Loyalty scheme on the brink

THE future of Nectar, the biggest loyalty card programme, is in doubt after the disclosure that some of its major sponsors are considering leaving the scheme.

Sainsbury's, a founder member, announced a review of Nectar last week. Chief executive Justin King refused to rule out leaving the scheme, which accounts for half the ailing group's £40m marketing budget.

'That doesn't feel like the right proportion to me,' said King. 'We are looking to save a significant amount of money from that in the next three years.'

It has emerged that another founding member, Barclaycard, has slashed the amount it spends on the card and no longer offers the scheme to new customers.

Comments from some of the 16 sponsors show how perilous Nectar's future is. Speaking on the condition of anonymity - they still have contracts with operator Loyalty Management UK - many said they were unhappy with the programme.

'It's not exactly driving sales,' said one retailer. 'We are certainly not in a rush to renew the contract.' Another sponsor said: 'It's not quite as exciting as we were led to believe it was going to be when it launched.'

Loyalty Management claims that Nectar has more than half of all UK households participating - and the range of sponsors covers 40% of an average household's spending.

Nectar, which has handed out more than £340m in rewards, had a shaky start in 2002. Loyalty Management had to halt the £40m launch advertising campaign when its registration website crashed.

In a recent survey of shoppers' preferences, cards came tenth after clean toilets.

But Brian Sinclair, client services director at Loyalty Management, said Nectar was a thriving scheme that offered valuable benefits to sponsors. 'It's the best possible investment,' he said. 'We are confident that our sponsors feel that.'