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The Nectar loyalty scheme marked its first anniversary this week by announcing the signing of all:sports as its latest collection partner and hailing the recruitment of more than half the UK's households.

Loyalty Management UK (LMUK), which operates Nectar on behalf of its sponsors, claims it has surpassed its first-year targets by signing up 13 million households to the scheme - about 55% of the UK total.

In the past 13 weeks, LMUK says that ten million of those accounts have been active, equating to 12.8 million cardholders.

With an average of 1.3 individuals registered for each account, LMUK believes that more than 17 million consumers have collected Nectar points since its launch.

In addition, more than 50,000 households continue to sign up to the scheme every week.

"Shoppers immediately realised the benefits of collecting points from a variety of companies into one account," says LMUK chief executive Rob Gierkink.

But beneath the flurry of statistics released by LMUK this week, many questions remain unanswered about the effectiveness of the programme at increasing market share for its partners at the expense of competitors.

After all, since Nectar's launch, its most important partner, Sainsbury's, has lost its number two slot in the UK grocery market to Asda, which does not operate a loyalty scheme.

Gierkink responds by pointing out that Nectar's intention has always been to build growth for its partners over the longer term, and that in certain sectors, it is already demonstrating clear benefits.

Tangible benefits

For instance, BP increased its fuel retail market share from 24% in August 2002 to just under 27% in February, five months after Nectar's launch, according to Omnicar.

What is becoming apparent is that Nectar's development is mirroring Loyalty Management International's schemes in other territories.

The figures show that the greater the number of sponsors visited by the individual collector, the greater the consumer's spend and loyalty are likely to be. That is the killer proposition LMUK believes will ensure Nectar's future growth.

Although LMUK refuses to disclose consumers' spending levels with Nectar's partners, it has revealed that the average Nectar member collects with 2.24 of the eight sponsors. Almost 2.5 million collectors are earning points at three sponsors, and 1.27 million are collecting with four or more.

The company expects these figures to grow as new sponsors emerge. Other partners are Debenhams, Barclaycard, Vodafone, Ford, Adams and Thresher, with all:sports joining later this year.

The addition of the sports goods retailer, which is ditching its smart:card scheme to join Nectar, will take the total number of retail outlets participating in Nectar to 5580.

Redemption habits

Each Nectar member is accruing an average 5000 points a year, enough for an annual £25 discount on Sainsbury's shopping.

While Gierkink admits that Sainsbury's and Argos are the most popular rewards channels, he insists the company is happy with consumers' redemption habits.

He adds that 60% of all Nectar points issued have been redeemed, a higher figure than might have been expected at this stage.

The company is focusing on its existing base to boost Nectar's growth, a strategy reinforced by the promotion of its rewards offering and the forthcoming switch to electronic redemption.

This, it is hoped, will make rewards easily accessible and encourage shoppers to collect points more rapidly.

To support this, LMUK is investing in a relationship marketing strategy developed by Harrison Troughton Wunderman (HTW) that includes targeting home-movers to offer them discounts at nearby outlets of partners. This will come complete with a map, and underlines the benefits to partners of enabling them to share the cost of marketing communications.

"Nectar has the most powerful consumer database in the UK, meaning its targeting is both cheaper and more effective than that of rival schemes," says HTW founder Martin Troughton.

LMUK is also planning a range of Christmas offers, and has hired British Gas DM controller Lorraine Graves to oversee the strategy. The company will continue to run brand advertising, promoting activity such as its Multipoints special offer periods.

With gaps remaining in the scheme for collection partners in DIY, fashion and pharmacy retailing, as well as utilities (Npower is rumoured to be in advanced talks about joining), there is scope for Nectar to extend further into the UK shopper's wallet.

But there is little evidence yet that this will translate into the long-term market share gains for which its partners are striving.