N E C T A R - M A K IN G LO Y A LT Y

P A Y
GROUP 4
SWYL|TEJAS|DEVRAY|NIKUNJ|SHRAVYA
oyalty Program

Loyalty programs are structured marketing efforts

that reward, and therefore encourage, loyal
buying behaviour — behaviour which is potentially
of benefit to the firm
Insights ---Customer’s “Rewards”
perspective

v
lu e Immediate gratification
vC a sh v a ----
v
vR e d e m p tio n oMore
---- p tio nChoice
s
v
vA sp ira tio----
n a l vFeel
a lu e Good factor
v
vR e le v a n ce
---- Does it make sense
v
vC o n v e n ie n ce
---- Ease of availing reward
Some insights --- Company perspective
Loyalty initiatives are not short term marketing tools . They
should
•deliver tangible value in proportion to the value the customer brings to the
company
•offer right mix of Product, Price, Service Delivery & Relationship benefits
•Communication to be transparent , timely and focussed
•Consistent across all customer touch points

Loyalty initiatives must also be profitable

•Treat profitable and unprofitable customers differently
•Get your metrics in place ---- measure costs & returns
 today ?

Complete
Customer
“ Relationship ” Cu
Experience st
e o
Custome Pe r m
r cost r
ve cei
of va d
using lu
e
your
product

Primary Product / Relationshi

drivers Price service Brand p

•Purchase price •Physical product •Ethics •Loyalty Programs

•Effort •Service product •Image •Co Brands
• Time • Service delivery •Reputation •Alliances
•Service environment•Positioning •Special treatment
• •Affinity
•Customer community

Customers want an end - to - end relationship experience

Why should a consumer own a
loyalty card?
Ø Entitlement to discount(s)

Ø Entitlement to credit of bonus points on the loyalty card

Ø Possibility of redeeming accumulated points at different POS

Ø Better deals and offers

Ø Free products and premiums

Ø Perks and Privileges

Ø Cash back
•

•
Why should a business
offer a Loyalty Card ?
Ø Identification of Customers (enabling deeper relationship marketing)

Ø Reason for More Contact with Customer

Ø Identifiaction of Customer Behaviour – who buys what, when, where

how much, how, etc. + Identification of Trends.

Ø Increased Sales Volume / Turnover

Ø Damage to Competitors (if successful and especially if rewards based

on minimum requirements, eg. air miles)

Ø Cross Marketing Opportunities (eg. Finacial Services)

Ø Possibility To Sell Customer Data (in certain circumstances)

 W h a t a re th e p itfa lls o f
a L o y a lty C a rd P ro g ra m ?

ü High Cost of Promotion and Implementation

ü Effort / human resources possibly removed from other
marketing projects
ü Difficult to Get Out of such schemes (once in always in, well at
least for a long time)
ü If Scale, Customer Benefits and Other Requirements are Not
Achieved Then Scheme May Be an Expensive failure.
ü Customer information may be partial or misleading.
•
A b o u t N e cta r

• Britain’s largest rewards program with over 13.5 million active

collectors launched in 2002
• Coalition loyalty program with top sponsors like Sainsbury’s, BP,
Debenhams, Barclaycard, Thresher, Vodafone, Ford, Adam’s,
etc.
• Offers 2 points for every £1 spent at sponsor
• 1 point earns a credit of £0.005 on redemption- 1% discount per
pound spent
• Redemption either at the sponsor store or through Nectar call
centre/ website
• Provides point update mailings (PUM) four times a year offering
rewards on redemption
• PUM offers laser printed incentive coupons
• PUM better for sponsors & suppliers since lower
•
•
ü
Nectar Performance
ü Monthly revenue rate of £20 million
ü Gross margins of 23%
ü Breakeven in operating income
ü Expected profitability next year
B u sin e s
s M odel
of
N e cta r
Benefits for Sponsors -
üLift- Nectar collectors spend more per transaction & use
more frequently

üAcquisition- New customers can be made by offering point

incentives to Nectar collectors

üRetention- Lower churn rate of Nectar collectors

üUpsell- Incentivise purchase of higher margin products &

services

üHuge customer database can be used to provide

customized offers and cross sell

üAllows sponsors to share fixed costs such as marketing

communication, data mining and processing
ü
üHigher response rates & lower attrition rates compared to
solo loyalty programs
Coalition v/s Solo loyalty
Programs
•Nectar Te sco
üC o sts b o rn e so le ly b y h o st
ü Costs shared by sponsors and co m p a n y
Nectar üLo ya lty to Te sco g re a tly
ü Loyalty to the program rather in cre a se d
than to the sponsor üC u sto m e rs m a ke p u rch a se s in
ü Customers make more va ryin g fre q u e n cie s
purchases and more üLim ite d d a ta b a se o f o n ly
frequently at sponsors cu sto m e rs p u rch a sin g a t
h o st o u tle t
ü Wider database of customers
üLim ite d ch o ice o f re w a rd s fo r
from multiple sponsors
cu sto m e rs
ü Great choice for customers ü
hence greater perceived ü
value ü
ü ü
ü
 Challenges
ü Tough competition for Sainsbury’s- Nectar’s biggest
partner
ü The decision of sponsors whether to go for solo
loyalty program or stick with Nectar
ü Sponsors concerns of customer loyalty to partners
versus loyalty to Nectar
ü Nectar’s offering of points to competitors products &
services
Recommendatio
ns
ü Minimum number of points required to redeem rewards from
Nectar; however the value of redemption would still remain
the same
ü Better and more aspirational rewards as compared to cash
discounts
ü Club offers with various sponsors for a single purchase and
provide more points on those purchases
ü PUM to be used to offer services such as delivery of birthday
gifts, wedding gifts, etc. on redemption
ü PUM can include invitations to promotional events, parties,
sports matches, etc.
ü
ü