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What a Freedom of Information request revealed about East Coast Rewards

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As part of the campaign to save train loyalty scheme East Coast Rewards (a campaign which was partially successful, to the extent that Virgin East Coast ended up making a generous conversion deal), a Freedom of Information Act requested was submitted to obtain more information about the programme.

This is fantastic stuff which reveals the nitty-gritty information you would never normally discover.

Here are the highlights of the document.  I have seen the original letter from Matt Short at East Coast Main Line Company Ltd.

When National Express defaulted on the East Coast franchise, East Coast Trains inherited a loyalty programme with 3,000 members

Within six months of the launch of East Coast Rewards (January 2012), membership numbers had increased to 207,000

By 31st January 2015, membership had increased to 671,000

23% of sales made on the East Coast Trains website from April to January 2015 were for tickets on other train operators.  (Many of these sales will have been made to generate East Coast Rewards points – I certainly purchased tickets on the East Coast website purely for this reason.)

East Coast received a 5% commission on these tickets.  This generated £2.8m between April 2014 and January 2015.

During the same 9 month period, East Coast Rewards spent just £571,000 on fulfilling redemptions provided by outside providers (ie the cost of redemptions for shopping vouchers, alcoholic drinks etc).

These latter two points are very interesting.  Assuming that the cost of a redemption ticket to East Coast is nil (which is only true if people redeem for trips they would otherwise have not undertaken) and assuming that the bulk of third party tickets bought on the East Coast site were bought to generate points, the scheme was very profitable.

Of possibly even more value is that East Coast had detailed travel information on 671,000 people via the membership database.  Virgin has effectively given this up by moving to awarding a paltry number of Nectar points – a move which is unlikely to generate any marginal increase in business.

Comments (45)

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  • Rob says:

    its not that profitable – isn’t this a multi-billion pound franchise? Looks more like a rounding error in the bigger scheme of things…?

  • Chris says:

    The problem that made EC Rewards unattractive to any potential bidder was the fact the EC management didn’t move it on at any point until the last couple of months and that was probably Virgin looking at the points liability.

    Fares went up every year but the points required never went up, so every time there was a dare increase an already very attractive scheme looked even more attractive. Everytime there was an increase there should have been a devaluation whether or not the scheme made money. At the very least it should have been run with the aim of standing still.

    Virgin have ran Flying Club for years and I’m guessing someone looked at this scheme and almost laid an egg.

    The scheme has gone and will not be back that’s for sure. While the attempts to save it have been admirable some of the diatribe online particularly Facebook has been a joke and is embarrassing.

    Some of the names Soutar and Branson have been called over the last week have been shocking and these people should be blocked from posting.

    Also food for thought – whilst Nectar is pretty poor had the franchise been 100% Stagecoach there probably wouldn’t even be that. EMT have nothing.

    • Save East Coast Rewards says:

      We would not have minded if East Coast enhanced the scheme BA style as long as it was still significantly better than Nectar.

      One suggestion I made was they keep EC Rewards as the base currency and add Nectar and Flying Club as transfer partners. That way they could keep any obligations to Nectar while also offering a scheme that encourages travel.

    • Paul says:

      You make some good points Chris! I think perhaps they should have put the number of points up in line with ticket prices, however the new scheme with Virgin is awful, and at the very least they should have kept the set number of points to get a ticket, rather than just give you vouchers.

      As for the things that people have said on Facebook, some people are not as good as others at expressing their frustrations but I think its good to see that so many people are passionate about the issues, and lets face it neither Soutar or Branson are whiter than white in their dealings (although they would like to appear so!)

      • Rob says:

        It is more passion than you will ever see spilt over Nectar, that’s for sure! I think any announcement that Nectar was being closed would be met with a mild shrug of the shoulders at most.

  • Rob says:

    Saying that the cost of redemption sales is nil IF people only use it for additional trips is a big IF. Also the effect of more people on the trains would still have a higher cost to serve even if the cost was nil.

    But I don’t live anywhere near the east coast franchise so maybe I am being to forgiving.

    • mark2 says:

      Surely it is only zero cost if also the seat would otherwise have been unsold for cash.

      • Rob says:

        You have to assume, like BA, that you only release seats you won’t sell.

      • JQ says:

        But seats on non-reserveable trains are unlimited in theory, or did EC only let you redeem for reserveable tickets?

        • Oyster says:

          You needed a reservation. Just like normal advance tickets.

  • tony says:

    Yep, I’m saying this is a huge assumption to claim the journey wouldn’t otherwise be made – I know I redeemed tickets for both myself and my wife that we needed to make. There are also going to be a lot of small business owners who would simply use the rewards scheme as a way of keeping costs down.

