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Nectar's mobile app

Interview with Jan-Pieter Lips, managing director of Nectar

If you ask the analysts at Gartner, they will confidently predict that by 2013 more people will access the web from a mobile device than a PC. It seems reasonable then that so-called 'smart phones' are permanently changing consumers' methods of communication and engagement with shops, brands, friends, family and all other forms of media. In Western Europe, North America and parts of Asia, the availability to a large number of mobile subscribers of more advanced handsets (typified perhaps by the iconic iPhone and iPad) has reached a tipping point that will allow much higher and faster levels of web connectivity, which in turn will drive even greater mobile web usage. Another crucial factor in the growth of mobile web usage has been a relative shift in demographics in some of these regions towards growing populations under the age of 30--and these are consumers who are very heavy participants in the growth of social media via mobile devices.

This is such a fundamental shift in the digital environment that any large scale supplier of consumer loyalty programme services has to both understand and embrace the opportunities. The mobile handset has now penetrated deeply into the lives of consumers in almost all global markets. The growth in smart phones is turning this device into a mobile computer and internet access device that is always on, always with the consumer, has location specific and personalised targeting capability.

The executive team at Groupe Aeroplan, the owner of Nectar, are well developed in their plans to adapt and adopt to this new reality. Jan-Pieter Lips had originally given a presentation at the Loyalty World conference in London in November 2010 on 'why mobile, and why now?', giving details of Nectar initiatives in the UK for its membership base of some 17 million consumers.

We therefore asked Lips for a follow-up interview this year, to understand more about this initiative and how it was being adopted by Nectar collectors. We began by asking Lips about his background in loyalty marketing. He explained how he had joined the LMI (Loyalty Management International) group originally created and owned by Sir Keith Mills via their Netherlands office in the late 1990s. He had migrated from that location to the UK as part of the development team for the launch of the Nectar programme in 2002 and was appointed as Nectar's managing director in 2009. Nectar is now part of the Groupe Aeroplan structure.

First, we asked Lips what had initiated this move into mobile apps for Nectar.

"We launched our App because smartphone usage reached a tipping point in 2010, mostly driven by Apple", Lips said. He explained that the theoretical decade long process of convergence of various forms of technology and the internet was actually now reaching a critical mass. The clear innovator and leader in this trend was the huge success of the Apple products amongst consumers globally. The driver for change in this area has been generated by the global impact of Apple and Blackberry making mobile, on-the-move connectivity a much more user friendly and effective process with larger screens, better connectivity, a huge surge of task specific apps for mobiles from suppliers.

In order to understand what Nectar members were really seeking in this area they commissioned research based on the question 'what would you like to see in a mobile application?' The Nectar smart phone survey was undertaken in June 2010 by over 200,000 respondents of whom 36% owned a smart phone, some 58% had owned this for less than one year, and 59% were finding out about new apps via an app store or via friends.

The tipping point for larger scale adoption by collectors was a result of the following developments in the mobile market technical and commercial environment:

• screen size and clarity for store locations serving Nectar collectors;
• flat rate monthly data charge widely available via suppliers;
• mobile network speed improvements and cell coverage;
• the demise of so-called 'walled gardens';
• member appetite, including the development of Facebook and other social media.

The research also highlighted the following member requirements:

• access to Nectar point offers on the go and in their own time;
• to see their points balance and manage their account 24/7;
• store finders so as easily to locate where they can collect and spend points;
• to receive communications when new offers are available through the app (70% are happy to receive alerts from Nectar);
• attainable and worthwhile offers that are updated frequently (weekly or monthly).

The large number of Nectar e-store partners with over 500 online partners in the programme was a further important factor driving this change.

Based on the precept of 'Nectar everywhere' and data driving membership relevance through increased value, convenience and inspiration, the development of Nectar leadership in this space was an obvious next step for the programme. What was also crucial to delivery in this area was the ability to offer genuine value to collectors, to make the offers personalised. (This is not a medium for anodyne and untargeted customer offers, which can actually backfire on the delivery agent.)

Lips stated that brand advertising via this application was not for Nectar but they would promote offers that were targeted and had real value for collectors. In fact 70% of those surveyed indicated that they would be open to receiving push-notifications from Nectar.

