Turned around and moving up: The Co-Op’s new membership scheme

Since taking the helm three years ago, Richard Pennycook has put membership at the heart of the Co-operative’s turnaround plan. A few weeks ago, I caught up with him to hear about the next chapter in the Co-op’s remarkable story – one that confirms the company’s commitment to its customers.

Launching this Wednesday, and nearly six months in the planning, is the Co-op’s new membership scheme. The new program will allow members to collect a 5% discount on all own-brand products purchased, including grocery items, insurance, legal services and funerals. In doing so, the company hopes to boost loyalty among its shoppers – as of May, around one-quarter of sales were made to members, and the company plans to increase this number to at least 50%. Within its retail business, own-brand accounts for 4,000 products – more than half of the company’s grocery business.

This initiative’s strong appeal, which goes above and beyond most customer loyalty schemes, comes from its main feature: by buying own-brand products, shoppers are giving back to the community. For all purchases falling within the own-brand category, the Co-op will be giving 1% – which is expected to be around £15m per year – to 1,500 local ‘communities’, designated by clusters of Co-operative businesses in a single area. Members will be able to vote from a shortlist of projects that can receive the funds, and the company plans eventually to allow members to propose their own projects.

The Co-op’s new membership cards

Not only do customers benefit hugely from shopping own-brand within the Co-op – imagine what 5% back on groceries can add up to over a lifetime – but local communities benefit as well. Richard is hugely optimistic about the implications of the scheme in the future: “If this works for the Co-op, it’s the articulation for real of our new purpose, which is championing a better way of doing business for you and your community. Every product has a story, and every product should be proud of it.”

Since July, the Co-op has been running the scheme for 65,000 colleagues, who have already earned £167,000 for themselves and £36,500 for local communities. It’s certainly not the first time The Co-Op has taken care to live by the ‘do no harm; do some good’ adage: the company is one of the largest purveyors of fairtrade items in the UK, including coffee, chocolate, tea, bananas, sugar and roses. As a company born from the need to eliminate the exploitation of workers and customers alike, the Co-op is truly living up to its founding mission.

“If this works for the Co-op, it’s the articulation for real of our new purpose, which is championing a better way of doing business for you and your community. Every product has a story, and every product should be proud of it.” – Richard Pennycook, chief executive of the Co-operative

Supporting this effort is the company’s most recent recruit, Rufus Olins, who has been the company’s first Chief Membership Officer since August. The new role intensifies the company’s commitment to its eight million-strong membership scheme, for which he will be in charge of communication and growth.

Richard Pennycook
Chief executive Richard Pennycook

The past three years have been a period of turnaround for the company, bringing the business from the point of near-disaster in 2013 to profits up to £81m in 2015, more than a 10% increase. When Richard started with the company in 2013, he joined on an interim basis as finance director. Included in his list of achievements since becoming chief executive officer in 2014 – along with the new scheme – are governance reforms, offloading non-core businesses, revamping the senior leadership team and rebuilding confidence in the food business. With his efforts, the company has moved beyond its pre-2013 position, and is now reaching new heights with a £1.3bn investment that is breathing fresh life into the group.

It is safe to say that the Co-op is unlike the typical large grocer: owned by its over eight million members, and made up of clustered communities around the country, the Co-op is a unique proposition in the retail industry – and this latest program just goes to show how innovative a company can be when showing their customers that they care. By putting the customer at the core of the company, the Co-op is sure to have its focus set on the right place to continue moving forward.

In a period of just three years, the Co-op has gone from on the brink of disaster to conceiving one of the most impressive customer loyalty programs that MBS has ever seen. It’s always exciting to see such a successful turnaround take place – and I look forward to seeing what new heights the company will reach next.

Moira@thembsgroup.co.uk | @MoiraBenigson | @TheMBSGroup