Nectar Group 4 Final

8/8/2019 Nectar Group 4 Final

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-E C TA R M A K IN G LO YA LT YPA YSWYL|TEJAS|DEVRAY|NIKUNJ|SHRAVYA

ROUP 4


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oyalty Programyalty Program

Loyalty programs are structured marketing efforts

that reward, and therefore encourage, loyalbuying behaviour behaviour which is potentiallyof benefit to the firm


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perspectiveperspective

v

v a sh v a lu ev

v e d e m p tio n o p tio n sv

v sp ira tio n a l v a lu ev

v e le va n cevvC o n v e n ie n ce

- - - - m me di at e g ra ti fi ca ti on

- - - - o re C hoi ce

- - - - ee l Go od f acto r

- - - - oe s i t m ake sen se

- - - - a se o f a vai ling rew ard


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Treat profitable and unprofitable customers differentlyTreat profitable and unprofitable customers differently

---- &Get your metrics in place measure costs returns---- &Get your metrics in place measure costs returns

offeroffer ig h t mi xig h t m i x , , &of Product Price Service Delivery Relationship benefits, , &of Product Price Service Delivery Relationship benefits

deliver t a n g i b l evalue in proportion to the value the customer brings to thecompany

.oyalty initiatives are not short term marketing tools Theyhould

C o m m u n i c a t i o n ,to be transparent timely and focussed,to be transparent timely and focussedC o n s i s t e n tacross all customer touch points

oyalty initiatives must also be profitable

---ome insights Company perspective


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to ayo ay

rimarydrivers hysical product ervice product ervice delivery ervice environment

EthicsImageReputation

Positioning

oyalty Programs o BrandsAlliances

pecial treatmentAffinity ustomer community

P r i c e /r o d u c ts e r v i c e B r a n d R e l a t i o n s h ip urchase priceEffortTime

C u s t o m ec o s t

fs i n go u rp r o d u c t

C u s t o mre r c e ie da l u e

o m p l e t eu s t o m e r

R e l a t i o n s h i pE x p e r i e n c e

- -us t o m e r s w a n t a n e n d t o e nd r e l a ti o n s h ip e x p e r i en c e


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Why should a consumer own aWhy should a consumer own a

loyalty card?loyalty card? Entitlement to discount(s)

Entitlement to credit of bonus points on the loyalty card

Possibility of redeeming accumulated points at different POS

Better deals and offers

Free products and premiums

Perks and Privileges

Cash back


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Why should a businessWhy should a business

offer a Loyalty Card ?offer a Loyalty Card ? Identification of Customers (enabling deeper relationship marketing)

Reason for More Contact with Customer

Identifiaction of Customer Behaviour who buys what, when, wherehow much, how, etc. + Identification of Trends.

Increased Sales Volume / Turnover

Damage to Competitors (if successful and especially if rewards based

on minimum requirements, eg. air miles) Cross Marketing Opportunities (eg. Finacial Services)

Possibility To Sell Customer Data (in certain circumstances)


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High Cost of Promotion and Implementation

Effort / human resources possibly removed from othermarketing projects

Difficult to Get Out of such schemes (once in always in, well atleast for a long time)

If Scale, Customer Benefits and Other Requirements are NotAchieved Then Scheme May Be an Expensive failure.

Customer information may be partial or misleading.

h a t a re th e p itfa lls o fLo y a lty C a rd P ro g ra m ?


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Britains largest rewards program with over 13.5 million activecollectors launched in 2002

Coalition loyalty program with top sponsors like Sainsburys, BP,Debenhams, Barclaycard, Thresher, Vodafone, Ford, Adams,etc.

Offers 2 points for every 1 spent at sponsor

1 point earns a credit of 0.005 on redemption- 1% discount perpound spent

Redemption either at the sponsor store or through Nectar callcentre/ website

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

PUM offers laser printed incentive coupons

PUM better for sponsors & suppliers since lower

b o u t N e cta r


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Nectar PerformanceNectar Performance

Monthly revenue rate of 20 million Gross margins of 23%

Breakeven in operating income

Expected profitability next year


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B u sin e sM o d e lfN e cta r


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-enefits for SponsorsLift- &Nectar collectors spend more per transaction use

more frequently

Acquisition - New customers can be made by offering pointincentives to Nectar collectors

Retention- Lower churn rate of Nectar collectorsUpsell- &Incentivise purchase of higher margin productsservices

uge customer database can be used to providecustomized offers and cross sell

Allows sponsors to share fixed costs such as marketing

,communication data mining and processing &Higher response rates lower attrition rates compared to

solo loyalty programs


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Coalition v/s Solo loyaltyCoalition v/s Solo loyaltyProgramsProgramsNectar Costs shared by sponsors and

Nectar

Loyalty to the program ratherthan to the sponsor

Customers make morepurchases and morefrequently at sponsors

Wider database of customersfrom multiple sponsors

Great choice for customershence greater perceived

value

Tesco

C o sts b o rn e sole ly b y h o stc o m p a n y Lo ya lty to Te sco g re a tly

in cre a se d

C u sto m e rs m a ke p u rch a ses inv a ry in g fre q u e n cie s

Lim ite d d a ta b a se o f o n lycu sto m e rs p u rch a sin g a t

h o st ou tle t Lim ite d ch o ice o f re w a rd s fo r

custom ers


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ChallengesChallenges

Tough competition for Sainsburys- Nectars biggest

partner

The decision of sponsors whether to go for solo

loyalty program or stick with Nectar

Sponsors concerns of customer loyalty to partners

versus loyalty to Nectar

Nectars offering of points to competitors products &

services


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RecommendatioRecommendationsns Minimum number of points required to redeem rewards from

Nectar; however the value of redemption would still remain

the same

Better and more aspirational rewards as compared to cash

discounts

Club offers with various sponsors for a single purchase and

provide more points on those purchases

PUM to be used to offer services such as delivery of birthday

gifts, wedding gifts, etc. on redemption

PUM can include invitations to promotional events, parties,

sports matches, etc.


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Nectar Group 4 Final

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