Nectar to switch focus to redeeming rewards

Nectar is switching the focus of its marketing messages to how loyalty points can be used to redeem rewards rather than on collecting points in an effort to build a stronger emotional connection between its partners and consumers.

Nectar

Don’t look a Nectar gift horse in the mouth.

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.

Rosie Baker profile

Viewpoint:

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.

Readers' comments (6)

  • Wonder why, in that case, they recently dropped their relationship with Amazon, one of the most popular places for Nectar members to redeem their points?

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  • Maybe due to the bad publicity following the tax avoidance scandal.

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  • The Nectar scheme is really just Sainsburys loyalty scheme as the vast majority of points will be redeemed there.
    Other partners seem to come and go over a 3 to 4 year cycle which makes you think that they don't see a loyalty benefit themselves.
    All these loyalty schemes have traditionally only seen 35 - 40% of the points issued actually redeemed. So getting customers to use their points up is important for them to actually see some value from collecting. However, if they did all redeem you would have to wonder if the companies operating the schemes would still have the funds to redeem all the claims?!

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  • I've recently come across Nectar's sister company Adpoints. They've got an interesting model that rewards Nectar members with Nectar points for watching commercials. If Nectar could integrate Adpoints deeper into its site and partners that could be very interesting, especially if you could buy the product being advertised at one of their partners.

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  • I disagree that collecting points is automatic, in the case of Nectar, I actually drive past my nearest petrol station to go to the BP one where I can collect points. I'm also pleased to see Nectar's more consolidated approach with Ebay, so you no longer have to click back and forth between the sites to collect points.

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  • I disagree that if all the customers redeemed their points the companies operating the schemes would struggle to cover the claims. Studies have proven that customers who redeem their points end up spending more with their loyalty card provider so there is a commercial model behind the schemes.

    Is the point not more that in today´s market with so many loyalty cards on offer from coffee chains through to airlines that customers are becoming fatigued and will end up concentrating on a limited number of providers? I think consolidation of the schemes is inevitable so Nectar´s strategy to increase emotional connection is a sensible one.

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