Coalition marketing first emerged for consumers in 1988 with the launch of AIR MILES in the United Kingdom. Over the next 30 years, the business models for coalition schemes around the world morphed from Sir Keith Mill’s original model to account for the mix of key partners and their prominence, the program economics and value proposition for members, consumer behavioral changes, and the unique market dynamics of specific countries.
By Aaron Dauphinee
Among those individuals that have been in the coalition loyalty marketing sector for more than 15+ years, and can say they were witness to Nectar’s launch in 2002, there is a range of perspectives on what this recent transaction means for the Nectar programme, its new owner Sainsbury’s, and UK shoppers.
With a great deal of media coverage last week, The Wise Marketer has sought out individuals in the coalition industry with a very unique perspective on the significance of this shift. We asked four quick questions to Brian Sinclair, former Managing Director of Nectar and member of the original start-up team, to get to the heart of this. Sinclair’s thoughts are here:
TWM: Brian, thank you for taking the time to speak with us today. This news must have some impact that is quite personal for you as co-founder and a member of the original team that launched Nectar? What are your topline thoughts on whether this will ultimately be a good, a bad, or a negligible transaction?
BS: First of all, I would point out that this transaction is not that surprising and it really makes sense. Sainsbury’s has always been fundamental to the Nectar program since we launched the programme. The two brands have been linked since day one and this just goes to further cement that connection. Obviously, having been a part of the team to successfully grow the business to where Aimia acquired us, I can say that new ownership can be rejuvenating. I think that’s what’s taking place here, and I’m excited for James Moir (the current Managing Director of Nectar) and his entire team to be better positioned for growth and innovation.
TWM: Clearly you feel this is a positive transaction for Nectar and Sainsbury’s. Why is Nectar an attractive acquisition for this grocer? It’s seemingly not their core business so what is it that they are bringing to Nectar as the owner?
BS: Nectar is in need of further innovation to remain relevant to consumers, in particular to millennial shoppers and even the younger cohorts that will follow them. Aimia clearly needs to focus on other areas of their business right now. Their ability to dedicate the resources needed to drive innovation at Nectar likely would not happen relatively soon. However, the UK grocery market is highly competitive and changing quickly, which requires Sainsbury’s to focus on innovations that will keep customers shopping in their stores. Sainsbury’s, as owner, now has the authority to make innovation a priority within Nectar and to align it to their grocery customers, both current and future.
TWM: You’ve worked in the AIR MILES program in Canada, then launched Nectar in the UK, and when at Aimia you were exploring US coalition models for the US market, which makes your point of view fairly poignant on this next question. What does all this mean for the loyalty industry and coalition marketing?
BS: It’s interesting. I’ve been, as I’m sure you also have in your own right, in a number of conversations over the past week where this question has been asked. My view is that loyalty is far from being dead and brands that utilize it to innovate will come out ahead. For example, Toronto based Drop just raised $21M as a start-up to deliver card-linked loyalty solutions that allow brands to access customer data outside of their store or e-commerce ecosystems to better know who the customers are that have true headroom for incremental spend and then target them with data-driven offers. It’s this type of innovation, that can help retailers to seamlessly mine the mountain of available data to enable better decisions on how brands can engage with their customers, that is going to revolutionize the loyalty industry.
TWM: We don’t want to keep you much longer and are cognizant of your time, but what can consumers in the UK expect from the fusion of Nectar into Sainsbury’s?
BS: Clearly, I am biased towards thinking that consumers gain the most value from a programme that is easy to enroll in, easy to understand, allows you to quickly earn points with personalized offers and then redeem for rewards and experiences that make a difference to your life. This is the backbone of the coalition model so there’s continuity for UK customers because the program will continue, perhaps just more aligned to the grocers objectives. But that’s actually a good thing. Coalition has always been about knowing where your customers shop beyond your own footprint. Sainsbury‘s will need to determine how Nectar will continue to deliver this enhanced view of their customers while turning the programme to meet their own objectives. I will predict that they introduce innovations that overtly target millennials and are designed to best capture this group’s attention since their purchasing power and influence is only increasing.
Aaron Dauphinee is COO at The Wise Marketer.