How Aimia ensured a seamless transition from a legacy loyalty programme to Nectar
By Jan-Pieter Lips, Managing Director, Nectar UK
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Homebase, the UK’s leading home improvement retailer, is recognised for its choice, style and customer service across the wider home improvement market. Before joining Nectar in 2009, Homebase operated the UK’s fourth largest loyalty programme, Spend & Save, for 18 years. Nectar offered a coalition loyalty value proposition with broader appeal, which Homebase believed would help the retailer deliver higher sales by leveraging Nectar’s ability to deliver cost effective, one-to-one targeted marketing. Homebase saw this option as an attractive alternative to Spend & Save, which had seen declining KPI s and had a more niche appeal.
Spend & Save was an established loyalty programme, with a high penetration of sales. Homebase considered it critical that the programme’s 4.2 million active members were migrated seamlessly to Nectar.
The transition team immediately identified one potential roadblock to a smooth transition to Nectar: Spend & Save offered a 10% programme funding rate to its top tier customers—a very rich value proposition indeed. It was therefore crucial that the team managed the transition to the coalition in a way that maintained the strong loyalty of these top tier customers. Fortunately, Nectar’s strong UK brand, as well as its ability to deliver Nectar points on a large proportion of household spend across the Nectar partner network, offered a potent alternative to Homebase’s legacy loyalty programme.
Nectar offered Homebase a loyalty proposition with broad consumer appeal, which would allow the retailer to build stronger relationships with a larger portion of their customer base. Armed with the richer data set and deep analytical insight that Nectar provides, Homebase would gain a more complete view of customer behaviour—a view difficult to achieve in a proprietary loyalty scheme operating in a low-frequency retail environment.
For Homebase, Nectar offered the following core opportunities:
- Customer appeal: Nectar’s strong brand and broad earning potential increased the overall appeal of the loyalty proposition. At the same time, the coalition offered Homebase higher sales penetration and increased data capture.
- Data-based insight: With the rich data and deep customer insight that Nectar provides, Homebase would gain a more complete customer view that included personal, attitudinal, behavioural and lifestyle data. Leveraged appropriately, this data set would give Homebase the ability to deliver more targeted and relevant offers to Homebase customers.
- Category performance: Spend & Save’s simple cash-back programme design limited Homebase to promoting single products in their offers. Nectar’s currency-based structure would enable the retailer to reward cross-sell category activity with bonus point offers targeted to shift customer behaviour.
- Multi-Channel communications: Spend & Save relied on a traditional paperbased direct mail model. Nectar, in contrast, allows Homebase to communicate with customers via highly targeted multi-channel communications that include web, email, social media and mobile platforms. The coalition partner model, meanwhile, ensures that programme communications are more cost efficient, with costs shared across the network.
To leverage the opportunities identified by the transition team, Nectar and Homebase built a transition solution around three key activities.
The three key activities were:
- Home Movers Kit: Nectar redesigned their monthly coalition mailing which is triggered by a Collector changing addresses. The mailing includes a map of the Collector’s new neighbourhood and shows the nearest places to earn and redeem Nectar points. This mailing allowed Homebase to communicate with Collectors at a time in which they are most likely to be considering DIY and home purchases.
- Cross Sponsor Initiatives: Coalition loyalty programmes provide partners with the unique opportunity to leverage their mutual strengths and complementary customer bases. Homebase took advantage of this opportunity to create strong awareness of its Nectar launch: Nectar’s fuel retail partner BP supported the launch with POS and forecourt promotions, while card-issuing partner American Express supported it by including a message in one of its direct mail promotions during the launch period.
- Customer behaviour analytics: Post-launch, Nectar and Homebase performed detailed data analysis on 12 months of robust transactional data. This analysis revealed eight distinct customer segments within the Homebase customer universe. The segmentation in turn provided the basis for effective in-house KPI reporting and a robust lifestyle marketing communication strategy.
The move to Nectar drove improved programme value perception that leveraged the coalition’s broad consumer appeal.
Key positive results included:
- Spend & Save’s 4 million member customers have grown to over 7 million Nectar collectors who now shop at Homebase.
- The Home Movers Kit direct mail campaign continues to achieve overall response rates of more than 20%.
- The customer segmentation and lifestyle communication strategy continues to deliver incremental sales.
Promotional deals and events offer the customer further savings on top of Homebase’s already great prices, and the use of storewide or categoryfocused promotions helps to drive footfall and incremental sales. Working together, Nectar and Homebase continue to build strong relationships with Homebase’s best customers.
“The first year working with Nectar exceeded our expectations. Nectar is a clear advantage versus our competition: We have seven million active customers, it has broader customer appeal, and delivers higher sales. Using Nectar to connect with our customers is a real opportunity for the future. It’s an opportunity to drive sales by a focused programme of direct marketing, to drive loyalty by rewarding our frequent, loyal shoppers, and also to use the insight to improve the shopping experience for the customer.” - Paul Loft, Managing Director, Homebase