    Let’s say the average cost of a 1st class advance ticket is £50. If 1 in 12 make a redemption like this over that nine month period then you’re back to zero – and with the catering (& especially the alcohol) there was a real cost associated to each redemption, too.

    • Chris says:

      Yes, that was how I looked at it also. As Raffles said you would assume they would only release seats they wouldn’t sell, however quite often peak time trains were in there as well which made it look even more attractive.

      If you were redeeming for a standard class ticket, lounge pass or wifi the cost to EC would have been negligible. Redeeming in first class would have cost more but probably not much. Factoring in food and say two rounds of drinks as well as the tea and coffee you are probably looking at between £6 and £10 a head tops – bearing in mind they will get the stuff at cost.

      So to work out if it was profitable all those £6-£10s have to come off the total as well.

      Running the scheme probably never cost them anything but it certainly hasn’t made them millions.

      • Will says:

        Although one more thing that’s not factored in is the amount of u redeemed points outstanding. That’s quite an important number not mentioned above. Interesting nonetheless.

  • callum says:

    I’m not really convinced the campaign had anything to do with the generous conversion deal (not that it is particularly generous, 3p of nectar points for each point, which could have gotten much more value with a redemption).

    And your assumptions that reward seats cost them nothing are wholly unjustified. I’d personally assume the opposite – that the majority of people who redeemed did so instead of paying for a trip – train travel habits aren’t remotely comparable to flying on BA, not least because the driving factor for the BAEC is to encourage you to fly them over the dozens of alternatives, something train companies don’t really have to do. Granted my viewpoint is just an assumption too, but why would Virgin give up such an allegedly profitable scheme? And if it’s so great, why has no other train company made one?

    • Save East Coast Rewards says:

      I personally think it was just a bunch of assumptions and bad planning on the part of Virgin. Their director of marketing used to work for Virgin Trains (the west coast one) where Nectar was a success because it never replaced anything (their Traveller scheme for high spenders still exists, now on East Coast high spenders are much worse off). They probably didn’t do much research into rewards and thought the same formula of offering Nectar would work just as well here.

      As for other companies. The Arriva group (Grand Central, CrossCountry, Chiltern, Wales) have sent out surveys asking what people would like from a loyalty scheme. Hopefully they have taken note of the popularity of EC Rewards (the timing of the survey seems to imply they’ve seen how many people used the East Coast scheme) and will launch something that’s not Nectar.

      • callum says:

        Which is all just one huge assumption based on your preconceived bias – you liked East Coast how it was and want it to stay that way.

        Everyone, including Arriva and Virgin Trains East Coast, have been well aware of its popularity for years. That is not the issue. The issue is whether it’s profitable or not – clearly they do not think it is. And as they are the ones with the customer data on it (your claim that the person in charge just randomly scrapped it and blindly installed Nectar is blatantly absurd), I’m more inclined to believe them!

        • Paul says:

          Callum, given that the old scheme had 670,000 members, you have to ask yourself why they didn’t keep the existing scheme, or even if it wasn’t profitable, why didn’t they engage with all the members?

          Even if their plan was to bring in Nectar all along, they could have avoided all the negative feeling and at least made it seem like they had got member opinions rather than they surveyed 2,000 people ( such a small percentage of both their reward members and indeed their overall customer base) and made themselves look better.

          As they didn’t do any of this and if they decided that the old scheme was far too generous, they have managed it all very baldy which makes me think that its likely they did randomly scrap it without too much though in the blind hope that people would think Nectar was a good ideas as its such a popular loyalty scheme already.

          • callum says:

            Because people whinging about not getting free stuff isn’t as useful to a business as you seem to think it is!

            I’m astounded so many people think this discontent comes as a shock to Virgin. Just like with the BA valuation, they have more than 2 brain cells and are well aware people prefer more free stuff to less free stuff. The more pertinent point is will scrapping the scheme result in less ticket income. They think it won’t. You presumably think it will – in which case, what do you know that they don’t?

          • callum says:

            Firstly, the vast, vast majority of their customers are not whinging about it online. Secondly, it’s not “business savvy” to avoid negative press at any cost. You genuinely think it makes business sense to spend/lose millions upon millions of pounds just to shut up a few whinging people who will give up and stop within a few weeks anyway? And you really think enough of these people are going to stop using the train to actually matter?

            So you know virtually nothing about the economics of it then – in which case, why on Earth should I listen to your business lessons on the subject?

          • Paul says:

            Callum, I didnt say avoid negative press at any cost!

            Its costs virtually nothing to survey their existing rewards members using online tools, so no, I dont think its worth spending millions on avoiding negative press – my point is that its very cheap to do so and so it just requires a bit of thought – surely thats what their marketing team is paid for.

            I also didnt claim that enough customers will stop using the service – that was just your interpretation of my comments, nor did I claim to have all of the answers in terms of lessons of business, and I am not saying that just because a few people complain that people will stop using the service.

