Presented By Prachi Thapar Trivikram Apte Rohit Garg

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What does loyalty mean to business ?

Repeat Purchases ? Retention of Customers ? Create Profitable Customers ?

LOYALTY
Acquisition of Customers ? More Information on Customers ? Just Another Marketing Program ? Reward Loyal Customers ?

Reality ..could be all of the above !!!!

Nectar: Background
Formed in Sep 02 by Keith Mills, Gierkink and a few other team

members with a decades experience in Loyalty Programs One of the most expensive and most attention getting new product launches in UK marketing history with a mammoth 30 mn campaign Positioned to customers based on the ease of attaining rewards by attaining points into 1 common account and the simplicity of carrying 1 card Opening Partners: Sainsburys, BP, Barclaycard, and Debenhams Usual awareness of new product within 3 months from launch in UK was at 6% of households, whereas the same for Nectar was at 46% Partners by Sept 2003
Adams, Thresher, Vodafone, Ford, all: sports, E-energy

1% growth in BP market share 4 million new customers for Debenhams 9% boost in Barclaycard turnover

Nectar Working of program

Members were provided a magnetic

striped prefilled plastic membership card Points were credited to the card as per the purchases made Customers earned 2 points for every 1 spent Thus for every 500 points redeemed, customers would get a discount worth 2.5 on their next purchase
Redemption
Check out (POS) Over the phone (points update mailings)

Costs of mailings, card, PUM shared by all

Benefits
Sponsor Benefits
Nectar collectors would spend more with the sponsor because (a) they would spend more per transaction, and (b) they would use the sponsor more frequently. The sponsor could identify Nectar collectors who were not customers of the sponsor and offer points incentives for these collectors to become customers

Lift:

Availability & Wider choice

Earn rewards more quickly

Acquisition:

Higher Value to loyalty

Retention:

Customers of the sponsor who were Nectar collectors would churn at lower rates than noncollectors. Customers of the sponsors who were Nectar collectors could be offered incentives to buy higher-margin products and services.

Up-Sell:

Business Model
LMUK earned income from four sources:
Spread : First it sold points to sponsors so that they could issue them to their customers and then, after consumers had redeemed the points, it bought them back at a lower price, the difference being known as the spread Float : Earn Interest on the outstanding balance of points sold but not yet redeemed Breakage: Points bought and issued but never redeemed Program Fee: Nectar charged sponsors a fixed fee ,

Nectar Customer Database

Nectar had accumulated a 400-

gigabyte database of demographic and behavioural data 21 million active and lapsed collectors 800 million transactions Each sponsor was sent their own detailed product-level information

Each of the 13.5 million active collectors had a value to Nectar based on the number of points issued to them by sponsors. The distribution of this value across the base of collectors was as follows

Calculation of Value of Customer Base

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Managing Retention
Proportion of inactive collectors was growing at @ 12% of

collector base Evidence of active collectors were based on 2 methodologies

Collection Activity Redemption Activity

About 80% of all redemptions were made at Sainsburys LMUK sought to encourage collection from multiple

sponsors as it was inversely proportional to the collector inactivity Collectors began to collect from more sponsors 10% increase in points earned during and after month of redemption Customers looked towards redeeming more aspirational rewards like theme park admissions or flight tickets

Sainsburys Looks at Nectar

Tesco and Sainsburys have loyalty programs, Safeway and ASDA

doesnt have
Senior managers think tying up with Nectar provides a strategic

edge
JV with TNS to track the product behavior of a panel of a million

Nectar collectors in Sainsburys

Should we go solo like Tesco, or are we better off as part of Nectar?

TESCO Club card Vs Nectar card

TESCO CLUBCARD Collecting Points For each pound you spend at TESCO and EON, you get two points Club card vouchers sent 4 times a year NECTAR CARD For each pound you spend you get two points Endless list of sponsors

Spending Points Get more points

Limited period double your Tie up with Thomson points scheme Local Directory & other special offers

Credit card

TESCO Credit card ( Earn 1 point for every 4 spent. APR is 18.6%)

Nectar American Express (Earn 2 points for every 1 spent). Get double points in first 3 months. APR is 16.9%)

What should Justin King do with the program?

Continue with the program as it is

Cons of going Against: Start own loyalty program

Loose data on prospective customers Risk of loosing current customers due to no

partners Increases cost of attracting customers

Negotiate for better terms with Nectar
Ask for better customer data including product

specific. As 50% contributor to Nectar, negotiate better price.

What should Rob Gierkink do with the program to keep Sainsburys happy?
Provide more customized data
Work on integrating advertisement budgets Showcase the benefits occurring to Sainsburrys

over past year

What should he do to keep the other sponsors happy?

Start providing detailed customer reports, can

start with a free trial program Enroll more partners Avoid conflicting partners, might work well in one of case.but can be a loss for small players Try and work out integrated marketing plans, so as to save cost on similar advertisements

What should he do to keep the collectors collecting?

Organize parties, special events.

Include wider list of products on which points can

be redeemed. Introduce levels of benefits depending on the points accumulated in a month e.g. silver, gold, platinum.

To summarise

Loyalty isnt created by a programit can at best strengthen it.

Loyalty is not about short term rewards.it is about end-to-end customer experience with your products / services

Companies need to have a enterprise wide loyalty strategy backed by customer centric processes to deliver value
Co branded programs work --- Ensure you get the value proposition right

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