Maximise your Avios, air miles and hotel points

Sainsbury’s is paid £100m by Aimia to take Nectar off its hands – and the lessons to learn

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I have been telling anyone who would listen for the last couple of years that it was inevitable – to me – that Sainsbury’s would take control of Nectar from its Canadian owner Aimia.

Over the last few years Nectar has lost partner after partner, with Homebase and British Gas the latest to exit.  If Sainsbury’s had walked away then Nectar would, literally, be worthless.  It was only a matter of time before Aimia realised that the best it would ever achieve was a negotiated exit.

(Or, as the press release put it: “Selling the Nectar business to Sainsbury’s was the optimal risk-adjusted outcome for Aimia”.)

Sainsbury’s will have had a good laugh as it negotiated this:

Sainsbury’s is paying £60m to Aimia for the business and its associated companies and joint ventures

…. but Aimia is paying £105m to Sainsbury’s to account for the number of unredeemed Nectar points in circulation

…. plus a further £55m to Sainsbury’s as a ‘net working capital adjustment’

Depending on how you treat the working capital adjustment, Sainsbury’s has therefore been paid either £45m or £100m to take Nectar off Aimia’s hands.

In pure cash terms, we know that the press release states: “Adjusting for and giving effect to the Nectar transaction, Aimia’s net cash and liquidity position will be reduced by approximately $174 million.”

Of course, Sainsbury’s is on the hook for future Nectar redemptions.  The majority of those will be in a Sainsbury’s store, however, and the supermarket can now change the redemption rate – or kick out other redemption partners to increase in-store use – to ensure that it makes a decent profit on the £105m it received.

For Aimia this is another body blow.  The main part of the company is Aeroplan, the Air Canada loyalty programme which was sold off.  Air Canada announced last year that it was starting a brand new loyalty scheme and severing all ties with Aeroplan, leaving Aimia in serious trouble.  I explain that story in detail in this article.

Imagine if IAG sold Avios for £3bn – which is what it is worth based on £200m of operating profit – and then in a few years time announced that it was relaunching BA Miles, severing all ties with Avios and leaving Avios shareholders – and members, who could no longer redeem for flights – up a rather wide creek and paddle-less.  That is what happened to Aimia with Air Canada.

What should the industry learn from this?

There is a lesson here for Clubcard and Avios.

Loyalty schemes with revenue based redemptions do not work.

Customers like ‘gamification’.  Customers like the fun of thinking they are being smart and they are maximising the value of their points.  When customers can find ways of getting outsize value from their points, they will go out of their way to collect them and focus their spending on products that can offer them.

No-one cared about Nectar.  Since 1 Nectar point was worth 0.5p in 95% of cases, people just treated it as cashback.  However, it was cashback that involved effort to redeem.  If you saw a product in Sainsbury’s offering 100 bonus Nectar points, you just got annoyed because you would have preferred them to offer 50p off upfront and save you the faff of spending them.

To give it credit, Nectar has been trying harder over the last year or so.  The Nectar app has had a few decent deals from time to time, mainly with Virgin Trains.  However, even here they messed up.

Almost all Nectar offers are targeted.  Very few are open to all.  This means that we can’t write about them on Shopper Points, so they don’t get circulated.  They also don’t get discussed on moneysavingexpert, hotukdeals and other ‘deals’ sites.

Nectar may have felt it was being clever using only targeted offers, but in reality it was costing itself a small fortune in free publicity.  As an example, note the big plug we gave to Tesco on Head for Points and Shopper Points yesterday for its current LEGO bonus points deal.  If that had been targeted, we wouldn’t have written about it.

If you have a stash of Nectar points, don’t worry about spending them quickly.  They are totally safe for now.  The question now is whether Sainsbury’s is willing to be adventurous and bring in more exciting redemption and earning options.

Comments (90)

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  • Mr(s) Entitled says:

    Not sure about the gaming point. HfP readers maybe but as a percentage of total users? I can see an argument for simplicity. Perhaps the truth is most people just dont care. As I often find out when my other half askes why her credit cards have all changed again.

    • Daftboy says:

      I think that’s very true – gaming is an element but only a strong focus for a minority of members

      • callum says:

        Aren’t the vast majority of clubcard vouchers redeemed instore at face value?

        • Rob says:

          So they claim … but I don’t know anyone who does this. But perhaps I am self-selecting because when I find someone I know who has a lot of Tesco points I always make them read SP ….

      • Callum says:

        Well there’s no reason whatsoever for them to lie about it.

        In which case, loyalty schemes with revenue based redemptions surely can work? I’d completely lose interest in Clubcard if it went that way, it seems the majority wouldn’t.

    • Alan says:

      Yeah, a friend recently proudly told me how he’s spent all his Avios for cash off flights. Could have had much better value on a redemption, however clear simplicity (and in fairness progress in that until I encouraged him he was never even collecting them!).

    • Frenske says:

      Ditto. I struggled for years to recommend my wife a new credit card. She said had enough cards, until “posh” friends told her that were earning 50+K Avios per year using Gold Card way. Now she is finally all game.

  • Rob says:

    Got a million nectar points I need to shift then. Hope they come up with something creative.

    • Alan says:

      We use ours on ebay. Be careful with large Nectar balances, theft is quite common. It happened ot us over New Year where someone went in to Argos in Hammersmith (we live nowhere near there) and used our points (even though we still had the cards).

      To be fair to Nectar, they issued us new cards and recredited our account with no problem and gave us an extra 1000 points for our trouble. My wife looked on the internet and found that this type of situation is not uncommon.

