Nectar

Submitted By

Abhijat Dhawal

80303120011

Introduction

Case talks about the business plan of Nectar and how company introduced new way of loyalty program.

Challenge faced in the case

Case mentioned the challenged faced by Sainsbury and how nectar helps the company to retain its customer with loyalty program. How Nectar established and grew its business.

Sainsbury’s has following options and it can choose one of these options and formulate its strategy based on the evaluation of these options:

1. Should Sainsbury’s continue with Nectar or should Sainsbury’s follow Tesco and have a separate loyalty reward program?

2. It also has an option to have their own loyalty program3. Any other option

Facts of the case

Making Loyalty Pay talks about the loyalty program undertaken by Loyalty Management UK i.e. LMUK which managed British supermarket chain and one of the biggest retain chain Sainsbury’s.

The following composition of the customers shows the response gained by the largest reward program:

54% customers – collect Nectar points

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40% customers – persist

Addition of 50,000 new customers every week

Sainsbury’s sponsorship is a center of attraction for LMUK. Company tries to fetch the retailers and makes a profitable multi-sponsor loyalty

network. Nectar has collaborated with many big brands and retail stores including Sainsbury, BP,

Debenhams, Barclaycard, Thresher, Adams, Vodafone, Ford, All: Sports, e-Energy etc. In order to map the different product purchase behaviour of a panel of a million Nectar

collectors in Sainsbury’s, it has recently joined hands with the world’s largest retail firm Taylor Nelson Sofres. The result of this association accounted store brands for almost 50% of Sainsbury’s revenue.

Earning and redeem of points:The shoppers belonging to Nectar carry a plastic card and produce it whenever they make a purchase and they are credited with the program pointsThere are two ways to redeem the Nectar points:1. While checking out at the end of the visit2. Redeeming from Nectar either by calling the call centre or by visiting website

Evaluation of the case

Should Sainsbury’s continue with Nectar?

Pros Cons Approximately 57% of the revenue

is generated by Nectar’s loyalty program.

Multiple sponsor and incentive coupon awareness drives around 2.9% lift in the revenue

It has a tough competition with the great competitors and it has to sustain in the competition in the market

Sainsbury’s is spending more than 120 million pounds towards the loyalty program of Nectar, because of which the earnings are decreasing.

Should Sainsbury’s have its own loyalty program?

Pros Cons This option is cheaper as compared It may take time to get established

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to Nectar’s loyalty program, as it doesn’t have to pay any fee to Nectar

It will have a full control over the program and have a free hand in designing the policies of the loyalty program

and Sainsbury’s may find it difficult to create the awareness for the program to its valuable customers.

There is a threat that the customers may shift to the other retail stores because of non-association of Nectar brand

Should Sainsbury’s discontinue with the current loyalty program and divert the funds in non-loyalty program?

It can divert the funds allocated to the loyalty program towards the expansion and the promotions. It may help the Sainsbury’s to increase the sales volume and ultimately the market share. However, in this plan, it would have to incur the cost of the new employees and set up cost in the other cities.

Possible solutions

Considering the data in the given case, there can be two possible solutions for Sainsbury’s which it can implement in the current scenario. They are as following:1. As Sainsbury’s has its own brand name, it can start with its own loyalty program and

be independent of the Nectar. It will help Sainsbury’s to enhance the brand equity and in future it may also act as a competitor to Nectar for the best loyalty program host.

2. It can continue its association with Nectar for the restructured values of money. It may award points for every 3 or 4 pounds spent. This will help Sainsbury’s financially and strengthen the financial aspect of the company.

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