TEN LESSONS
IN LOYALTY
Reflections on the
Tenth Anniversary of Nectar
INSIGHTS
By Jan-Pieter Lips
Managing Director, Nectar Uk
and Aimia Middle East
Ten Lessons In Loyalty / 1
EDITOR’S NOTE
When we decided to devote an
edition of Aimia’s Insights to the
tenth Anniversary of the Nectar
launch, I knew that the first guy
from whom I’d want to get some
insight was Brian Sinclair. Sinclair
is something of a legend among
loyalty marketers. He was there
for the launch of the AIR MILES
Reward Programme in Canada
in 1992; having had a hand in
one coalition launch, he joined
Loyalty Management Group Ltd.
in London in 2001, where he ran
business development for Nectar
and was instrumental in signing
the coalition’s founding partners.
Today Brian heads up new
commercial ventures for Aimia
in the United States. Clearly he’s
a man who doesn’t rest on
his laurels.
When I asked Brian to talk about
the most important lesson he
learned from the Nectar launch, his
answer was unequivocal: Nothing
is more important than putting the
right team on the ground.
“When I joined Nectar, I was one
of six people,” Sinclair says. “When
we signed our anchor sponsors
and learned we had a business, we
were 13 people. Six months later,
we were at 500 people. Our day
job was running the business, and
our job at night was interviewing
and hiring people. That’s when
we learned the importance of
putting the right team in place.
We worked as hard at recruiting
as we did running the business,
and we insisted on hiring
extraordinary people.”
With the right people in place,
the Nectar launch team grew
into an organisation driven by a
common purpose: To build the
largest loyalty programme in the
UK. According to Sinclair, the
Nectar teammates all shared a
common trait.
be the global leader in loyalty
management, that inspires
us today.
But the loyalty landscape looks
vastly different than it did
a decade ago. Sinclair sees
boundless opportunity in loyalty,
but cautions that the stakes have
never been higher.
“The biggest change is in the
importance of customer data,”
Sinclair says. “You know, I go back
20 years in this business, and back
then the discussion was all around
the importance of the currency
and the brand. There was very little
discussion about the importance
of data. Today, the conversation
is equally about the data: how
we collect it, how we mine it, how
we gain insight from it, how we use
it to communicate with members.
Data fuels everything we do.”
The story of Nectar the loyalty
brand is also the story of Aimia
the loyalty company—and the
story of Aimia is also the story of
the loyalty marketing industry as
a whole. We started off talking
about currency; now we also
“Passion,” says Sinclair. “The
talk about data. But the central
difference between good and
thread running through this history
great is passion. We were so into
is the importance of customer
Nectar, and so passionate about
relationships: how to cultivate
the vision, that it was contagious.
It got to the point that we wouldn’t them, how to derive mutual
benefit from them, how to make
allow any Tesco bags in the office.
them strong and sustainable. At
Our break rooms were filled with
its heart, Nectar is a relationship
Sainsbury’s water and biscuits.
engine: it brings together brands
We really were living the brand.”
and consumers, and powers those
relationships through currency and
As a frequent visitor to Aimia’s
data. It brings relationships to life.
offices on the Strand, I can attest
that the same passion still drives
Happy birthday, Nectar. Cheers for
the business today. Nectar is now
ten years—and here’s to at least
more than just Nectar; Aimia now
ten more.
incorporates white-label loyalty
and loyalty analytics services
—Rick Ferguson
alongside its coalition operations.
Vice President,
And it’s our passion for the
Knowledge Development
Aimia brand, and our vision to
© 2012 Aimia Inc. All Rights Reserved.
2 / Ten Lessons In Loyalty
INTRODUCTION
This year marks the tenth
anniversary of the launch of
Nectar, now the United Kingdom’s
largest loyalty programme.
The past decade has taken us
on quite a journey—a journey
undertaken not only by the
Nectar team, but also by all of
our stakeholders, collectors, and
partners. We’ve taken our share
of knocks, but we’re proud that
Nectar has emerged as one of the
driving forces for the evolution
of customer loyalty in the UK.
And we’re ready to make the
next decade as successful as the
previous one.
But the UK marketplace is a vastly
different environment than the one
in which we launched the Nectar
programme in 2002. The next
decade therefore presents both
challenges and opportunities for
UK loyalty marketers. The loyalty
market in the UK has become
increasingly saturated; 20 years
ago, UK consumers earned loyalty
rewards on only £1 out of every
£100. Today, loyalty cards from
Nectar, Boots Advantage, and
Tesco Clubcard, among other
programmes, take up residence
in nearly every consumer’s wallet,
and that £1 has expanded to £15.
In 2010, UK shoppers reported
holding on average at least three
loyalty cards in their wallets. With
companies ranging in size from
your local coffee shop to the
UK’s biggest brands now offering
loyalty schemes, the number of
cards in wallet has likely doubled
since then. And with new entries
into the loyalty market announced
every day, including schemes from
digital pure-play brands such as
Play.com, we anticipate that this
market will continue to grow.
And it’s not just the size of the
loyalty market that looks different
today; consumer interactions
with loyalty programmes have
also evolved. Aimia research
“When
we launched
Nectar ten years
ago we said that it
was a win, win, win. A win
for shoppers as they could earn
points in lots of places. A win for
our partners as it would allow them to
keep their best customers loyal. And a win for
growing the loyalty industry. I’m delighted to see
that our vision was right. Over the past ten years it
has been very exciting and satisfying to watch
Nectar on its incredible journey… all the
time at the forefront of the
loyalty industry.”