      We now spend them as soon as we earn them

      • Tracy says:

        Yes, happened me too. An argos in England, i live in Scotland. Was about £150 nectar points but I did get them back.

        • David Butcher says:

          Seems very common – has just happened to me – 10,000 points spent at Argos whilst I was at home with my card. Nectar are going to sort it but it is a concern how regular this seems to be – same thing happened to my son and a friend. Not sure how the scam works but there’s obviously a huge weakness in their security system.

  • Bagoly says:

    And there was I hoping that the detachment of Nectar from Easyjet was so that they could partner with a different airline.

    In Germany and Poland one can use Payback to get M&M miles.
    Their kicker is targeted offers for earning E.g. 5* or 10* as many points if one has saved down a coupon (in the same way as the Amex UK offers).
    I can see how that could drive some spending.
    Interestingly enough there are quite a few retailers who offer Payback only on online sales – presumably reckoning to bring extra business without paying out on store business they would get anyway.

    In Germany they also offer a free linked Amex card.

  • Jude says:

    I managed to rack up lots of Nectar points with the My Coupons site and used them when they doubled up at Christmas or cinema /pizza offers in the summer. Since mycoupons closed I have hardly any and can’t be bothered with the scheme.

    • john says:

      I still often get 2x, 3x, 5x points offers spit out from the tills which can offer a good return, as well as extra points on things i often buy anyway. There are occasionally offers on the nectar app worth doing, but I agree not as good as mycoupons when I would often get double points through mycoupons and 5x from the till spit out voucher!

  • J says:

    I use nectar for pizza express vouchers as you get a little more for them – should I cash them in now?

    • Andrew M says:

      An apparent £3.75 of value for £2.50…only it isn’t. You’re effectively getting 1/3 off, but with many restrictions e.g. can’t combine with other offers. So if there happens to be a 2 for 1 or 50% off promotion running, you’re actually losing money versus simply redeeming your nectar points in store.

    • Rob says:

      No, it is one of the better options if you can’t access any other promo.

    • Frenske says:

      Most PE promos don’t work on Friday evening and Saturday. So I only use Nectar points when we go on those times.

    • The_real_a says:

      Does anyone actually pay full price at pizza express? What with o2 priority, wuntu etc etc…

      • David says:

        I still enjoy my NUS card 40% off on Mon/Tues, despite not having been a student for many years ????

  • Tilly says:

    I have a very small amount of nectar points. Don’t shop in Sainsbury’s unless picking up a snack and so most points came from Homebase. Never redeemed them as nothing from what they offer as redemptions actually interest me.

  • Concerto says:

    Payback isn’t massively exciting though and certainly doesn’t generate loyalty shopping, in my case anyway. Normal people whom I meet condemn it as a waste of time.

    • JamesB says:

      I used to think the same until last year when I managed to earn £457 in nectar points and it seemed almost effortless. Comprised 2x credit card applications, 2x life assurance applications, and the rest largely from instore bonuses and coupons. I generally got more bonuses and coupons from Sainsbury in a month than I got from Tesco in the whole year. Added to that, I remain convinced that for both my food and petrol purchases Sainsburys has been cheaper than Tesco even before considering the coupons. Even my Tesco debit card has failed to swing it their way. I agree spending is a bit dull but there was the double up which Tesco has abandoned and I got the 50% back on ebay. It is also possible to squeeze a little more value with giftcard promotions in store at Sainsburys. I would have liked the 50% back on Virgin Trains but probably blew any chance of that by exchanging for vouchers last week. I will probably just spend on a good discounted TV at argos or the new ipad when it comes out this year so eill be happy enough even at the standard redemption rate.

    • Bagoly says:

      Normal people generally consider Avios a waste of time!
      That’s good for most of us here who as a result get more than our fair share of marketing budgets.

      Payback in India looks as dull as Nectar.
      Payback in Poland is struggling to sign up physical shops.
      Payback in Germany is as useful to me as I think Tesco Clubcard is to many HFPers – in fact slightly more so because there is no way to buy M&Ms for cash.

  • Neil says:

    I got rid of my Nectar card after their horrendous tie up with the Daily Mail. They lost so much business. That was the real lesson to learn there!

    • Stevie G says:

      +1 I thought nectar were in trouble when they hooked up with the Daily Mail. The final nail in the nectar coffin

    • mark2 says:

      Oh dear! that must have been very distressing for you; did you get counselling?
      How did you find out how much business they lost for this reason?
      Changing to Nectar was a downgrade compared with their previous scheme. I enjoyed getting a Waitrose gift card from the Mail which Waitrose had given us.

    • The_real_a says:

      Since when did snowflake behaviour hit the mainstream?

      • Sussex Bantam says:

        I’m pretty sure they didn’t “lose so much business”. But there was a lot of noise in the Twitter echo chamber…

      • Sidknee says:

        Oh dear, ‘Snowflake’, ‘Saboteur’….. Just like the Daily Mail, don’t you dare express a different opinion.
        I did not find it distressing in the slightest to ditch my nectar card. It really is a poor scheme, with poor returns and badly run. Perhaps choose a brand partner without all the baggage. But then again, as I say, it’s badly run.

      • Callum says:

        Back when it became socially acceptable to be openly racist, xenophobic, sexist, homophobic and/or generally unpleasant to certain groups.

        Us “snowflakes” (a bizarre insult, I love snow and the individual flakes are rather pretty) have always been around, we just stand out more now.

    • Delbert says:

      I’ve got an offer on the Nectar app of 1000 bonus points when buying a copy of The Daily Mail or The Mail on Sunday. Expires in 5 days. Will wait until Monday and buy a copy.

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