membership pricing

Pricing Strategy

The rise of Membership Pricing

To remain competitive and navigate the challenges of strained economic times, businesses are becoming increasingly creative with their pricing strategies.

Traditional, fixed pricing is evolving as businesses shift towards more flexible and innovative models. Over in Europe membership pricing is a case in point.

In the UK, Sainsbury’s and Morrisons have joined Tesco in offering exclusive prices to members, with Marks & Spencer also trialing this with “Sparks Prices” over the summer.

These supermarket membership schemes reflect an evolution of traditional loyalty schemes by moving beyond offering rewards to offering special prices for members. This model is now expanding into other areas of retail and hospitality, with Pret A Manger also launching membership pricing through its Club Pret offering.

With Club Pret, customers pay £30 a month for a membership which entitles them to five free hot drinks a day and 20% off the entire menu. Similar to Tesco’s Clubcard Price labels, Pret’s discounted member prices are spotlighted on its shelves.

What’s fuelling the increase in membership pricing?

As the cost of living and rate of inflation remains high in the UK, businesses are seeking ways to maintain steady revenue streams while navigating challenging market conditions. Membership pricing incentivizes loyalty by offering better value for money. By encouraging customers to buy regularly in exchange for discounted prices, the membership pricing model enables a more stable and consistent revenue flow, helping companies manage their operational costs.

Meanwhile, the cost-saving benefits appeal to consumers at a time when personal budgets are tight. Reputationally, businesses offering discounted prices for members during challenging economic times, particularly where membership is free, can position themselves as more accommodating and attuned to the needs of their customer base.

The risks

However, precision is key to getting the membership pricing model right. Without this, businesses run the risk of being accused of arbitrary price hikes which see regular prices inflated to create the illusion of a members’ discount. Businesses need to be cautious to avoid alienating customers by implementing extreme price rises or introducing memberships that are made too exclusive by their high cost.

Pret’s pricing profits

Despite creating some stir around the inflation of non-member prices, the Club Pret model has shown strong success since launching. The membership program played a key role in Pret returning an annual profit this year for the first time since 2018.

Club Pret has not been immune to the sting of inflation however and since launching in 2020 has increased the cost of its membership twice, taking it from £20 to £30 a month. Although this increase was softened by members’ store-wide discount climbing from 10 to 20%, the rise will inevitably put off some customers.

Is membership pricing here to stay?

For membership pricing to be sustainable and achieve similar success in other markets, businesses need to be able to address consumer concerns about price hikes and ensure they consistently deliver good value. Membership pricing offers the key benefit of giving businesses access to a wealth of customer data, and this will inevitably influence the durability of this model.

Customer data generated by membership pricing can be harnessed by businesses to perform accurate shopper analysis, implement tailored marketing campaigns and inform future pricing in a way that maximizes margins and limits costs. To achieve this, however, businesses need the right tools that empower them to collect and process this data.

The growth of digital solutions such as intelligent pricing can support businesses as they pursue creative strategies like membership pricing. Intelligent pricing enables businesses to deliver the right price at the right time across membership and standard pricing, while also analyzing usage and cost data which can be used to adjust future pricing and drive profits.