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Case Summary:
Nectar is a loyalty scheme, which differentiates the market and was launched in September 2002. A number of organizations like Sainsbury’s , Barclaycard, Debenhams, and BP amalgamated their existing loyalty schemes under one umbrella called Nectar. This scheme is operated by an independent company called Loyalty Management UK (LMUK), this allows the partners to concentrate on their own business. The registration is easy and is completed by filling out an application form available at the partner’s outlets and on the internet as well. The nectar points are redeemed for free flights, meals, vouchers etc. The high spenders are attracted by rewards like “Flights to Australia” and the low spenders are attracted by rewards like “Free Video Rentals.” The operating costs are low due to shared costs divided between the partners, whereby partners can avail themselves of a much richer data bank of their customers, analyzing their purchases across different products and purchased in different outlets.
Trouble arose during the first week of operation, due to the reward of 100 bonus points the demand increased and the registration website collapsed when it experienced 100,000 hits per minute and the personal data of other shoppers could be viewed.
The use of such loyalty programs is highly popular with airlines who derive a large proportion of income from this source. Although these programs are significantly costly for merchants offering them, advocates of loyalty programs argue that the information obtained from these schemes helps them better understand the customer needs, preferred brands and buying patterns which in turn helps in development of new products and fu ...