GRP 3

• Apurv Naik 08FT-009
• Mandakini Singh 08FT-022
• Sarath Chandra 08FT-
• Shailendra Sharma 08FT-047
• Elise Hoppe 09FRN -062
>> What is Nectar ?
- Points Collection based Loyalty Program

>> Who ran it ?
- Loyalty Management UK

>> Who paid for it ?
- Sponsors: Sainsbury’s, Barclaycard, Debenhams and bp
The reason: Keith Mills, Gierlink and others wanted to
“encash” their knowledge and experience in
designing and managing loyalty programs.

Past Experiences: Air Miles (UK); Air Miles (US); Reward
Points - FMCG (coupon clipping), US and
Canada
Past customers :- British Airways, American Airlines, US
Airways, Coors, Clorox, Coca Cola)
• The working Model of founders:
Design, Operationalize, Turn Profitable, Sell

• Target: Group of retailers having their own reward
programs, but not happy and willing to join
forces to grow
 Major Businesses
 Sainsbury’s Supermarkets
 Sainsbury’s Bank
 JS Developments
 Shaw’s Supermarkets
 Around 40 per cent of Sainsbury's Supermarkets' products are sold
under its own-brand label.The remainder are branded proprietary
products.
 Stores sell a wide range of fresh, chilled, frozen and grocery foods as
well as an increasing range of non-foods in the health and beauty, adult
and children's clothing, toys, electrical goods and home wares ranges.
 June 2002 Sainsbury's Supermarkets had 463 stores in the UK
1869
Founded

1922
Grew to become the largest grocery retailer

1990’s
Big Downfall

2000-2004
Business Transformation Program
Tesco : 26%

Sainsbury: 17%

ASDA: 17%

Morrison: 6%

Convenience Stores:
20%
0thers: 14%

Market Structure 2002
 Justin King appointed Group Chief Executive, Mar 2004
 Company not performing well, so whether to retain the Nectar or “call
quit”

To answer we must understand
• Why loyalty Programs?
• Is Nectar a good Loyalty Program ?
• Is Nectar the best investment option for Sainsbury?
 Loyalty to whom ?? ….brand, products or low prices.

 Customer benefit vis-à-vis margins

 Is it really creating differentiation ??
A differentiating concept
 The strength of a Loyalty Program Concept lies in its ability to establish
relevance for target customers.
 Research studies have established that coalition programs (or co-
branded programs) tend to fare well in their ability to motivate desired
customer behaviours.
 Another finding has been with the relevance of rewards for customers,
for example, contribution to a social cause.
Technological backing
 Analysts have indicated that successful realization of a CLP Solution is
influenced by a choice of technology.
 This mandates that a thorough analysis of an organization’s needs
along with an objective evaluation of solution options should precede a
decision about a CLP Solution.
 Defines evaluation parameters, as each evaluation situation is more
likely to be unique.
 Step 1:Loyalty Situation Analysis
 Company’s long term vision
 Business goals and objectives

 Step 2: Data Gathering & Gap Analysis
 analyze profits
 recency, frequency, and monetary (RFM) value models
 Identification of best customer profile

Analyzed data elements may include:
 Segments defined by company Product profit margins
 Channels by which products were purchased
 Customer communication channel(e-mail, direct mail, etc.)
 Step 3: Earnings Overview
 overall margin/$ of specific products purchased

 Step 4: Potential Program Impact
 setting up profitability goals

 Step 5: Loyalty Program Design
 structure, payout levels, and reward recommendations that
will drive the desired behaviours of best customers
 Quality Offering
 Cash Value
 Perceived Value
 Aspirational Value
 Redemption Choice
 Convenience
 Relevance

 Step 6: Estimate Program Investment
 costs of research and strategy development, setup,
operations, project management, systems, support services,
communication, mailings, fulfillment,and rewards.
 Step 7: ROI Model
Projected incremental profit generated
by the recommended program
 Profit by line of business
 Profit detail by category, if applicable
 Profit detail by segment, if applicable
 Financial liability, with breakage(points never redeemed by
customer)
Revenue Sources
 Income from Spread
 Interest on Float
 Breakage
 Program Support Fee
Performance Snapshot Sep,2003
13.5 Million active and 6.5 Million Lapsed customers
dasd
da
da
 da
Collection :
 Two Points for Every £1 Spent at the retail outlets of
Sponsors
 Translated into discount of 1%
Redemption :
 Checking out at Sainsbury ‘s Store
 On Phone and through website
 Largest Supplier – Argos
Quarterly Points Update Mailings
Coupons
 Lift
 Acquisition
 Retention
 Up-Sell

 High Response rates for Coupons
 Low cost of communicating offer to customer
 degree of technological alignment that loyalty solution
needs to have with other systems including aspects
like service-oriented architecture and open-systems
 Future direction of loyalty and CRM aspirations of the
organization
 Vendor Viability -like presence of the vendor
(including sales offices and local support),
compatibility of existing data center arrangement
 Cost of Ownership- elements of cost involved in
adopting a solution over a period (typically three
years)
 Difficult to evaluate at this stage
 Cost of Promotion
 Customer insights
 Segmentation
 Targeted communication
 Nectar rewards economically
 Have superior service benefits: express payment, home delivery,
specialty treatment for top 20% spenders.
 Inspiration: Airlines industry (Video)