—Sir Keith Mills,
Founder of Loyalty
Management
Group
© 2012 Aimia Inc. All Rights Reserved.
shows that in today’s challenging
post-recession economy, two
thirds of UK consumers use
loyalty currencies to help them
economise. Eight out of ten
loyalty collectors claim to collect
points on their loyalty schemes
whenever they can, with a third
collecting more rewards now than
they did prior to the recession.
These numbers suggest that
loyalty programmes are ever more
relevant to consumers seeking to
extract as much value as possible
out of their brand relationships.
Loyalty is more ingrained in our
lives than ever.
The past decade has seen Nectar
grow from a small start-up firm
to an integral and ingrained part
of UK consumer life. With 18.5
million collectors, Nectar has
relationships with over 50 percent
of UK households. Our collectors
swipe Nectar cards at the till at a
rate of 24 swipes per second, and
our customer service team has
handled over 18 million customer
interactions across telephone, post,
e-mail and web channels since
launch. Our data expertise has
even helped solve a few crimes.
In the case of a multi-million
pound drug ring, the perpetrators
were careful to pay for their
supplies with cash—but insisted
on collecting their Nectar points
at our partner locations, which led
the police to them straightaway.
With expansion programmes
now operating in Chile and Italy,
Nectar has become a global
phenomenon. Our challenge now
is to build on our legacy loyalty
expertise, to reward loyalty beyond
the transaction by rewarding
interactions across the loyalty
lifecycle. Today, building customer
loyalty requires smart, datadriven insight and timely, relevant
rewards. Nectar’s tenth anniversary
provides a convenient milestone
to take stock of where we’ve been,
and to look ahead at where we
must go. As you embark on your
own customer loyalty journey,
we hope you find these “lessons
learned” to be valuable signposts.
Ten Lessons In Loyalty / 3
Celebrating 10 years of nectar
© 2012 Aimia Inc. All Rights Reserved.
4 / Ten Lessons In Loyalty
LESSON 1: STAND BY YOUR BRAND
A brand is one of a company’s
most precious assets. But a
brand is more than just a name,
a logo, and a creative treatment.
Your brand is informed by every
aspect of your business—your
products and services, your
touch points, your customer
experience, and perhaps most
importantly, your people. If you
fall down on delivering any one
of these assets, then your brand,
and your customer loyalty, will
suffer. A coalition loyalty brand
is an especially delicate creature;
it must be strong enough to
resonate with consumers, but
must not overshadow the brands
of its coalition partners. We’ve
borne witness to partner brands
positively benefiting from
their association with Nectar—
British Gas, for example, reported
an increase in brand scores as
a result of their entry into the
coalition. But while we’ve been
managing this brand balancing
act for ten years, the danger of
complacency is omnipresent.
Launch Logo
Current Logo
© 2012 Aimia Inc. All Rights Reserved.
That’s our first lesson learned:
Be ever vigilant against brand
complacency. The Nectar brand
represents ten years of consistent,
successful brand management,
of earning consumer trust and
delivering against our brand
promise of rewarding consumer
connections. Here are a few tips
gleaned from our history to help
you stand by your brand:
> Build a brand with legs. It’s one
thing to dream up a great brand,
but quite another to bring that
dream to life. When we wrote
the original brand brief for
Nectar, we had a few clear but
challenging goals. The brand
had to complement but not
overpower our partner brands.
It had to convey the concept of
rewards. It had to resonate with
all UK households: large and
small, young and old alike.
But a brand that stops at its
original mission quickly becomes
dated and weak. Fortunately,
the Nectar brand has enough
“stretch” that we’ve been able
to leverage the brand to expand
into new product and service
lines such as Nectar Business,
our eshops, and Nectar Daily
Deals. The brand is now strong
enough that it has become a true
international brand, with Nectar
programmes operating in Chile
and Italy. Nectar has become a
brand with real muscle. Build a
brand that can grow, and growth
will follow.
> Evolve with your customers.
When we launched Nectar, we
centred our brand promise
on the concept of “treats.”
Nectar was a platform by
which collectors could translate
everyday shopping activities into
simple rewards that they might
not otherwise enjoy. The impact
of the UK recession, however,
has forced us to reappraise how
we talk to our collectors. Whilst
our brand promise still rings true,
our collectors aren’t necessarily
looking solely for treats today.
Many collectors now look to loyalty
rewards as a means to stretch their
shopping budgets. By evolving the
Nectar brand with our collectors’
changing priorities, we’ve ensured
that the programme remains
relevant today.
> Don’t skimp on communications.
Even with the switch to e-channels,
customer communications are
expensive, and there is always
the temptation to trim the
communications budget to
improve the bottom line. Targeted,
direct communications are a
noble goal, but the danger is that
“targeted and direct” actually
becomes “fewer and infrequent.”
The result is often a decreased
brand profile and lower
consumer engagement.
We were as much at risk of this
problem as any brand. Fortunately,
a 2008 strategic review resulted
in a reversal of this process.
By leveraging the brand strength
of the coalition, we worked with
our partners’ marketing teams
to proactively promote Nectar
throughout each of our customer
journeys. We reinvested in brand
communications and witnessed
renewed momentum and greater
programme engagement. Our
collective investment paid off in
new partnerships, such as those
with Homebase and British Gas,
that increased our UK household
penetration by 10 percent. By
focusing back on brand awareness,
we dramatically improved our
bottom line.
Today, more than 50 percent of all
UK households hold a Nectar card,
and the brand enjoys 74 percent
spontaneous brand awareness.
We bring the brand to life through
our own assets, as well as those
of our partners, to keep it at the
heart of our collectors’ shopping
experience. That the brand continues
to resonate strongly with consumers
and businesses alike, both home and
abroad, is a testament to our journey
so far.