            My point is that its very easy to manage the messages on social media, and the fact that they appear to have ignored customers concerns rather than address them makes me think they have just mismanaged the whole message around rewards and Nectar – which would suggest to me that they don’t really know what they are doing.

          • callum says:

            Paul, I didn’t say spend millions on doing a survey… If they did a survey, they would discover people prefer the old scheme (though as that’s blatantly obvious I have no idea why a survey needs to be done at all). Unless you’re suggesting that they just ignore the survey results, keeping the old scheme would cost them millions.

            No it isn’t… The only way to “manage” them would be to have someone censoring the page – which will probably annoy people even more. People do not want to get less rewards for the same purchases, and will not hesitate to throw a hissy fit on the Virgin Trains Facebook page regardless of how much Virgin try and spin Nectar to be a good thing. It’s incredibly easy to criticise, but unless you can suggest a better tactic then you have no basis whatsoever to make claims like “they don’t know what they’re doing”.

          • Paul says:

            Callum, I just did suggest a better tactic!

            They should have surveyed the existing members, to make them feel listened to – it doesn’t matter weather they were listened to or not, they could have done it just to make them feel better – its all about how you position these things.

            They then announced that they only surveyed a random sample of 2,000 customers which weren’t even part of the rewards scheme.

            Its too late for them now, but the reason I claim that they don’t know what they are doing is because they released that information about the survey they did do.

            They already knew that they had 670,000 existing members so no one is going to agree with them that 2,000 random customers opinions gives you an insight into existing customers wants from a rewards scheme.

            Are you telling me these are the decisions of an informed marketing team?!

          • callum says:

            So your suggestion for a better way to handle this is for them to ask people what they want, they say they want it kept how it is, Virgin says tough it’s changing and then somehow they “feel listened to”? Do you really think their customers are that thick?

            Actually, most people who understand how statistics work would agree it could give a decent insight into this. The exit poll for the last general election surveyed 16,000 people to cover the votes of 30 million people. They predicted the Tories would get 307 seats, they got 306. They predicted Labour would get 255, they got 258. Seemingly small sample sizes to a layman can actually be incredibly accurate.

            I see no reason as to why they couldn’t be the decisions of an “informed marketing team”. While you say you’ve given an example for a better tactic, I don’t think it even touches on how Virgin should have marketed Nectar better than they have done.

          • Paul says:

            No, Callum I dont think customers are that thick, but I do think it would make them feel listened to, and Virgin would have a much stronger argument to say that they had consulted with rewards members about what they want.

            Your information around statistics would be relevant but its fundamentally flawed. They didnt survey 2,000 rewards customers. They surveyed 2,000 random customers and they made it pretty clear that they didn’t specifically target existing members.

            I would agree with you if they had sampled 2,000 existing rewards members but they didnt.

          • callum says:

            Well it certainly sounds like you think they’re utter morons! You’d have to be if you’d feel “listened to” when a company asks you what rewards scheme you want then completely and openly ignores it! (Unless your suggestion was that they fabricate the survey results?) For the ten millionth time, its MIND-NUMBINGLY OBVIOUS that people prefer more free stuff over less free stuff. Your insistence that that question needed to be asked is beyond absurd.

            Virgin surveying it’s customers is a completely valid methodology – they are not there for the sole purpose of catering to East Coast Reward members. Other people do matter you know!

  • Aeronaut says:

    All rail ticket retailers get a 5% commission, that’s how the system works. It used to be 9% until fairly recently.

  • Lady London says:

    Fascinating. Just think how much more profitable an airline frequent flyer scheme must be then..

    Wonder if we could get the equivalent information on the Avios scheme by a Freedom of Information request? that would set the cat amongst the pigeons ! 🙂

    Well done Raffles.

    • Save East Coast Rewards says:

      Unfortunately BA aren’t subject to FOI information, just like Virgin Trains East Coast aren’t now. So next year I won’t be able to easily find out how popular the switch to Nectar has been.

      FOI requests are restricted to the government and companies owned by the government.

      It took me a while to get it online (I was quite busy so I sent it to Raffles to look over as I thought he’d be interested), but I now have the full letter online (link in first paragraph):

      • mark2 says:

        I think that it is fortunate that BA aren’t subject to FOI information; if they were they would still be nationalised and I doubt that we would be getting Avios!

  • Joe says:

    Do you know if they will be bringing traveller to East Coast?

    • Save East Coast Rewards says:

      They did promise extra benefits for their loyal passengers (this wasn’t on their original lists of things to be offered but was added a week or so after we started campaigning). At the time I thought it may be something like Traveller or one of the older schemes such as GNERtime which rewarded their high spenders.

      However, when I asked on Twitter I was told these additional benefits would not be launched until 2016.

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