a reward

Barriers to Adoption

Despite the apparent popularity of loyalty cards, there are notable barriers to wider adoption. Privacy concerns are the foremost issue, with 33% of consumers indicating that personal data privacy worries deter them from signing up. This reflects growing consumer awareness and sensitivity towards data security in an era of frequent data breaches and increasing scrutiny over personal information usage. Retailers need to address these concerns transparently to maintain and grow their customer base.

Loyalty cards are no longer loyalty cards in supermarkets. They are a card that allows you to purchase a product at the normal price, rather than an artificially inflated price. Your consumer habits are then sold on. It's a con.

The requirement to download an app (18%), particularly in the older demographics, and mandatory sign-up for discounts (17%) also serve as deterrents. The former suggests that a segment of the population may find additional digital engagement unnecessary or invasive. The latter highlights resistance to obligatory sign-ups, which can be perceived as coercive. Simplifying the sign-up process and offering alternative ways to access discounts might alleviate these concerns.

It is annoying when there is only a rewards app and not a card as my elderly mother doesn't have a mobile phone.

Impact on Consumer Behaviour

Customer loyalty cards are effective in encouraging repeat business, with 72% of consumers stating that these cards motivate them to return to a shop or brand. However, the survey also indicates that lower prices (30%) are the most critical factor in driving consumers back to stores, followed by the range and quality of products (18%) and better discounts or deals (16%).

Why don't they just lower the prices in the first place

This suggests that while loyalty cards do play a part in customer loyalty, they cannot be a substitute for competitive pricing and high-quality offerings. Retailers must balance loyalty rewards with fundamental aspects of their value proposition to maintain a competitive edge.

Summary

Customer loyalty cards are a double-edged sword in the retail sector. On one hand, they can drive consumer loyalty and repeat business, evidenced by their widespread ownership and the significant percentage of consumers using them. On the other hand, challenges such as privacy concerns and mandatory requirements to receive discounts are clearly issues for consumers. Furthermore, the importance of competitive pricing and product quality cannot be overstated, as these are fundamental drivers of consumer behaviour.