Grocery Loyalty Boom Swaying Price Sensitive Shoppers

Grocery loyalty programs have long followed a standard format where retailers offer card-specific deals and customers scan a card at checkout. The primary goal of these strategies has been data collection rather than offering compelling, differentiated value. Over the past year, grocers across the country have revamped their loyalty programs to offer more savings and support a closer connection with shoppers seeking economic relief. This pressure has bred innovation, with updates including wider adoption of digital coupons, customized pricing, and automatic rewards redemption.

Widespread Changes Across Retail Formats

Features like tiered programs and members-only events are now common. Retailers have made it easier for shoppers to earn points and shave dollars off purchases. The updates stretch from hard discounters to specialty chains. Lidl recently launched its Lidl Plus loyalty program in the U.S., while Sprouts Farmers Market’s new rewards program offers everything from points accumulation to a “foragers’ roundtable.” Retailers with fuel stations, like Kroger, have boosted savings at the pump and sweetened rewards across groceries and gasoline.

Unit sales are slowing, and grocery shoppers are willing to defect from regular destinations to retailers that offer better value. Retailers need to pull every lever to improve their positioning. Loyalty programs are one area where they have control. Sales are slowing, and the pressure on shoppers’ wallets means they will quickly switch to whoever offers the best deal, making program design a critical battleground for market share.

Lessons from Specialty Chains

The loyalty program offered by Natural Grocers, a Colorado-based natural and organic grocer, stands out. Its {N}power loyalty program, which launched just over a decade ago, has helped the company post sales gains at a time when other grocers are seeing declines. The program offers regularly rotating deals, articles, and recipes. It features an easy-to-understand point scheme where a customer spends a dollar to get a point. This has helped keep people shopping in its aisles while also driving trips and basket size.

{N}power has been so successful that it prompted an analyst to ask Natural Grocers Chairman, Director and Co-President Kemper Isely during an earnings call why he thinks the program is so effective. Isely’s answer was straightforward. He said it is effective because the grocer has learned what its customers want in a loyalty program. Instead of just giving them a discount on gas like most supermarket programs do, they give special discounts on certain commodities like eggs and avocados that shoppers value.

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Isely said the grocer gives customers special offers tailored to their shopping patterns and offers games they like to play. The program supports a sense of community among its members. Natural Grocers promotes itself as the grocer for health-conscious shoppers. Its loyalty program offers the savings, articles, games and special events that address their specific needs. Two other specialty grocers have loyalty programs that demonstrate this approach.

Sprouts Farmers Market lets members get sneak peeks at new products and vote on new products they would like the grocer to bring into its stores. These unique features support Sprouts’ positioning as a place to discover niche products. The Fresh Market lets members pick an area of the store, like coffee, produce or beer and wine, where they want to earn extra savings.

Adapting to the “Promiscuous” Shopper

Traditional points-based systems reward shoppers who buy a lot of stuff from one grocer. This system may struggle to entice people who aren’t ready to commit or are looking to pare back their spending. A visit-based system speaks to a different core need. Convenience store chain Circle K recently revamped its loyalty program to focus on visits in an effort to drive more traffic into its stores.

Instead of focusing on racking up dollars off or points, Circle K and Weigel’s have focused their revamped loyalty programs on visits. At Circle K, a purchase of at least five gallons of fuel or spending $3 or more inside stores earns customers a “visit,” which they can accumulate and cash in for free products. Weigel’s lets shoppers ascend through four tiers depending on their monthly visit count, with the rewards increasing with each tier.