Nectar Group 4 Final

yalty Program oyalty Loyalty programs are structured marketing efforts that reward, and therefore encourage, loyal buying behaviour — behaviour which is potentially of benefit to the firm

perspective v v v v v v v v v v

•deliver

value in proportion to the value the customer brings to the

company

•offer • •

of Product, Price, Service Delivery & Relationship benefits to be transparent, timely and focussed across all customer touch points

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

o ay to

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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)

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. •

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Britain’s largest rewards program with over 13.5 million active collectors launched in 2002

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Coalition loyalty program with top sponsors like Sainsbury’s, BP, Debenhams, Barclaycard, Thresher, Vodafone, Ford, Adam’s, etc.

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Offers 2 points for every £1 spent at sponsor

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1 point earns a credit of £0.005 on redemption- 1% discount per pound spent

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Redemption either at the sponsor store or through Nectar call centre/ website

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Provides point update mailings (PUM) four times a year offering rewards on redemption

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PUM offers laser printed incentive coupons

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PUM better for sponsors & suppliers since lower

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Nectar Performance ü Monthly revenue rate of £20 million ü Gross margins of 23% ü Breakeven in operating income ü Expected profitability next year

ü - Nectar collectors spend more per transaction & use more frequently ü - New customers can be made by offering point incentives to Nectar collectors ü

- Lower churn rate of Nectar collectors

ü - Incentivise purchase of higher margin products & services ü 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 Tesco Nectar •

üC o sts b o rn e sole ly b y h o st

ü Costs shared by sponsors and com pany Nectar üLo ya lty to Te sco g re a tly ü Loyalty to the program rather in cre a se d üC u sto m e rs m a ke p u rch a ses in than to the sponsor ü Customers make more purchases and more frequently at sponsors ü Wider database of customers from multiple sponsors ü Great choice for customers hence greater perceived value ü ü

v a ry in g fre q u e n cie s üLim ite d d a ta b a se o f o n ly cu sto m e rs p u rch a sin g a t h o st ou tle t üLim ite d ch o ice o f re w a rd s fo r custom ers

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