Ten Lessons In Loyalty / 5
LESSON 2: KEEP IT SIMPLE
One of the keys to Nectar’s
success is its simple and direct
value proposition. The idea that
Nectar collectors can carry a
single loyalty card, earn a single
currency across a wide range
of partners, and redeem that
currency for rewards, is simplicity
itself. Still, the growth of the
programme over the past decade
means that the threat of added
complexity is emerging. The
more partnerships you add, the
more collecting and redemption
opportunities you introduce,
the more difficult consumers
may find it to keep all these
programme details in their heads
at once. Without increased
communication, the programme
becomes more opaque, which in
turn can drive down participation.
In this environment, programme
growth can become both a
blessing and a curse.
Indeed, consumer choices have
become so overwhelming that
programme simplicity is essential
to pushing any brand up the
consideration ladder. Here’s how
Nectar has learned to keep
it simple:
>Keep your ear to the ground.
The Nectar launch created a
great marketing platform for
both our partners and us. But we
couldn’t stop there. Our success
has relied equally on our ability
to listen to our collectors as
their needs and lifestyles have
changed over time. Staying close
to our collectors has allowed
us to introduce new platforms
such as our mobile app, and
new opportunities such as our
Daily Deals, without introducing
additional complexity.
>Remind collectors of the
basics. We learned early on to
treat each day of the Nectar
programme as if it was the first
day of launch. We constantly
remind our collectors of the
basics: where to collect points,
and where to spend them.
Although we live and breathe
loyalty back at the office, our
collectors have a million other
priorities in their daily lives. Our
communications must help them
understand how loyalty can
improve rather than weigh down
those everyday responsibilities.
Even after a decade in market,
we must continue to drive
awareness of the Nectar
partners, earn opportunities,
and rewards.
>Provide consistent value.
Consumers always react more
strongly when you reduce
benefits than they do when you
increase them. But in mature
loyalty programmes, there
inevitably comes a time when
you must reduce or eliminate
a benefit. If you botch the
transition, programme advocates
can quickly become detractors
who air their concerns through
social media. Many of our peers
have learnt to their detriment the
cost of cutting programme value.
Our lesson: offer transparent
value designed for the long
haul. Giving our collectors a
clear picture of programme
value outweighs the pricing and
margin flexibility we lose through
transparency. This trust is
reflected in the consistently high
ratings we receive in collector
satisfaction scores.
>When necessary, break the
rules. Sometimes we’re asked
why we’ve never introduced
programme tiers to Nectar.
Providing overt tiers that
separate perks and rewards by
spending level is, after all, classic
loyalty marketing best practice.
But in a household programme
like Nectar, tiering can backfire
if some collectors are reminded
each time they shop that they’re
bottom-tier customers. So we’ve
“broken the rules” by eschewing
public tiers in favour of segments
based on current and projected
value. Still, we never say never,
and we’ll always revisit such
decisions when necessary.
Nectar has succeeded because
of its elegant simplicity—a great
value proposition that evolves
to meet its collectors’ needs. To
engage your customers in longterm relationships, however, we’ve
learnt that it’s not enough to keep
your communications simple and
your value proposition honest and
consistent. That simplicity must
extend to your data collection
efforts: you must collect only
the data that you plan to use,
and use the data you collect.
Then close the loop by delivering
value and relevance back to your
members. It’s the key to building
a loyalty engine that will run as
well in its second decade as it did
in its first.
© 2012 Aimia Inc. All Rights Reserved.
6 / Ten Lessons In Loyalty
LESSON 3: CHOOSE FRIENDS WISELY
Nectar launched with four
anchor partners: Barclaycard, BP,
Debenhams and Sainsbury’s.
Ten years later, BP and Sainsbury’s
remain coalition anchors, while
the other two founding partners
have moved on to deploy different
marketing strategies. From the
outset, we knew that getting the
right partners on board would
shape our destiny—and as in
any promising relationship, it’s
disappointing when a coalition
partnership doesn’t stand the
test of time. But the experience
we gained from this parting of
the ways has helped us launch
new, successful partnerships with
companies such as Homebase and
British Gas.
Fortunately, the strength and appeal
of the Nectar brand has remained a
consistent draw, helping us to form
partnerships that strengthen the
coalition and provide added value
for our partners, collectors, and
stakeholders. Here are some lessons
we’ve learned in the art of choosing
friends wisely:
efforts—they invest in employee
engagement and training, build
customer awareness, and bake
programme insights into their
promotional and CRM strategies.
Nectar thrives when our core
partners commit to the “purple
line” running through their
marketing DNA.
>Look for complementary
partners. Just as the manager
of a professional sports team
shapes his squad by choosing
the best combination of skills
and experience to complete
the roster, so does our Nectar
team seek out partners to fill
key roles in the programme
value proposition. Our “everyday
spend” partners such as
American Express, BP, eBay,
and Sainsbury’s power the
programme by driving daily
consumer interaction. Household
consolidation partners such
as British Gas and Homebase
reinforce programme value
amongst British families.
And our partners in categories
such as travel, fashion, and
entertainment provide both
excitement and emotional
appeal. In Nectar, the whole
is greater than the sum of
the parts.
>Define partnership success. As
in any business partnership, it’s
important to pinpoint the value
that our partners derive from
their loyalty investment. This
ability is ever more essential
as the recession has seen
marketing budgets come under
scrutiny. The beauty of Nectar’s
data-driven marketing model
is the beauty inherent in all
successful loyalty schemes:
the ability to measure the return
on our partners’ investment.
While loyalty management
will always be a combination
of art and science, our loyalty
analytics expertise gives our
partners confidence that Nectar
is delivering against agreed
objectives, which provides
a tangible return on their
commitment to the programme.
