Groupe Aeroplan, operator of the Nectar coalition loyalty scheme in the UK and the Aeroplan programme in Canada, has announced the details of the launch of the Nectar programme in Italy, on 1st March 2010.
A new company, Nectar Italia S.r.l., has been set up to launch and operate the programme and is a joint venture with Oney Banque Accord, a financial institution with more than 6.2 million clients in Europe. Groupe Aeroplan retains 75% ownership of the new programme, with the remaining 25% being owned by Oney Banque Accord.
According to managing director, Gerard Whelan, the Nectar Italia programme was modelled on the Nectar programme in the UK which, since its launch nearly ten years ago, has signed up 50% of households in the UK. The new programme will offer members the chance to earn points at more than 5,000 retail outlets throughout Italy, and those points can be redeemed for a range of rewards.
In its first year of operation, the programme hopes to acquire more than 5 million Nectar Italia collectors.
Editor's note: Full details of the entire structure of and programmes operated by Groupe Aeroplan are featured in a 40-page case study in The Wise Marketer's brand new report, The Loyalty Guide 4 - see www.theloyaltyguide.com.
Launch partners
The initial partners in the Italian coalition include:
- Simply Sma (the number three grocer in Italy, with 275 proprietary stores and 725 franchises branded Punto, Simply, Ipersimply, Sma, and Cityper);
- Auchan Hypermarkets (with 50 stores nationwide);
- Api Ip (a large network of fuel stations with 4,200 stations nationwide);
- Oney (which will launch a Nectar Italia co-branded credit card alongside its existing credit and charge cards);
- UniEuro (an electronics and electrical goods retailer with 97 direct stores and 70 franchises);
- PC City (IT specialists operating as a sister brand to UniEuro);
- Hertz (the car rental firm, with 230 agencies in Italy).
Auchan Hypermarkets has previously operated a 'loyalty card' which offered various discounts and benefits, but it was not a points-based programme. That card has now ceased (since the beginning of 2010). Both Sma and Api also operated points-based loyalty card programmes, and both are winding down those programmes. By April 2010, all the partners' existing loyalty programmes will have been wound down and replaced with Nectar Italia.
Earning points
In addition to collecting points with these partners, Italian consumers will also be able to collect and redeem points with online retailers and through Nectar's own credit card. It is anticipated that more partners will join the Nectar Italia programme in the near future.
Right from the start, collectors can earn Nectar points through the e-Store which currently hosts more than 30 popular brands including Nike, Guess, Dell, Apple Store, Alitalia, Air France, KLM, Finnair and Emirates. Whelan said that the store's roster of e-retailers would be expanded as the programme grows.
Every time a Nectar Italia card is used in any of the 5,000 participating outlets (and online), the member earns 1 point for each 1 spent (and 1 point per 1 litre of fuel purchased from Api Ip).
Redeeming points
The new programme already has a travel redemption option, in the form of a flexible voucher that can be purchased with points, and provides a discount with travel operator Alpitour. Nectar Italia's range of travel redemption options is expected to expand further as the programme develops.
Most existing Italian loyalty programmes work on a model of collecting points and then redeeming them for physical merchandise rewards from a printed catalogue. The first Nectar redemptions catalogue produced is therefore a paper booklet which illustrates a range of some 200 products that collectors can choose from. These reward options cover everything from household appliances, electrical appliances, to lampshades, children's toys, and sports items.
There is also an element of in-store redemption available through points-issuing partners. For example, Auchan, Sma, UniEuro and Api Ip will allow in-store redemptions, but this aspect will not be promoted significantly. The programme's initial focus will be on saving points for physical rewards rather than spending points quickly - which is the approach that Italian consumers are already used to, and the company's research suggested that it is most appealing to Italians.
Financials
On the matter of finance, Whelan confirmed that the company is on target with its forecast of total launch costs of approximately 20 million. In keeping with the ownership structure, 75% of that cost will be borne by Groupe Aeroplan. There are approximately 35 people working for Nectar Italia in the Milan office and another 60 staff in the call centre. Nectar Italia has retained Arvato (a division of Bertelsmann), an international media and communication services company, to provide one channel of rewards fulfilment and other resources.
Nectar Italia has the right to expire points when an account has remained inactive for more than 12 months. But, Whelan said, due to the fact that it is a new programme, there is not yet sufficient data to run proper breakage estimates with any degree of accuracy until 2012 at the earliest. Nectar Italia will be subject to the same predictive modelling as Group Aeroplan's other loyalty programmes, and over time the company expects breakage rates similar to the other programmes.
The programme will have a financial reserve. In accordance with Italian regulatory requirements, a bank guarantee equals 20% of the expected outstanding liability at the end of the loyalty programme must be in place at the time of the launch. According to Whelan, "We believe that the programme should generate gross billings to the order of 80 million by the end of its third year, and be cash positive in 2011."
The market
Whelan concluded: "Italy is an interesting place from a consumer perspective. As a G8 economy with nearly 60 million people and a mature loyalty market, we believe that Italy offers a significant untapped growth opportunity for Groupe Aeroplan. Nectar Italia will be the first coalition loyalty programme in Italy to be operated by an independent loyalty management company, and while there are other loyalty cards linked to retailers, there is currently nothing on this scale."
The company has conducted a number of focus groups and quantitative analysis of the market, and results suggested that the majority of consumers will participate in a coalition loyalty programme. Modelled after the Nectar coalition in the UK, Nectar Italia will be actively seeking new partners in other key sectors, including retail banking, perfumeries, telecoms (including mobile, fixed line and data services), DIY, and travel.
Corporate background
Groupe Aeroplan owns the Aeroplan programme (Canada), the Nectar programme (UK), and Carlson Marketing (worldwide). In the Gulf Region, the company also owns 60% of Rewards Management Middle East, the operator of Air Miles loyalty programmes in the United Arab Emirates, Qatar and Bahrain. Groupe Aeroplan also operates LMG Insight & Communication, a customer-driven insight and data analytics business originally spun off from Nectar's UK-based operations.
In the UK, Nectar claims membership of some 50% of households and, since its launch in 2002, more than 1.3 billion worth of rewards have been redeemed by collectors.
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