Nectar has its Hoover moment

Reward scheme Nectar’s botched relaunch (MW last week) rounds off a dire 12 months for free giveaways and prize promotions. The loyalty card, which allows customers to collect points at retailers such as Sainsbury’s, BP and Debenhams, has received a flood of complaints from collectors who have failed to get their promised rewards.

This comes after the TV quiz scandals that rocked UK broadcasters last year and a sharp increase in complaints to industry body the Institute of Sales Promotion (ISP) about dodgy competitions and giveaways. ISP chairman Clive Mishon has threatened to investigate and possibly expel any member company that fails to abide by regulatory codes drawn up to protect the public. However, it has emerged that Loyalty Management Group (LMG), which runs Nectar, is not a member of the ISP, although it says it is a member of the Institute of Direct Marketing.

Upmarket strategy

Nectar’s problems began with last summer’s relaunch that attempted to move the scheme away from its downmarket discount image. This came in advance of LMG’s sale to Canadian company Aeroplan for 368m, netting Nectar founder Sir Keith Mills a 160m fortune.

The relaunch shifted emphasis to rewards. Nectar sent out new cards to 8 million customers offering free gifts such as whitewater rafting trips and neck massages. However, complaints have poured in from cardholders who could not get their preferred rewards. LMG says this is because there was more demand than anticipated for pampering treats such as massages and beauty treatments.

Nectar head of rewards Jonathan Bolden adds/ “All collectors that have applied have received a free treat but due to exceptional demand for certain categories of treats, some customers have not received their first choices. For this we are sorry.” He says that LMG has worked closely with TLC Marketing, the company responsible for providing the treats, to ensure scheme members “have a positive experience”.

Sales promotions have been in the dock since the Hoover Free Flights fiasco in 1992, when thousands of purchasers of Hoover vacuum cleaners were denied promised free airline tickets to the US due to excess demand.

ISP deputy chairman Becky Munday, who is also chief executive of Mando Brand Assurance, compares the two situations: “Frankly it looks as though the same thing has happened to Nectar now. It is not that the scheme can’t afford the rewards, it’s the practicalities of getting those rewards to consumers that’s at fault.”

But Jamie Matthews, a founder of Initials Marketing, says: “Demand is so difficult to predict a lot of the time. You want to make the offer as rich as possible but you never know just how the consumer is going to react. Sometimes it just goes wild. That is why a lot of companies use insurance companies and brokers.”

Keeping promises

Even so, the ISP’s Mishon says it is up to companies running promotions to ensure they can live up to their promises. Since last year’s TV quiz scandals, where competition entrants were cheated by TV production companies, complaints about sales promotions and prize competitions have tripled, according to Mishon. “More people are involved in promotions, while they understand less and less about them,” he adds. “There are steps you can take to ensure you don’t fall into the over-redemption trap, such as putting limits on offers and getting insurance. It is all about education.” He believes that many brands spend too much time on the creative side of promotions rather than on the complex backroom processes.

The overwhelming majority of promotions are run without problems. But when they go awry they can inflict more damage on a brand’s reputation than any other form of marketing.

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