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Retail loyalty schemes: How can food and drink manufacturers get the upper hand?

By Nick Ryan

- Last updated on GMT

Loyalty schemes and price promotions have become widespread among retailers. Credit: Getty / RealPeopleGroup
Loyalty schemes and price promotions have become widespread among retailers. Credit: Getty / RealPeopleGroup

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Nick Ryan, the co-founder and CCO of revenue management firm Acumen, looks at how food and drink manufacturers can ensure they are benefiting from supermarket loyalty schemes.

Retail loyalty cards, now commonplace after being introduced in the 1980s, demand more critical examination. These schemes imply shoppers are getting good deals when the reality is more nuanced. Yes, discounts and rewards lure customers in. But are they as good a tool as they make out to be?

Shoppers have grown accustomed to loyalty schemes when they shop for groceries. Yet psychology is at play. Whilst there is a cost-of-living crisis in the UK, retailers bank on consumers craving loyalty rewards in order to save money.

Retailers have sophisticated tools for analysing shopper loyalty data, giving access to average basket spend, affinity purchases, product penetration and a range of other data. Equipped with shopper insights, retailers can accurately predict demand patterns, tailor product assortment and shelf placement, and strategically market certain products and manufacturers over others through personalised promotions.

In this article, I will dive into whether loyalty schemes are the shopping saviours they claim to be and how trade promotion management (TPM) platforms can offer food and drink manufacturers a helping hand in countering the retail loyalty card.

Cracking the ROI myth

Although promotions account for a substantial portion of sales, over a third on some brands, not all brands are seeing strong returns from their promotional investments. This trend of uneven or diminishing ROI on promotional offers is an ongoing challenge for brands in the UK and in markets across Europe.

Determining the right promotional strategy and product mix to cut through the noise instore remains a pressing priority for brands seeking to maximise revenues. On the plus side, a growing number of FMCG companies recognise the power of analytics and this is where TPM platforms can help brands improve their ROI.

TPM solutions bring together all of a brand's data, from in-store activities to pricing, promotional plans to trade terms across products and customers and channels. This data can be analysed as a whole, identifying proven trends and opportunities, so leaders can make more informed decisions, rather than basing these on ’gut-feeling’.

Best-in-class solutions seamlessly connect the business process with the data requirements of the analytics process, offering a smooth experience at both ends. It's for these reasons that the TPM market is expected to grow at 10.9% CAGR over the next five years.

Bringing TPM solutions to life and highlighting their value, Acumen recently worked with manufacturing giant Premier Foods to help them integrate data sets to get true visibility of ROI, helping them make better trade spend decisions in the long run.

The discount risk cycle

Discounts and promotions have become indispensable tools for retailers to maintain market share and relevance with shoppers. But excessive reliance on recurrent promotions and price cuts risks trapping brands in a vicious cycle of discounting to unsafe levels just to keep sales buoyant and loyal shoppers engaged. Ultimately, this knee-jerk discounting spirals into an unsustainable strategy that erodes long-term profitability and brand equity.

Rather than rely on deep discounting to retain market share, brands should leverage TPM platforms. By centralising pricing, promotions, trade terms and retail sales data, TPM solutions enable informed strategic decisions, not reactive guesswork.

The analytics identify true market trends and optimise spending for sustainable growth versus short-term market share defence. TPM data integration provides real time clarity for brands seeking to break out of dangerous discounting cycles.

Loyalty schemes may promise shoppers great savings, but the reality is more complex. Uncontrolled discounting traps brands in an unsustainable spiral of reactive deals that erode profits over time. Rather than playing this game, manufacturers need to be making data-driven decisions.

TPM platforms can provide the missing insights – centralising pricing, promotions, and sales data to reveal true market trends. Armed with this intelligence, brands can achieve sustainable growth focused on delivering genuine value to shoppers.

In other news, nearly 200 people working for AG Barr are facing redundancy.

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