Nectar: Making Loyalty Pay

Tushar Bhandari A008

Yogendra Gupta A027
Saket Agrawala B004
Ashish Shukla F051
Case Summary
New group chief executive of Sainsbury : Justin King
Nectar is loyalty program undertaken by Loyalty Management UK i.e. LMUK which managed
British supermarket chain and one of the biggest retain chain Sainsbury
UKs largest rewards program- Nectar
54% customers collect Nectar points
40% customers persist
Addition of 50,000 new customers every week
Nectar provides Sainsbury with valuable information about their customers that helps keep
Sainsbury thriving (target marketing, shelf stocking, etc.)
Loosing dominance of Sainsbury as once the dominant sponsor - collectors started earning
points from other sponsors
Over half of the 240 million pound budget went to Nectar, thus raising a question if the
budget could have been better spent?
Case Summary
Competitive landscape
Mark & Spencer: Highest Quality, Highest Price
Sainsburys: Medium Quality, Medium Price
ASDA: Low Price, Low Quality
TESCO: Lowest Price, Low Quality
Partners of Nectar Scheme
Sainsbury, BP, Debenhams, Barclaycard, Adams,
Vodafone, Ford, All: Sports etc.
Earning and redemption of points
Shoppers belonging to Nectar carry a plastic card
and display it whenever they make a purchase.
They are credited with program points that they
can redeem one of two ways:
Majority of points gained while checking out at Sainsbury
supermarkets (2 points per pound spent)
Redeem directly from Nectar either by calling the call center
or by visiting website in response to offers enclosed in PUMs
that Nectar sends out 4 times a year to active collectors
Evaluation of Alternatives
Sainsbury continuing with Nectar
Advantages Disadvantages
Approximately 57% of the
revenue is generated by Nectars
loyalty program.
Multiple sponsor and incentive
coupon awareness drives around
2.9% lift in the revenue

It has a tough competition with
other competitors and it has to
sustain in the competition in the
market
Sainsburys is spending more than
120 million pounds towards the
loyalty program of Nectar,thus
having serious impact on the
companys bottomline

Evaluation of Alternatives
Sainsbury having their own loyalty program

Advantages Disadvantages
This option is cheaper as compared
to Nectars loyalty program, as it
doesnt have to pay any fee to
Nectar
It will have a full control over the
program and have a free hand in
designing the policies of the loyalty
program


It may take time to get established
and Sainsburys may find it difficult
to create the awareness for the
program to its valuable customers.
There is a threat that the customers
may shift to the other retail stores
because of non-association of Nectar
brand

Evaluation of Alternatives
Diverting its funds to non-loyalty programs
like that of ASDA
Impact
Increase in the fund share towards the expansion
and promotion
Might assist in increase in the sales volume leading
to increase in market share
Might lead to higher costs towards hiring new
employees and setting up units in new cities
WHAT ROB GIENKIRK SHOULD DO TO IMPROVE
RELATIONSHIP WITH SAINSBURYS
Loyalty Program to be managed by LMUK, which allows its Sainsbury to concentrate on their own business
By having a share cost of multiple partners, the cost would be greatly reduced
Collating the data of customers for different products purchased in different outlets for better segmentation
Award more points to Sainsbury's' customers when products are purchased
Sainsburys Advantages:
Nectar card holders will collect points and redeem them for flights, meals, vouchers, etc.
Make rewards more attainable by pooling in points from a variety of firms rather than single merchant
Nectar points are exchanged for Nectar vouchers
More attainable due to a number of different loyal partners
What should he do to keep the other
sponsors happy?
Share acquired customer information with partners simply
for using the Nectar program
This will decrease the chance that partners will create their own loyalty
programs
Better ROI for partners because of the amount of consumer information
gained in return
Share analytics expertise with partners so they are aware of their ROI

Nectar should use their power and high brand visibility to
promote and market partners
Creates more visibility for partners
Attracts more customers that end up using the Nectar program at these
retailers
What should he do to keep the
collectors collecting?
Simplicity
Be able to direct and target to consumers to tailor the best possible redeemable options
Partners must be chosen carefully to complement the existing customers collection and
redemption options
Remain close with consumers
Create a mobile app
Reward loyal member behavior
Encourage people to shop more frequently and to pass it on with word of mouth to friends
Consistency with high-value customers
Be consistent with emailing members on the frequent items purchased by consumers
Identify inconsistent Nectar members
Approach them with special offers
THANK YOU