With the variety of players in a
loyalty coalition, it’s important to
ensure balance across the partner
network, so that each partner
>Take the long view. Coalition
contributes to both individual
partnerships fail most often
and programme success. This
when the partner takes a shortterm view, using the programme balance ensures that all partners
work together to create trust and
to shore up acquisition targets,
engagement across the coalition.
or to deliver quarterly returns
It’s impossible to overestimate the
through tactical campaigns. But
loyalty is never a short-term play; power of a trusted partnership—
after all, our most successful
our most successful partners
programme partners have become
are those that have committed
our most powerful advocates. That
to the programme for the long
term. They place the programme advocacy drives growth, for both
our collectors and partners.
at the heart of their marketing
© 2012 Aimia Inc. All Rights Reserved.
Ten Lessons In Loyalty / 7
© 2012 Aimia Inc. All Rights Reserved.
8 / Ten Lessons In Loyalty
LESSON 4: EXECUTE FLAWLESSLY
In operating a programme that
serves nearly 19 million collectors,
the Nectar team is painfully
aware that an operational error
affecting as little as 0.1 percent of
our collector base can equate to
20,000 consumers experiencing a
broken interaction with the brand.
In today’s connected world, even a
“one-in-a-million” error may result
in 19 collectors tweeting, posting,
or blogging their displeasure to the
world. Earlier this year, programme
emails erroneously sent with the
word “test” in the subject line
resulted in cheeky comments
on Twitter within half an hour of
delivery. If that’s not reason enough
to strive for perfection, what is?
temptation to launch quickly and
“learn in market” rather than achieve
operational perfection on day one.
The Nectar team was prepared
to take a few risks, and the result
was a few technical glitches in the
days after launch. Fortunately, we
had invested in strong customer
service capabilities, which allowed
us to respond swiftly to our new
collectors’ concerns.
So while we still hit the occasional
bump in the road, we’ve also
learned the wisdom of setting high
operational standards. Here are a
few other lessons we’ve learned
about how to execute flawlessly:
>Prepare for the best-case
scenario. Wise operators know
to prepare for disaster. But
what do you do when results
far exceed your expectations?
We knew that Nectar was a
winning idea, but even we were
surprised on launch day when
our website buckled under the
pressure of tens of thousands
of new collectors all attempting
to join the programme at once.
We were forced to find a manual
fix, fast, and we learned some
valuable lessons about thinking
When launching a programme as
on our feet. Never since have we
ambitious as Nectar, there is a strong
underestimated the power of the
Nectar brand. By preparing for
the best as well as the worstcase scenario, we ensure a
smooth rollout of new initiatives.
“Nectar
is one of the
most innovative
consumer loyalty and
marketing programmes
launched in Europe. In our
experience with Nectar since inception,
they are a world class benchmark in
transforming retail data into actionable insights
and campaigns to deliver superior consumer
experience by exploiting the
power of technology.”
Some errors result in little more than
red faces around the office—we’ve
had multiple jokers register as the
Prime Minister on our website, for
example, resulting in programme
mailings sent to 10 Downing Street.
But the steady accumulation of
errors is no laughing matter. An
internal audit in 2006 revealed that
failure to cleanse our data regularly
resulted in a net loss of £350,000
per year in mis-targeted mail—not a
frivolous cost.
—Karmesh Vaswani,
Vice President and Head of
Europe-Retail, CPG &
Logistics, Infosys
Limited
© 2012 Aimia Inc. All Rights Reserved.
>Expect the unexpected. In the
tumultuous race to launch day,
we overlooked a key element
of our fulfilment plan: the need
for Sunday post deliveries, and
the inability of the Royal Mail to
support us. We were forced to
secure alternative delivery, and
in some cases delivered member
registration packs to our partner
stores in freezer vans. Some of
those purple packages were
mistaken for magnum ice creams
and tucked into the chiller
sections of some Sainsbury’s
shops—which resulted in a few
surprise discoveries by amused
Sainsbury’s customers.
>Solve problems in real time.
From day one, we empowered
our customer service teams
to acknowledge and rectify
collector concerns in real-time.
We encourage our associates
to adopt a can-do attitude, and
instil a strong bond of trust and
integrity across the team. From
the feedback we receive, we
know that our ability to solve
problems as they arise results
in stronger trust from
our collectors.
A key component of flawless
execution is living up to our partner
commitments. Regardless of the
IT integration challenges, we’ve
yet to turn away a prospective
partner due to the effort required.
We understand that an increase in
transaction time at till or a flaw in
our data security protocol can start
a new partner relationship off on
a bad footing from which it might
never recover. We’ve been fortunate
to have partners willing to learn with
us, and to evolve their infrastructure
to support the programme’s growth.
Today, our operational targets
ensure that our systems remain
robust, stable and secure. So while
we are sure to hit a sour note or two
in our next decade, we’ll continue to
grow our systems to meet collector
and partner needs. And if we make
a mistake, you can rest assured that
we’ll only make it once.
Ten Lessons In Loyalty / 9
LESSON 5: EARN TRUST
With Nectar’s growth has come
increased responsibility for
the careful management of the
consumer information entrusted
to us. Nectar collectors tell us a
lot about themselves: about their
shopping habits, their lifestyles,
and their demographics. Even their
reward redemption patterns reveal
something about their hopes and
dreams. They’re willing to share this
information with us because of the
clear value inherent in the Nectar
programme. But as our consumer
base has grown, and as technology
has changed both the number
and the shape of our customer
interactions, we’ve recognised the
need to structure our commitment
to responsible data usage, and to
affirm the data privacy principles
by which we abide.
