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: Sainsburys, 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
Sainsburys Supermarkets
Sainsburys Bank
JS Developments
Shaws 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

1990s
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--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 organizations 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
Companys 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
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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)