Nectar shows host of golden opportunities

Even when the economy is booming, everybody loves something for nothing. So during a recession, when people are cutting back on their spending, the lure of loyalty schemes is even greater. Nectar, the loyalty card programme which has 16 members including Sainsbury’s, BP and Expedia, is capitalising on this by using TV ads for the first time in five years to raise awareness of the benefits the scheme can offer its customers.

Leading the changes is newly appointed managing director Jan-Pieter Lips, who says he is revamping the brand to make it much simpler for its members to understand and take advantage of offers. Lips was promoted in March after previously serving as director of client development at Nectar.

Not just content with marketing the services that Nectar already has on offer, he says a restructure was needed of the company’s products to make them clearer for shoppers. “The aim is to streamline the rewards into categories and demonstrate that we have so many ways of redeeming points and making them worthwhile,” Lips says.

A loyalty scheme may seem like a simple concept to grasp but when Nectar was first established in the UK back in 2002, with partners including Sainsbury’s and Debenhams, it was the first scheme to cross multiple retailers and market sectors. As such, it was much more complex than most loyalty card initiatives and its list of partners has continued to grow ever since. Nectar now has 12 million households on its database and is in regular communication with them, primarily through e-mail and direct mail.

While some critics describe the majority of Nectar’s offline partners as “niche and irregular”, the company has continued to grow and has also launched a successful online affiliate business, partnering with over 300 websites including eBay and Play.com.

This is an area that Lips calls Nectar’s “hidden gem” and he is keen for the latest ad campaign to raise awareness of this initiative. “The online part of our business is our best kept secret,” he says. “Only about a million of our customers use it – and are very happy with it. We want to increase their use through ads that tell people to visit the website.”

“Millions of our customers are unaware of our online partnerships and the fact they can collect points by going to the sites this way. We want to maximise the value of our programme for customers and there’s still quite a few who don’t understand how the system works, so we want to make them aware of these things,” he says.

The new ads also aim to raise awareness of the scheme’s latest deal with Homebase, which replaces the store’s own loyalty “spend and save” scheme. Lips says this was the UK’s fourth biggest loyalty scheme before it ended.

Antony Jones, chief executive of loyalty programme specialist The Logic Group, says that core to the Nectar programme’s success has been the cross-promotion provided for it by its partner brands.

Nectar’s scores have been improving recently, following the launch of its latest above-the-line marketing campaign. YouGov says an improvement in index scores seems to have been driven by an increase in value for money as well as quality – resulting in more buzz around the brand as well.

“Nectar has been well received by brands in general, but particularly its retail partners – Sainsbury’s, BP and now Homebase – and, to an extent, Debenhams before it went its own way. These have helped raise its profile and create good cross-commercial opportunities,” he says.

Jones adds that Nectar’s retail partners are used to asking customers for their cards at the tills, so the scheme’s brand equity is particularly high in these areas. “For most of its other partners, which are primarily service-based, it is just an added bolt-on which could be utilised if the consumer chooses to,” he explains.

Lips says he recognises this himself, which is why the company has increased its marketing budget, with the aim of keeping customers aware of the brand even without face-to-face contact with its partners’ staff.

“Marketing is incredibly important for Nectar, so we market in our own right. Of half of the population who own our card, more than 10 million households are active in the community, who we are in touch regularly with these with different benefits,” reports Lips.

He points out that just as brands run promotions mentioning their involvement in the Nectar scheme, he creates marketing on behalf of its partners. Lips says Nectar produces as many as “300 million targeted communications every year”, of which many are for partners.

“It’s not necessarily about maximum coverage, it’s about getting really good understanding about what they want to achieve, and then understanding who to target with what message with a customer-led approach,” he says.

Lips and Nectar marketing director John Sheekey work with each partner individually to find out what they want to achieve, both with existing customers – mainly spend-stretching or retention offers to get spend back up, and reaching prospective customers. It’s not how many customers, it’s reaching the right ones who look a lot like their best customers,” says Lips.

As well as this collaborative approach to loyalty, Lips says the company collects copious amounts of data with the aim of helping brands identify better with their customers and communicate with them in personalised and relevant ways. It rebranded itself in 2007 to carry the slogan “you deserve it” to help users realise it offers treats and is not just a points collection scheme.

“We have a wealth of customer information and we also have a number of different channels,” says Lips. “Two key benefits are the customer insight and the marketing channels [being] shared. We send out a points update by e-mail to our customers, offering a piggyback to brands at relatively low cost. We constantly test these to ensure we are displaying the right benefits and the right rewards.”

For Nectar, segmentation is crucial. Lips says the programme provides its commercial partners with three things – a loyalty scheme, its insight and data and its marketing channels. The various paperless direct marketing techniques help to make it viable competition against the likes of Tesco Clubcard and the Boots Advantage card.

These paperless options include e-mails based on boosting points, spending points and intelligence-based mailings. For example, an email goes out if a Nectar member changes address, pointing out where partners are located near the new home.

Lips adds: “The scale of our database is better than most that our competitors hold; we managed to increase ours to almost 5 million email addresses and offer advanced capabilities to target customers.

“We do most of our e-mails in-house, using a campaign management suite. It is our strategy to use the digital channel more, our customers are asking for the convenience and quite a few Nectar collectors prefer to not to have to walk around with paper coupons.”

The paperless approach may be pivotal to Nectar’s future success. The idea of carrying round a card seems increasingly outdated in a world where people are encouraged to think of their mobile phones as payment devices.

Lips confirms the company does have plans to enhance its paperless redemption using mobile phones. He describes this as “our next challenge”. He says that using the mobile for marketing will not involve SMS, which frustrates him as a marketing method, but GPS-based technologies.

“The aim is for location-based promotions, so customers can see local offers on their mobile. We are rendering our website for the mobile and in the near future, in the same way as we bookmark online, you will be able to bookmark on phones and go to the shops to redeem points,” he says.

It’s clear Nectar has big plans for the reward scheme. The new marketing campaign may enhance the company’s awareness but it will need to move with the times towards an increasingly digital future to keep both brand members and consumers happy. Lips say that he sees 2009 as just the beginning of the company’s evolution; the future holds a wealth of collaboration with both customers and partner companies.