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: Sainsbury’s, 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 Sainsbury’s Supermarkets Sainsbury’s Bank JS Developments Shaw’s 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 1990’s 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-à-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 cobranded 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 organization’s 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 Company’s 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 dasd da da da 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)