Why Nectar's losses are no problem for LMUK

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By: Wise Marketer Staff |

Posted on July 23, 2004

Media reports of the losses made so far by the UK's Nectar coalition loyalty programme have attracted much attention in both public and marketing circles, despite the programme's operator, Loyalty Management UK Ltd (LMUK), explaining that its financial situation is very much as was expected from day one.

The Wise Marketer's interview (July 22nd, 2004) with an LMUK spokeswoman revealed that, because LMUK is a private company, the firm is unlikely to comment on its financial plans or profit forecasts. We were told, however, that "the accounts lodged with Companies House are very much in line with [LMUK's] expectations, and that LMUK is encouraged by the figures so far."

In LMUK's first year of trading, the firm showed a loss on paper of some 32 million, which could reasonably be expected following such a high-profile launch. The second year of trading showed a loss of only 8.99 million. This means that the reduction in loss, year-on-year, was approximately 23 million. Although no extrapolation is practically possible, the latest figures seem positive.

Since its launch in September 2002, the programme has at least one card in more than 50% of the UK's households, and has acquired 11 new sponsors in addition to the 'big four' (which were Barclaycard, BP, Debenhams, and Sainsbury's).

Figures given to The Wise Marketer during the interview show that seven out of ten Nectar points collectors have already redeemed points within the programme, and that some 340 million worth of points have been redeemed to date.

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