To that end, Aimia has developed a
set of “data values” that place the
consumer at the heart of our data
management efforts. These values,
first articulated by Aimia executives
Jeremy Henderson-Ross and David
Johnston in our 2011 Insights white
paper, “The New Data Values,”
inform our approach to responsible
data management that helps us
drive better products, services,
offers, rewards, and recognition to
our collectors.
>Control. You must give customers
control over the data they have
provided by telling them with
whom you’re sharing it, and
giving them the ability to opt out
of data collection at any time.
>Trust. You must give consumers
confidence in the security of
their data. Trust results from
using personal data only in the
manner in which you promise
you’ll use it, and by sharing it
only with partners you’ve named
up front. You must collect only
the data you need, and use
the data collected to build
consumer value.
Historically, when it came to
deciding how best to utilise
consumer data for marketing
purposes, brands held all the cards—
but no longer. Consumers are much
savvier regarding the value of their
personal information, and what
they expect in return for sharing it.
Aimia’s 2011 Millennial Loyalty Survey
revealed that the UK’s Generation Y
consumers are more willing than
older consumers to share personal
details in exchange for rewards.
But abuse that trust, and these
consumers will quickly disengage,
perhaps never to return.
The TACT data values are by
necessity broad guidelines. Perhaps
the most important lesson we’ve
learned in the past decade is the
value of consumer trust—and by
holding these four data values as
the North Star by which we navigate
consumer privacy, we’ll continue
to build trust through every collector
interaction. Placing the consumer
at the heart of our data privacy
efforts is the best way to build
long-term value for our collectors
and partners.
Represented by the acronym TACT—
Transparency, Added value, Control,
and Trust—here are our four core
principles of TACT in more detail:
>Transparency. You must provide
customers with information
on the specific data you’re
collecting, the manner in which
you’re collecting it, and how
you’ll use it. The language
and access must be in a
consumer-friendly and easily
understandable format.
>Added value. Your customers
must feel that they’re getting
fair value in exchange for their
data. Whether that value comes
in the form of loyalty programme
rewards, partner benefits,
exclusive experiences, or
other rewards, this exchange
must be made explicit.
© 2012 Aimia Inc. All Rights Reserved.
10 / Ten Lessons In Loyalty
“BP
decided
to partner
with Nectar
because we felt we
needed a strong loyalty
proposition in our consumer
offer and as a result of Nectar’s
multi-partner nature,
we can access a much broader
spread of customers.”
—Neale Smither, Head
of Retail and
Supply, BP
“Our
customers
love Nectar and
as a result, we see it
evolving from a reasonably
functional loyalty scheme to
a truly emotionally engaging
loyalty scheme.”
—Andrew Mann, Director
of Loyalty and Insight,
Sainsbury’s
“Loyalty
is complex,
and Nectar
is an established
programme and the
market leader, so why would
we try to build something in
competition with that? Instead we
joined forces, and it has been a
brilliant decision.”
—Chris Jansen, Managing
Director, Services
& Commercial,
British Gas
“We had
two great
national brands,
with large customer
bases, and there seemed to
be a great fit between the two.”
“For the
first time,
Nectar collectors
can redeem points
against the fantastic range
of Nectar unwrapped gifts—
that really changes people’s lives.”
—Sarah Farquhar, Head
of Retail and Brand,
Oxfam
—Paul Simmons, UK
Director, easyJet
© 2012 Aimia Inc. All Rights Reserved.
“Our Nectar
customers are
higher spending and
more loyal than non-Nectar,
spending on average £10 more
on each transaction.”
“Over 50%
of our customers
say they buy more
from us purely because of
the Nectar scheme.”
—Jo Kenrick,
Marketing Director,
Homebase
—James Armitage,
Marketing Director,
Brakes
Ten Lessons In Loyalty / 11
LESSON 6: MARKET SMARTER
For as long as there have been
marketers, their budgets and results
have been scrutinised by those
who hold the purse strings. What’s
changed in the last decade is the
speed with which marketers are
forced to adjust strategy based
on disruptive technology, volatile
market forces, and evolving
consumer expectations. Certainly
Nectar is no exception to these high
expectations—and we sometimes
face even greater scrutiny, for the
simple reason that our results are
more measurable and transparent.
But we welcome the challenge.
After all, our partners count on us
to deliver results.
> Step 1: Reward the behaviour
you seek. A loyalty currency
such as Nectar points allows
you to surgically target those
consumers most amenable to
building stronger relationships
with your brand. You can deliver
loyalty incentives that encourage
your customers to shop more
frequently, to consolidate their
purchases, to purchase highermargin products, and to tell
their friends. The coalition
environment, within which
consumers earn more rewards
faster, likewise encourages
spending consolidation within
the partner network.
Current UK market forces continue
to keep us on our toes. We’ve
witnessed the rise of the “savvy
shopper”—consumers who
> Step 2: Deliver more effective
proactively seek ways to stretch
communications. Leveraging
their budgets, and who leverage web
loyalty programme data allows
and mobile devices to access daily
you to target the right offers
deals or perform price comparisons
to the right customers, through
that inform their purchase decisions.
the right channels, and at the
As Andrew Mann, Director of Loyalty
right times. Consumers perceive
and Insight at Sainsbury’s, reported
enhanced offer value, which
in Marketing Week in June, 2012:
results in higher response rates,
“We see the trend of savvy shoppers
which in turn drives greater
as one that will continue. Our
engagement and loyalty. Our
customers like the behaviour that
shared platform also allows our
they have adopted and feel it
partners to enjoy economies
is emotionally rewarding.”