Lips observed that everyday marketing in the future will be more direct, more targeted and more personalised, and in this context the Nectar apps platform offers an ideal base on which to extend this reach. The response from Nectar collectors was immediate: well over 400,000 Nectar iPhone app downloads have been recorded since August 2010. The launch of an Android app in early April 2011, closely followed by a Nokia Symbian app in the UK market, is expected further to increase this penetration of the base of membership.

Nectar also developed plans to expand to other mobile platforms later in 2011 as well as to introduce a mobile website. They had taken this initiative to a key issuance and redemption partner in the UK by developing a version of the app specific to Sainsbury's.

"The Sainsbury's App is more than meeting expectations in terms of customer demand and we are excited that, working together with Groupe Aeroplan, our app will evolve through a solid development pipeline", said Helen Hunter, head of loyalty for Sainsbury's in 2010.

Some 80 million Nectar points have already been awarded using the mobile apps, with nearly 2 million opt-ins for offers. On average, customers opt in to 3-5 offers per month. These are impressive numbers from Nectar, demonstrating good engagement across the customer base and sound evidence of sustained and repeated usage.

What was clear in listening to Lips discuss this development was his focus on getting the 'big hits' working first with major partners before rolling out other, possibly more localised, tactics--although this does seem an obvious area for future development due to the very location- and time-specific offers that a mobile app can deliver to collectors.

There are also opportunities to work with consumer packaged goods manufacturers to deliver targeted offers to collectors for brands in which they have demonstrated an interest. One area in which Nectar is demonstrating justifiable caution is with the bar code reading functionality of smart phones and the ability of POS scanners to read the barcodes. The increasing roll out of NFC (near field communication) technology was also seen as feature that is likely to develop as an alternative way to identify collectors and deliver them personalised offers and coupons.

Social media is covered via Facebook and Twitter but Lips confirmed that the business case and operational capability in other areas of social media are still under consideration.

The expertise and knowledge that Nectar UK operations have developed is also being folded into the Groupe Aeroplan regional structure as a 'centre of excellence' that could unbundle specific aspects of the technology and marketing to benefit the group's other loyalty programmes internationally in the twenty different markets in which they operate.

"It's as much about people and business process skills as the industrial-strength technical platforms that underpin mobile apps", Lips observed. When asked to sum up his view of the future, Lips was very positive about the opportunities: "Marketing needs to become more efficient and deliver ROI results. It is also true that we are seeing evidence of more consumers engaging with loyalty programmes even as they still chase value, as they now put an even higher priority on relevance and personalised communication from their suppliers."

Nectar is not the only large-scale coalition loyalty programme operator rolling out its collector offers using mobile apps. Loyalty Partner's Payback programme in Germany and Poland is also developing high profile expertise in this area. The company says that its app enhances paper coupons and online coupons by enabling users to save mobile vouchers with just a tap--up to ten-fold points for purchases made or up to a 50% discount on products. The points are automatically credited to the customer's account as soon as he shows his card at the cash desk in the usual way. The coalition scheme operator says there is no need to scan in or display the codes at the cash desk. According to a recent Payback survey, 35% of its members are likely to own a smart phone by the end of the 2011, according to Burkhard Grassmann, spokesman for the Payback management board.

Overall, we were left with the impression that Nectar UK is determined to deliver on this technology for the very personalised offers it can provide for collectors, and to apply the upgrades to service functionality only when the company is absolutely sure that collectors' experience will be 'glitch free'. It seems that the crucial factor in deploying mobile apps for loyalty programmes is not always the race to be first (although that can have some benefits) but more importantly the need to understand how customers are interacting with these devices.

Loyalty programme managers who are making the right moves in this space understand that getting the strategy right, building tactics to support the business model, and providing customers with personalised dialogue marketing is not a function of the technology itself but instead of how customers are using it in their daily lives.

It's hard to argue that this is not the correct strategy, and loyalty programmes have evolved from simple customer purchase/ reward offers into complex and highly sophisticated CRM tools. Logically, mobile apps should propel programme managers towards ever more personalised and relevant offers for their member bases. We have probably not seen the end of the dominance of the currently ubiquitous plastic card or loyalty key fob as a collector identification token, but we may have begun to see the very beginning of its end.