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

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 AnalysisCompany’s long term visionBusiness goals and objectives

Step 2: Data Gathering & Gap Analysisanalyze profitsrecency, frequency, and monetary (RFM) value

modelsIdentification 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 Overviewoverall margin/$ of specific products purchased

Step 4: Potential Program Impactsetting up profitability goals

Step 5: Loyalty Program Designstructure, payout levels, and reward

recommendations that will drive the desired behaviours of best customers

Quality OfferingCash ValuePerceived ValueAspirational ValueRedemption ChoiceConvenienceRelevance

Step 6: Estimate Program Investmentcosts of research and strategy development, setup,

operations, project management, systems, support services, communication, mailings, fulfillment,and rewards.

Step 7: ROI ModelProjected incremental profit generatedby the recommended program

Profit by line of businessProfit detail by category, if applicableProfit detail by segment, if applicableFinancial liability, with breakage(points never

redeemed by customer)

Revenue SourcesIncome from SpreadInterest on FloatBreakageProgram Support FeePerformance Snapshot Sep,200313.5 Million active and 6.5 Million Lapsed customers

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Collection : Two Points for Every £1 Spent at the retail

outlets of SponsorsTranslated into discount of 1%Redemption :Checking out at Sainsbury ‘s StoreOn Phone and through websiteLargest Supplier – Argos

Quarterly Points Update Mailings

Coupons

LiftAcquisitionRetentionUp-Sell

High Response rates for CouponsLow 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)