Sainsbury’s counts on coupons to ramp up Nectar loyalty

Sainsbury’s chooses coupons  to boost Nectar loyalty – Andrew Mann interview
Last month Nectar overtook Tesco Clubcard in cardholder numbers. This was used by Sainsbury’s to claim that it now had access to the largest loyal customer base.

The news prompted Loyalty Magazine to call Andrew Mann, director of insight and loyalty at Sainsbury’s, to ask him for his views on loyalty, Nectar, data and a few other things too. Under the care of CEO Justin King, Sainsbury’s has reestablished itself as the thinking person’s supermarket and despite strong competition from Tesco and Asda, it  continues to perform ahead of the market, growing its share for the twelfth successive period to 16.3%.

It is very clear that the Nectar loyalty scheme is hugely important to Sainsbury’s although it has kept its options open by spending multiple millions on a Catalina full colour “coupons at till” scheme, to compete with Asda’s own coupon programme and Tesco’s double points initiative.

But is this giving Sainsbury’s the data it needs to compete with Tesco by second guessing what customers are going to want next, and responding to their changing spending patterns? Are coupons the poor relation to a data-driven loyalty scheme like Tesco Clubcard or Boots Reward card even though they too use coupons as part of the offering?

Data tools
In the past two years Nectar has been developing tools to enable partners, especially Sainsbury’s, to mine deeper into data from its cardholders. This, says Nectar managing director Jan Pieter Lipps, means Sainsbury’s has been able to play catch up with its rivals, and respond better to market needs.

But the question remains to  be answered whether Nectar, plus Catalina vouchers, is the right recipe to enable Sainsbury’s to win the loyalty wars?

When asked how many customers he believed shopped only at Sainsbury’s, Andrew Mann honestly answered “probably none.”

Mann is in an unparalleled position to understand the UK supermarket loyalty business. He was head of Tesco Clubcard for three years, then moved to the role of marketing director responsible for planning before joining Sainsbury’s as director of customer insight and loyalty.

He commented: “The key thing that has altered in the last couple of years is the dramatic change in the economy. Customers have reassessed their priorities and are looking much more for value. This is why we invested in Catalina ‘coupons at  till’, and why we continue to work as a partner in Nectar.”

Sainsbury’s has been a partner in Nectar since 2002, but Mann says that in the last couple of years, there has been a strong focus on how to get value to customers. “The Nectar card is valued, because it offers targeted and relevant coupons. The value from the points is positive, but it needed to be more rewarding and simpler, and Nectar has now achieved that.”

Nectar has simplified its points redemption, and is actively working to increase the number of retailers using the scheme. It has been particularly successful with online retailers – of which there are now 400 – in addition to the 14 main partners.

Online involvement
A significant development is a deal struck by Nectar with Yahoo which will allow online advertisers to target high-street shoppers based on their purchases.
 
Under the opt-in scheme, Nectar would provide Yahoo with historical data on shoppers’ purchases. This can then be matched to their Yahoo log-in to tailor advertisements to each user on Yahoo’s sites.

The results would then be monitored by Nectar, which would show “return on investment” data. Around 2,000 of Nectar’s 16.8 million cardholders have already agreed to opt in to the service.

Yahoo hopes that the campaign, called Consumer Connect, will attract household brands which have previously been reluctant to venture into online advertising.

Cadbury, whose new owner Kraft has been using the US equivalent of the system since 2003, has already signed up to the service.

Mark Rabe, Yahoo’s UK managing director, commented at the time of the launch: “For the first time, UK advertisers will have a simple way to track offline sales from online advertising campaigns, driving accountability all the way through to return on investment.”

B2B relationships
Sainsbury’s is keen to develop its relationship with suppliers, and at its biggest ever  Trade Briefing in London on 16 March, Andrew Mann hosted a breakfast session designed to help suppliers leverage the value of Nectar to grow with Sainsbury’s.

Together with insight from Justin King on Sainsbury’s strategy ahead, Mike Coupe on the trading agenda, Gwyn Burr on the Sainsbury’s shopper and Roger Burnley on store operations and logistics, there was a strong focus on how suppliers can gain from information learned from the Yahoo’s consumer connect scheme.

The importance of loyalty
Mann believes that it is an advantage for customers to use Nectar because of the wider opportunity to earn points from other partners.

He also argues that the obvious success of loyalty schemes and rewards in today’s challenging environment is being seen and understood by a number of other retailers who are on the verge of launching their own schemes. SuperDrug is one of these. Ask restaurants, which has recently joined Nectar, is another.

“What we have with Nectar is different. It is a coalition scheme, so it isn’t about doing it our way, it is their way, and it is collaborative which is a major strength.”

But has Nectar, and the whole principle of reward vouchers for spend, got a bit tired?

Mann thinks not. “Customers really value their Nectar card and the rewards and coupons they get. Countering that, it needed some improvements, and they were made last year. Additionally, Sainsbury’s has made its largest investment in loyalty every with ‘coupon at till’ which is in 550 stores and 13,000 till points to combine Nectar with colour printed Catalina relevant rewards. People are coming to Sainsbury’s more and shopping with us more because it is rewarding. It is really good, but we can make it better.”

When asked how he was going to do that, Mann was understandably cautious, saying only that there would be more major investment this year, particularly in coupon at till, and this would be finished by Christmas.

What he did say is that they are trying to connect all the different multiple channels, such as coupon, direct marketing and electronic marketing, to make it simpler and more joined up across channels. He explained: “It will be possible for a customer to go onto the website and select our offers, then go and shop. We have effectively designed the scheme to now allow redemption in any Sainsbury’s store, whenever you want and at any of the retailers. Nectar is now very flexible.”

Competition
Over the past 12 months, all the food retailers have ramped up their loyalty offers, not least with Tesco’s Clubcard’s Double points. Coupons are proving a useful additional weapon.

So what does Mann think about new competition in the multi-retailer loyalty space, especially that of Barclaycard Freedom, which is bringing 30,000 small and medium sized retailers into the scheme, as well as some large retail names? The focus of the Freedom loyalty scheme is coupon information as well as instant rewards at the till.

He replied: “The more schemes that are out there the better for the rest of us, because it raises awareness of loyalty. If you get more companies running loyalty schemes, then it shows how important it is. Customers will vote with their feet. We have Nectar and we value that. We don’t need to join any other schemes.”

Mann would not discuss how much loyalty costs Sainsbury’s apart from admitting it is in the millions, which he feels is justified investment.

“Justin King has done a lot of things to encourage the loyalty of customers across a wide range,” said Mann. “We have changed our promotional strategy, introduced Basics, Taste the Difference and more coupons when you buy, so that we appeal to shoppers from all the demographics. We have very broad appeal now.”