Nectar to rethink rewards strategy

Nectar, the UK's biggest loyalty scheme, is to transform itself into a credit card-style programme amid concerns that many of its members are only swapping their points for money off at Sainsbury's.

The shift in strategy, which comes less than a year after launch, sees Nectar's owner Loyalty Management UK (LMUK), invest in a system called Electronic Redemption (ER). It will ultimately allow consumers to swipe their cards to purchase items such as Big Macs and Odeon cinema tickets.

Marketing has also learned that Nectar sponsors Debenhams and Thresher are keen to join the scheme's portfolio of redemption partners.

Debenhams admitted this week that many customers have asked why they are unable to redeem Nectar points with the department store chain, while Thresher is understood to be plotting the launch of a wine club and hopes to offer products in return for Nectar points. LMUK has an existing rewards deal with wine supplier Laithwaite's, and it is not clear when this expires.

LMUK believes the technology will boost Nectar, which has more than 11 million collectors, by enabling consumers to redeem their points easily across the full range of reward partners. At present, only Sainsbury's and Argos use an ER system, with the remainder requiring customers to hand over vouchers.

LMUK believes that for customers to earn and use points more regularly - and in the process earn the company more revenue - the redemption process needs to be made more simple. It is hoped that this will broaden the scheme's appeal into a truly cross-promotional programme rather than one simply offering discounted groceries.

In the next few weeks, LMUK will begin a year-long campaign promoting the broad range of rewards available through the scheme.

Last weekend it was reported that LMUK had failed to persuade Bhs and Arcadia to join Nectar.

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