CRM Nectar Group 3

Nectar: Making Loyalty Pay Group 3

Satish Gera Abhay Bijlani Ashish Chopra

High Quality Mark & Spencer

Competitive Landscape

Sainsbury's

Low Price

TESCO

High Price

ASDA

Low Quality

Companies that were part of Nectar Program

Nectar’s Process: How Collectors Earned & Redeemed Points

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scheme is operated by an independent company called Loyalty Management UK (LMUK) Customers (collectors) are given striped plastic cards (Nectar Cards)  2 Points = 1 pound (£)  Dominant Sponsor was Sainsbury’s initially.  Redemption is through two modes: 1) Collectors could redeem them at the stores/outlets 2) Collectors could redeem them directly from Nectar (PUMs) like offers from airlines, tour operators, theme parks & cinemas. The operating costs are low due to shared costs divided between the partners and suppliers. (For e.g. : Solo mailing would cost 0.45 £ whereas sharing resulted in a cost much below this that is only 0.05 £) Partners can avail themselves of a much richer data bank of their customers, analyzing their purchases across different products and purchased in different outlets.

1) What should Justin King do with the program? Solution: Sainsbury’s has following options: 1) Continue with nectar program 2) Start a separate Loyalty Program 3) Adopt Strategy followed by ASDA 1) Continue with nectar program

Pros

Cons

2.9 % lift in the revenue

Shelling out more than 120 million pounds towards the loyalty program

Rise in revenue through the program

Company is competing with the partners on some commodities

Cost is shared amongst the partners

Still it was the dominant sponsor

Increase in number of buyers due to large number of partners

Benefits sometimes get split due to similar offering by the partners

continued……

2) Start a separate Loyalty Program Pros

Cons

Cheaper in comparison to Nectar’s Loyalty Program

They will have to manage it themselves. Loss of continuity.

Full control over the program and free hand in designing it

Threat of moving it to other brands due to absence of  Nectar Brands

3) Adopt Strategy followed by ASDA It can divert funds to non loyalty programs, towards expansion and promotions and by decreasing price of its products. With this the company will have to incur cost of new employees and set up cost in other cities.

Q 2: What should Rob Gienkirk do with the program to keep Sainsbury’s happy ? Solution: This can be done by showing Sainsbury's advantages that the company can have if it remains associated with the Nectar Program: The program’s management is outsourced to LMUK, allowing consortium’s partners to concentrate on their own business. The cost of operating such a scheme are greatly reduced due to the shared cost of  having multiple partners. By pooling in new sponsors, cost can be reduced further 

The scheme helps in availing much richer databank on their customers, analyzing their purchases across a cross section of different products, purchased in many different outlets. 

The

loyalty scheme has a much broader appeal. Also, try to take company to different countries where Sainsbury's is not present. Help Sainsbury’s in developing new business as per customers insights collected by

Nectar.

Customer Advantages: Consumers

who use Nectar Cards at reward partners, will collect points which can then be redeemed for free flights, meals, vouchers etc. Card

subscribers can pool their points from a variety of firms rather than a single merchant, greatly enhancing their points earning potential and making rewards more attainable. Shoppers can view how many points they have collected by viewing them online in My Nectar or phoning the Nectar Cell Call Centre. Nectar points are exchanged for Nectar Vouchers. These vouchers are collected at the cards subscriber’s home or via the nectar call centre. 

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Customers perceive the rewards as more attainable due to the availability of a number of different participating loyalty partners.

What should Nectar do to keep its other partners happy In a collection satisfaction survey 59% rated Nectar better than other loyalty programs Nectar should be willing to share fixed cost of retailers such as customer acquisition, data management and processing. Nectar should make marketing efforts to promote other partners in order to increase their visibility and attract more customers Lower the program support fee charged for supporting the program

Nectar should invest in employee engagement and training efforts of its partners to increase customer awareness Nectar should provide additional benefits to those who use nector cards frequently. As a result customers of sponsors who are nector collectors will churn at a lower rate. Nectar should aspire to form long term relationship with its partners since customer loyalty is not a short term play Nectar should provide analytics expertise to its partners, so that its partners are aware of how much return are they getting by investing in nectar.

What should Nectar do to keep the collector’s collecting? •

Keeping it simple 

The more partnerships you add, the more collection and redemption opportunities you introduce, the more difficult consumers may find it to keep all information in their heads.  ‘Direct and Targeted’ communications – tailored to show the best possible redeemable options to the consumers •

Staying close to customers 

Just as one wants to know the changing needs and lifestyles of your customers, the same applies to Loyalty programs also.  Understand the need for new platforms like mobile app to track redemption of points. •

Reward the behaviour you seek 

Encourage customers to purchase high-margin products through you.  Encourage customers to shop more frequently and to tell their friends.

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Choose partners wisely Partners need to be chosen wisely such that they complement the existing customer’s collection and redemption options.

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High Value customers 

A personal shopper

Emailing members based on the items regularly purchased by the members.

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Identify customers not visited stores lately 

Attract them by coupons and special offers.