ASA Adjudication on Loyalty Management UK Ltd

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a. A direct mailing, for the Nectar reward scheme, which was sent to customers with their new Nectar card, stated "The it's all about me, me, me Nectar treats ... we're giving you a free treat - that's right - absolutely FREE! ... Browse through our treat-filled brochure and claim your FREE treat today!" Text on the reverse of the mailing continued "Your special free treat! It really is a free gift from us. Usually you have to spend points to get treats - but we are giving you ONE totally FREE - as a thank you and it's really easy to claim yours! ... Terms and conditions apply see nectar.com/treatme for details."

b. A leaflet titled "Your how on earth will I choose a free treat" accompanied the mailing and Nectar card. The leaflet stated "Celebrate our fantastic new world with a free treat ... You can choose from any one of the fabulous ideas on the following pages. Remember, this range of treats is a one-off special so you'll have to claim your FREE treat by 29 February 2008 to enjoy it." Text continued "The it's time I really spoilt myself pamper treats". The leaflet listed a selection of the treats available: a half hour back, sports or indian head massage, acupressure session, pedicure session, one week gym pass, manicure session, facial, reflexology session, reiki session. Text continued "Enjoy a wow that looks thrilling adventure treat". The leaflet listed a selection of the treats available: a round of golf or golf lesson, fun day out, wakeboarding, clay pigeon shooting, white water rafting, stadium tour, family portrait, paintballing. The reverse of the leaflet listed all the treats available under two separate headings: under "Adventure" was listed "Clay Pigeon Shooting, Day Out, Family Portrait, Golf Lesson, Kitesurfing, Paintballing, Power Boating, Round of Golf, Sphering/Zorbing, Stadium Tour, Wakeboarding, White Water Rafting" and under "Pamper" was listed "Acupressure, Back Massage, Facial, Gym Pass, Indian Head Massage, Manicure, Pedicure, Personal Trainer, Reflexology, Reiki, Sports Massage, Tanning Session." The terms and conditions were listed below. Point 4 stated " ... reserves the right to offer an alternative 'Free Treat' of equal value should a chosen 'Free Treat' become unavailable."

Issue

Twelve complainants challenged the availability of the treats because their choices were substituted with either the one-week gym pass or one of the "day out" treats.

CAP Code (Edition 11)

Response

Loyalty Management UK Ltd (LMUK) said they selected a specialist sales promotions company to administer the 'Free Treat' promotion on their behalf.  They explained that the sales promotion company worked from an active database of around 28,000 suppliers located around the country who were able to offer some form of treat.  The sales promotion company worked with the suppliers to ensure that an agreed number of treats were issued per week per supplier, a weekly quota.  LMUK said the quota was refreshed weekly for the duration of the promotion to ensure appointments could be made and suppliers were able to deliver the free treats.  They added that, as soon as a trend was spotted, the sales promotion company would actively recruit more suppliers.   

The sales promotion company administered similar promotions in the past and experienced response rates of between 0.5 and 1.5%.  They advised LMUK that the treats should be spread over a large number of suppliers to assist fulfilment rates.  LMUK selected 24 treats and understood from the sales promotion company that the distribution of response was likely to be reasonably evenly spread across all choices of treat.

LMUK said their direct response marketing was normally targeted to sections of the customer base who were likely to respond.  The 'Free Treats' mailing, however, was issued to the bulk of customers.  They said the most historically comparable type of promotion was the distribution of Nectar acquisition mailings which had typical response rates of 0.1 to 2%.  Based on those figures, the sales promotion company agreed to ensure availability of the 'Free Treats' up to a response rate of 2.5%.  They sent a letter from the sales promotion company confirming that.

LMUK explained that, in spite of their predictions, the response rate to the promotion was over 6%;  they said three of the 24 treat choices represented almost 40% of total claims made and 75% of all responses had requested a pamper treat.  They submitted a chart showing the breakdown of the treats claimed each week since the beginning of the promotion.  

LMUK pointed out that the terms and conditions of the promotion made clear that in the event of a 'Free Treat' becoming unavailable, an alternative 'Free Treat' of equal value would be offered.  They explained that the treats listed in the leaflet were bespoke products or services not available to the public, which the suppliers had contracted to provide to the sales promotion company.  The minimum expected value of a bespoke product or service was £5, although some suppliers chose to provide a service in excess of that amount.  They added that every Nectar customer who applied for a reward was provided with one.

LMUK took action when they became aware that availability of the treats was an issue.  They changed the mailing schedule to reduce weekly demand, reduced the total volume of mailings being distributed and removed the reference to "free treat" from mailings still awaiting distribution.  LMUK also sought to manage customer expectations through their website and call centre by advising customers that popular choices might not be available in light of high demand.  They increased the number of call-centre staff who advised customers to wait for the weekly allocations to be refreshed, which increased availability of the treats.  They also advised customers to wait until the mailing run was finished because demand was unlikely to be so acute by that time.    

LMUK said the leaflet and mailing would not be used again and they had no plans to run a similar promotion in the future.

Assessment

Upheld

The ASA noted LMUK had not administered a promotion of this nature before and had sought to make a reasonable estimate of likely demand by using response rates to their most comparable previous promotion.  We considered that the leaflet made clear that an alternative treat of equal value would be offered if a chosen treat were to become unavailable and we acknowledged the action LMUK had taken once they became aware that the response to the promotion had exceeded their predictions.     

We noted demand had been skewed heavily in favour of the pamper treats with three of the treats - back massage, facial and manicure - attracting 40% of the total claims.  We understood that this created a problem with supply because the promotion had operated on the assumption that there would be a reasonably even spread of demand across all choices of treat.  We understood that because demand for the pamper treats was high, those treats were most likely to be substituted.  We noted the alternative treats typically offered were a one-week gym pass or an adult pass for a day out.  LMUK told us that the average value of one adult admission for a day out was £6.56.  They did not provide us with average values for the week-long gym pass or the three most popular pamper treats.  We noted the treats were bespoke products or services with a minimum value of £5 that could differ in value from supplier to supplier.  We nevertheless considered that the average value of one of the pamper treats was likely to be considerably more than the average value of the day out or gym pass.  We considered that those customers who had requested a back massage, facial or manicure were likely to be disappointed to receive a day out pass or a gym pass instead.  We concluded that the administration of the promotion was likely to cause disappointment to some customers and that LMUK had not demonstrated that they had provided substitute treats of equivalent quality or value to those chosen.

The mailing and leaflet breached CAP code clauses 7.1 (Truthfulness), 27.4 (Unnecessary disappointment), 30.1(Reasonable estimate of demand), 30.4 (Inability to supply demand) and 42.5(a) (Refunds, substitute products and returns) but did not breach 3.1 (Substantiation) and 16.1 (Stock monitoring).  

Action

We told LMUK to ensure that substitute gifts were of equal quality and value if they decided to run a similar promotion in the future.

Adjudication of the ASA Council (Non-broadcast)