The shift will come into effect throughout this year and the brand is likely to launch campaigns demonstrating how cardholders can collect points and redeem them against bigger purchases such as a holiday or flights, instead of just using them to get money off shopping in Sainsbury’s.
In recent months Nectar has signed a number of new redemption partners, including EasyJet and restaurant group Tragus which operates the Cafe Rouge, Strada and Bella Italia chains, to bolster its reward offering.
These brands and reward parters including Vue Cinema, Eurostar and Expedia, are likely to feature heavily in activity to support the scheme but how Nectar rewards will be brought to life through marketing is still in the development stages, according to a spokesperson for the brand.
Increasing redemption is a way of increasing engagement with a loyalty scheme as activity tends to increase when a customer has redeemed a promotion or points, according to Stuart Evans, general manager UK of loyalty specialist ICLP.
Focusing on how members can spend points and encouraging them to do so is also a way to prevent loyalty points going unredeemed, traditionally known as “breakage” in the CRM industry, and amounting to a cost liability for Nectar.
Evans adds: “Loyalty programmes are increasingly paths for brand relationships and therefore those relying on historic models of discounting rather than creating true value for customers and relying on breakage [unredeemed points] instead of proper programme management will struggle to maintain customer interest with the new connected and digitally engaged audience.
“Breakage is a broken promise and in today’s world disappointing socially connected customers is not the way to succeed in loyalty,” he adds.
Nectar claims that collectors have redeemed £2bn worth of points since the programme launched 10 years ago. Sainsbury’s, Nectar’s largest partner, said in January customers redeemed £110m worth of Nectar points over the Christmas and New Year period.
Last year the brand introduced a new advertising concept, created by G2 Joshua, featuring a Gift Horse character and the strapline “Never look a gift horse in the mouth” to encourage members to use its eShops site to collect points online shopping with more than 500 retailers and boost their points balance.
There are 19 million Nectar card holders in the UK.
For most shoppers, collecting points is just an automatic thing they do at the checkout. It’s not always the engaged behaviour marketers would like to think. It has become collecting for collecting’s sake and i’d say far more people earn points than spend them and many more points are collected each year than are redeemed.
By promoting the value and significance of the rewards they can be redeemed against, the points start to take on greater meaning.
One of the aspects that makes Boots Advantage Card different to other established retail loyalty schemes is that it offers the feel-good factor. Boots has consistently made its Advantage Card about helping customers treat themselves, not about getting a few pounds off the next time they shop.
In doing so it has built up a relationship based on emotional connection and added value, not on transaction and Advantage Card points are seen as a reward, rather than a currency.
If Nectar can introduce more of this it will boost engagement and in turn cardholders will seek out more ways to collect points in a self-perpetuating cycle that benefits Nectar, its brand partners and members.