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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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  • Fenny says:

    Since the loss of Homebase & British Gas, I haven’t collected or used any Nectar points. The nearest Sainsburys is 10 miles away and I rarely go there since I changed jobs. Occasionally I stop for milk and a car wash at the petrol station.

    But Nectar points were so hard to use in store. At one point I had about £40 and wanted to spend some in the store near my Dad. Even though I had previously done whatever was required to use my points there, it was too long ago to still be valid (more than about 6 months) and I had to spend actual money,

    Just not worth the effort.

  • Chris says:

    OT: I’ve got my Platinum charge card which will get me and a guest entrance into lounges. My father, my sister and I will be travelling and I’d like to get us all into the lounge for free. I’ve already got a supp card for my GF and therefore she has a priority pass card. If my sister used my GF’s Priority pass and I used mine for my father and I, would we be okay? Or are there ID checks? Thanks!

    • Optimus Prime says:

      They ask for the boarding pass of the person using PP so they may compare the names.

      On the other hand my brother borrowed mine and used it in Madrid without problems…

      • JamesB says:

        Must be a lottery then, they never asked for my boarding pass last few times I used mine. I have always just shown them a screenshot on my phone therefore I suuppose they think they ard looking at the app and so more certain account is mine than if presenting a card.

    • imbruce says:

      You have to show your boarding pass at he desk

  • Zild says:

    Not to be pedantic but the term should be “gaming”, as in “gaming the system”. “Gamification” is the act of taking a system and making it more like a game, with the aim of making it more enjoyable (possibly more addictive) and therefore increasing both the number of people engaging that system and the time spent per user engaging the system.

    It does however make me wonder if gamification might be a way to improve (or at least differentiate) loyalty schemes, trading the existing rigid approach of X purchase = Y point = Z reward to a system of randomised, flexible rewards – your purchase may earn you anything from a few points to a free hotel stay, for example. Worth a thought.

    • Bagoly says:

      Interesting point.

      The example you give is one particular form of gamification – one might call is casinofication.
      IHG have added other sorts of games (E.g. the recent Memory Game)
      You are right that that can be enjoyable in its own right, and also provoke conversations (and competitions) with others which is often the point.

  • J says:

    i just swiped my nectar at Sainsbury (swipe and win promotion) and got 5000 nectar points – that’s £37.50 to spend in Pizza Express, not bad.

    • Choons says:

      …except that the pizzas in Pizza Express are not necessarily that good

      • J says:

        ha ha – i quite like the leggeras but i agree they are not the best pizzas.

      • Tilly says:

        Not much i can eat in Pizza Express which is why I’ve not been in one for about 7 years.

        • Choons says:

          I went in one for the first time in about 10 years ago but in September I went back to use up some of the nectar vouchers i had converted into them for my kids, who never used them.

      • Rob says:

        Can’t escape them if you have kids ….

        • Callum says:

          I wasn’t taken to Pizza Express a single time growing up and can confirm I turned out ok…

          What kind of backwater do you live in if the only activity suitable for children is Pizza Express!?

    • john says:

      Only got 1000 here but they also gave me 500 bonus nectar points if I spend £1 (on one titled “Thank you for spending your points with us”). £7.50 ain’t bad for doing nothing!

  • Scott says:

    Put slightly over £10 of petrol in just now and got a 1000 point coupon.
    Nice start and I seem to have over 500 points left on my card as well when I only had 16 last time I looked (they must have finally paid some bonus points I was owed).

    Another £10 of petrol later and maybe more + split shops over the weekend.
    Got towards £55 of points last time including at least one 5000 pointer.

  • Mark says:

    I drop any loyalty cards out of my wallet that earn less than 4%. I’ll generally not bother opening an app on my phone for any less than 10%. So i ditched 0.5% Nectar quite a long time ago. Caffe Nero and Boots Advantage are about the only ones left.

    • Rob says:

      Not a bad approach ….

    • TGLoyalty says:

      but surely 0.5% is better than nothing if you are shopping in sainsbury

      tbh loyalty cards themselves make no difference to my shopping habits but a money off coupon i get every few months from Tesco or Sainsburys does. as do £5 off till spits from M&S

    • Will says:

      I think that’s sensible, often easy to forget to cost the time taken to administer any given loyalty scheme vs the payback from it.

      Only reason I retain a nectar card is I collect the points mainly through eBay and the ability to redeem at checkout in sainsburies using the card is very convenient.

    • Mr Dee says:

      Unless I spend or intend to be spending large amounts over the long term then I wouldn’t bother using a loyalty card if the return is going to be minimal and it isn’t worth keeping a nectar card in my wallet for the one off shop.

    • Fenny says:

      Boots points don’t make up for the mark up on prices over Superdrug. Superdrug do their own loyalty scheme and give NUS discount.

  • Mr Dee says:

    The only nectar redemptions I made were at Mcdonalds when they first started, as the value was so low and very few redemptions worth aiming for I never saw the point in using them apart from linking them to ebay for the odd few points.

  • Scott says:

    I only use Nectar for Virgin East Coast trains vouchers.
    There’s nothing else that interests me.
    I generally use my mother’s card and give her the points, and if she shops at Tesco, she uses one of my clubcards to get me the points there.

    Ok, I might see if I can use my bonus points this weekend against a petrol purchase for a change. They’re about the only thing that will make me spend some money at Sainsbury (although the petrol station is well placed in the town centre and generally up to 3-4p cheaper than other places)

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