Just as consumers have armed
themselves with the tools to help
them cope in tight economic times,
so too should marketers—and no
tool set has proven as useful for
delivering marketing return than
the tools of loyalty management.
Not only do loyalty rewards drive
consumer engagement, but the
measurability of loyalty programmes
also enables marketers to better
rationalise their investment.
of scale, cooperating on
promotions that fulfil multiple
marketing objectives and
deliver even more value to our
collectors. Practiced effectively,
loyalty management materially
enhances marketing efficiency.
In our experience, there are three
steps to “marketing smarter” to
increase customer value:
> Step 3: Improve the customer
experience. Our data and
analytics expertise helps us
put our partners’ customers
at the heart of their marketing
decisions to ensure a more
positive, emotionally engaging
experience. Indeed, our early
work in data-led innovation with
Sainsbury’s led to the creation
of Aimia’s Intelligent Shopper
Solutions division, which drives
data-led marketing innovation
for retailers around the globe.
Loyalty management provides
the most effective set of tools
to help you market smarter. The
winners will be those brands that
leverage loyalty data across every
customer touchpoint to transform
their business. Within Nectar, those
partners who have embedded
loyalty into every stage of the
customer journey have enjoyed
robust, measurable results. That’s
the Nectar difference at work.
“One of the
most impressive
things Nectar brings
to the table is sheer
analytics and brainpower—we
can identify all of our potential
customers, their prospective value
and how much we should invest in
attracting them to British Gas.”
—Chris Jansen, Managing
Director, Services &
Commercial,
British Gas
© 2012 Aimia Inc. All Rights Reserved.
12 / Ten Lessons In Loyalty
LESSON 7: HARNESS INSIGHT
One key implication of Aimia’s
TACT data values is our
responsibility to shape a more
beneficial customer experience
for our collectors. While Nectar
began with the premise that it
would appeal to the majority
of UK households, we quickly
learned that “one size fits all”
was an unsustainable proposition
for our collectors and partners
alike. Consumer value detectors
have become ever sharper, and
staying ahead of their expectations
has required us to develop
sophisticated tools and expertise
to instill our programme offers with
actionable customer insight.
Loyalty marketers are at heart
marketing scientists—developing
hypotheses about collector
behaviour, testing and learning,
measuring results, and delivering
return to our partners. In our
business, we call it “precision
customer science.”
Over the last decade, our loyalty
analytics capabilities have allowed
us to transport our analytical
expertise around the globe in the
form of Aimia’s Intelligent Shopper
Solutions division. Along the way,
we’ve learned a few tricks to help
us harness analytical insight:
> Trust the data. Over the years,
we’ve borne witness to data
insights that at first glance may
appear incorrect, but which
later prove their predictive
power. In one example, the
Nectar insights team discovered
that, whereas partner “stretch”
promotions had previously been
effective, the recession and
the resulting tighter household
cash flows made some
collectors resent spending to a
particular minimum threshold.
In contrast, more generous
offers such as double or triple
points promotions without a
required minimum spend drove
better response and higher
return on investment. It was a
counterintuitive insight—but one
since proven across consumer
and Nectar Business spend alike.
> Measure long term customer
value. In the last decade, we’ve
learnt the benefits of sharing
insight with our partners. For
example, we discovered a direct
correlation between the number
of transactions during a new
collector’s first 90 days and her
long-term customer value, which
suggested that heavier up-front
communications investment
would pay strong dividends
later. Not only did we embed this
thinking in our own business,
but we also encouraged
our partners to act on this
discovery—a collaboration that
led to the creation of a “nursery
programme” for new collectors.
> Connect the dots. In 2011, we
brought our customer precision
science to life for Homebase, the
UK’s leading home improvement
retailer. As a relatively new
partner to Nectar, the retailer
hoped to leverage Nectar
insight to quantify the size
of the home improvement
market and understand their
share of wallet compared to
the market opportunity.
To complete this task, our
analytics team combined
three disparate data sources:
Homebase transaction and
account data from the Nectar
programme; MasterCard credit
transaction data to help identify
non-Homebase spend; and
market sizing data from financial
reports. By combining these data
sources, we quantified the entire
home improvement market to
help Homebase understand
their share of category spend.
Through segmentation and
product grouping, we helped
the retailer understand customer
share-of-wallet, and identified
behavioural barriers that
helped them refine their
promotional strategy.
Marketers are sometimes intimidated
by the sheer quantity of data now
available. We’re strong advocates
of walking before you run—perform
a basic segmentation, look for a
few behavioural gaps where you
think you might make a difference,
and test a few offers. Whether you
succeed or fail, you’ll be smarter, and
over time you’ll become very smart
indeed. Analytical insight allows
marketers to connect the dots back
to their marketing investments.
We’re pleased to report that many
of our partners have undertaken this
analytical journey alongside us, and
have benefited with stronger brand
loyalty and greater lifetime
customer value.
Customer A—Great customer Customer B—Good customer
with limited headroom
with high potential
© 2012 Aimia Inc. All Rights Reserved.
Customer C—Good customer
with limited headroom
Ten Lessons In Loyalty / 13
LESSON 8: DELIVER TANGIBLE VALUE
Loyalty marketers often describe
programme benefits in terms of
“hard” and “soft” benefits. Hard
benefits are tangible economic
rewards; the points, miles,
vouchers, cash back, or other
rewards that allow members to
enjoy a benefit for which they
would otherwise have to pay
out of pocket. Soft benefits, in
contrast, are intangible: preferential
treatment, exclusive access or other
“perks” that make customers feel
special. Nectar operates mostly on
the “hard” benefit side of the value
proposition; our currency translates
into tangible economic benefit.
Our partners, meanwhile, drive
the soft side of loyalty through the
customer experiences they deliver.
For the past decade, this equation
has worked wonders. What’s
different now is the change in
consumer expectations: they want
more, and they want it faster.
Indeed, Aimia’s 2011 Millennial
Loyalty Survey revealed that
Generation Y consumers in the
UK expect to earn tangible rewards
in a loyalty programme within the
first month of participation. These
heightened expectations will force
all of us to redesign our reward
propositions. To that end, here
are a few lessons we’ve learned
in delivering tangible value:
>Appeal to both spenders
and savers. Over the years,
we’ve learned to balance our
programme value between two
very different constituencies:
spenders and savers. Spenders
use their points quickly and
often on instant-gratification
rewards. Savers, in contrast,
accumulate points to save up
for big-ticket and experiential
rewards. These groups are
approximately equal in size,
so programmes that force
swift redemptions through
short points expiry are unlikely
to appeal to the saver group.
Effective loyalty schemes
need to facilitate both
redemption behaviours.
>Change with the times. External
market forces can swiftly
alter consumer perception of
programme value. When we
launched Nectar, we positioned
our rewards as “treats”, with a
focus on third-party redemptions
that functioned as little luxuries
to reward collectors for their
everyday shopping. In today’s
post-recession market, this
positioning risked making such
luxuries seem frivolous. So we
shifted our position to reflect the
concept of “savvy shopping”, of
helping our collectors use points
to stretch their budgets further
by saving on their bills. Rather
than downplay this behaviour,
we embraced it.
programme, which increases
disengagement, which leads
to a downward spiral. Whether
you’re operating a coalition or
a standalone scheme, you must
fund it robustly enough to move
customer behaviour, while still
enabling it to pay dividends to
your stakeholders.
Collector satisfaction often
lives or dies on the strength of
your rewards portfolio. Success
requires you to balance multiple
factors: the programme earning
velocity, the variety of rewards,
the ease of redemption, and even
your fulfillment operations. Our
programme analytics demonstrate
that redemptions are hugely
powerful in influencing collector
behaviour. While the instant>Offer a robust funding rate.
gratification demands of the
When brands are forced to cut
Millennial generation will continue to
back, all marketing lines are
drive the trend towards gamification,
open to review, and even a wellsweepstakes, and social rewards,
run loyalty programme is no
tangible value will always be the
exception. But while trimming
centrepiece of our rewards portfolio.
the programme budget might
help in the short term, in the long In Nectar, rewards variety—from the
simple pleasures of life to rewards
term it will cause a downtick
that fulfill our collectors’ dreams—
in customer engagement. This
is the spice of life.
downtick will in turn diminish
partner benefits from the
Ways that points convert to tangible value.
© 2012 Aimia Inc. All Rights Reserved.
14 / Ten Lessons In Loyalty
LESSON 9: INNOVATE OR DIE
Nectar has been described as one
of the UK’s most successful startup companies. A decade ago, we
launched the business in a world
of direct mail, dial-up modems and
paper vouchers. Today, we live in
a world of social media, mobile
computing and rewards-at-till.
And while we used to measure
“creative destruction”—the process
by which new technology disrupts
legacy business models—in years,
we now measure it in months.
Having launched Nectar during the
digital age, we’ve always benefited
from a web presence and digital
accessibility. However, we’re all
running to keep up with the pace
of innovation. Loyalty marketers
everywhere will need to innovate
swiftly to keep their programmes
relevant and top-of-mind
with consumers.
The rapid pace of change has often
forced UK marketers to latch on
to the latest marketing trends, be
they gamification, daily deals, social
media, or other such buzzwords,
without a true understanding of
the cost-benefit equation or a way
to measure the return. We’re no
exception to this temptation. But
rather than innovate blindly, we’ve
learned over the years to devise
solutions linked closely to our core
consumer proposition. Here are a
few hard-won lessons:
>Test and learn. The best way
to limit failure is to adopt a
test and learn approach to
innovation. Rather than rely
solely on market research before
launching a full-blown initiative
across the UK, we beta-test
new propositions and refine
them based on real-time
collector feedback.
FMCG suppliers, to receive realtime shopper insight that informs
their merchandising decisions.
Today, Aimia deploys this tool
around the globe for our retail
clients. Our history of innovating
with Sainsbury’s has led to the
launch of a joint venture in 2012,
Insights 2 Communication (I2C),
which will offer the grocer’s
suppliers comprehensive multichannel marketing solutions in
and around Sainsbury’s stores
and online.
>Derive insight from interactions.
In the next decade, painting
a complete picture of the
customer relationship will
require gathering insight beyond
the transaction. For example,
over one million collectors
Failure to beta-test can be costly.
have downloaded Nectar’s
In 2007 we decided to launch
mobile app, which allows us
a campaign offering free gifts—
to connect mobile behaviour
new, engaging rewards such as
to transactional data. Our
theatre tickets—to our collectors.
partnership with Yahoo! on
Instead of testing the offer, we
Consumer Connect, meanwhile,
rolled it out across the country,
allows us to gain insight into
and dramatically underestimated
online advertising campaigns.
the response rate. The flood
Today, digital and mobile
of requests forced us to send
interactions are as important to
alternative rewards—including
consumer insight as transactions.
a “sphering” reward to an 89
year-old woman, who didn’t
One of the most important lessons
much care for the idea of rolling
we’ve learned is that loyalty
downhill in a plastic sphere at
programmes, even ones as large and
30 kilometres per hour.
entrenched as Nectar, must evolve
or die. In today’s digital, mobile and
>Innovate with your friends.
socially-wired world, that evolution is
We learned early on never
more important than ever.
to underestimate the power
of collaboration. Working
closely with our colleagues at
Sainsbury’s, we developed our
Self-Serve analytics reporting
tool, which allows Sainsbury’s
“The horse is
marketing teams, as well as their
here today, but
the automobile is only
a novelty—a fad.”
—President of Michigan Savings
Bank advising against
investing in the
Ford Motor
Company
© 2012 Aimia Inc. All Rights Reserved.
Ten Lessons In Loyalty / 15
LESSON 10: IMAGINE TOMORROW
To those of us who have been a part
of Nectar since the beginning, the
launch of the programme ten years
ago seems like yesterday. And yet
the world of consumer marketing
looks vastly different than it
did in 2002; when we launched
Nectar, loyalty programmes were
synonymous with plastic cards
and mailers. And as Brian Sinclair
reminds us in the Editor’s Note,
marketers placed very little focus
on the value of consumer insight.
Today, loyalty programmes are
synonymous with data, with mobile
and social platforms, and with
analytical insight. Nectar remains
a strong and vital part of the UK
marketplace because it has come
of age with the modern loyalty
management industry.
Central to marketing evolution is the
concept of convergence: the natural
drawing together of seemingly
disparate technologies and channels
that creates entirely new products,
services, and business models. In
the last century, we saw computing,
telephony, and media converge in
the personal computer. The loyalty
industry joined this convergence
by migrating programmes from
direct mail and print to email and
the web. In this century, we’ve
already witnessed the convergence
of personal computing, traditional
media, music, and video with mobile
technology. Nectar has evolved to
leverage each successive stage of
convergence to remain valuable and
relevant to our collectors’ lives.
In the next decade, we’ll witness the
convergence of Big Data, mobile
technology, and the payments
industry with loyalty management.
As Baby Boomers retire, Millennial
consumers will become the engine
of the UK economy—and will bring
with them their demands for instant
gratification, mobile and social
engagement, and high expectations
of trust and responsible data
management. To remain as much
in the fore of UK shoppers’ minds
during the next decade as we have
been during the previous one,
we’ll need to ride this next wave
of convergence as deftly as we’ve
ridden the last few.
But if we must point to one single
reason why today we’re celebrating
Nectar’s tenth anniversary, it’s this
one: it’s because the Nectar launch
team had the cheek to imagine
the future. Ten years ago, the idea
of a mass-market coalition loyalty
programme with almost 19 million
members and nearly £2 billion of
rewards earned was nothing more
than a dream. Today, that dream is a
reality, a testament to the daring and
vision of its founders.
As we embark on the next decade
of Nectar’s journey, that’s our
task: to imagine the future. But as
much as changes in technology
and consumer behaviour will
continue to drive our evolution,
certain fundamental theorems
of loyalty will always hold true:
consumers will continue to seek
marketing relevance, will continue
to be motivated by reward and
recognition, and will continue to
seek relationships with brands
committed to building mutually
beneficial relationships built on
value, trust, and the transparent
flow of information. As long as these
theorems hold true, Nectar will
continue to play an important role in
the lives of UK shoppers. It’s a role
we cherish—and we look forward
to beginning this next stage of the
journey together.
“Nectar continues to
thrive after ten years, which
demonstrates that the coalition
model of loyalty works. This bodes
well for the future as loyalty programmes
are critical tools on the journey from mass
marketing to targeted marketing.”
—Sir Keith Mills, Founder of
Loyalty Management Group
© 2012 Aimia Inc. All Rights Reserved.
16 / Ten Lessons In Loyalty
The past
decade has seen
Nectar grow from a
small start-up firm to an
integral and ingrained part of
UK consumer life. With 18.5 million
collectors, Nectar has relationships with
over 50 percent of UK households.
Our collectors swipe Nectar
cards at the till at a rate
of 24 swipes
per second.
© 2012 Aimia Inc. All Rights Reserved.
Ten Lessons In Loyalty / 17
About the Author
Jan-Pieter Lips
Managing Director,
Nectar UK and Aimia Middle East
In the UK, Jan-Pieter is responsible for the management and continued expansion of
Nectar, the UK’s largest loyalty programme, which has been embraced by more than
18.5 million UK consumers. Jan-Pieter is a leading loyalty industry figure and is often
sought out by media to discuss current events that affect the industry.
Since joining Nectar as part of the launch development team, Jan-Pieter has held
a series of important roles with the company. Prior to being appointed Managing
Director, he was Director of Client Development, where he was responsible for
the company’s efforts in developing relationships with leading UK companies to
participate as Nectar partners. He was also responsible for developing and
launching Nectar Business, the extension of the Nectar programme into the
business-to-business market.
About Aimia
Aimia is a global leader in loyalty management. Our unique capabilities include
proven expertise in building white-label loyalty strategies, launching and managing
coalition loyalty programmes, creating value through loyalty analytics and driving
innovation in the emerging digital and mobile spaces. We build and run loyalty
programmes for ourselves and for some of the world’s best brands. We own and
operate Nectar, Aeroplan in Canada, and we have majority equity positions in
Air Miles Middle East and Nectar Italia. We hold a minority position in Club Premier,
Mexico’s leading coalition loyalty programme, and Cardlytics, a US-based private
company operating in merchant-funded transaction-driven marketing for
electronic banking.
Visit us at aimia.com
© 2012 Aimia Inc. All Rights Reserved.
WHY NOT LET THE PEOPLE WHO RUN
NECTAR RUN YOUR LOYALTY PROGRAMME?
YOUR
BUSINESS
BUSINESS
RESULTS
OUR
INSIGHT
For an initial conversation, call Will Shuckburgh on + 44 20 7152 4806
or write to him at Will.Shuckburgh@aimia.com.