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MARKET COMMENT
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Vodafone Group (LSE: VOD)(NYSE: VOD) is apparently expected join the Nectar loyalty card programme. The Financial Times broke the story ahead of the announcement, which is expected later today. The mobile phone giant, together with two other high profile retailers, will be adding its name to the scheme. These two other shopkeepers are believed to be Adams, the children's outfitter, and First Quench, the owner of the off-licenses Threshers and Bottoms Up. If you happen to be a regular shopper at Sainsbury (LSE: SBRY), or fill up your car at a BP (LSE: BP.)(NYSE: BP) garage, then you are unlikely to be a stranger to Nectar. Barclaycard credit card holders will also be familiar with the Nectar loyalty card scheme. Interestingly, Nectar lags Tesco (LSE: TSCO) and Boots (LSE: BOOT) in the loyalty card stakes. In a recent ICM survey over 40% of respondents said they held a Tesco Club Card whilst 31% of those questioned had a Boots Advantage Card. Just 27% of those asked said they held a Nectar card. The survey also showed that shoppers overwhelmingly preferred lower prices to loyalty card schemes. The study indicated that 86% preferred lower prices when asked to choose between points or prices. Only 9% said they would opt for a loyalty card over better prices. This then begs the question as to why Vodafone Group would want to join a scheme that is so greatly rejected by such a vast proportion of the population. A clue to the answer may be found in the details of the ICM survey. Tesco's Club Card is widely held across the social classes, as classified in marketing parlance. Whether you are an AB, C1 or C2 shopper, you are just as likely to hold a Tesco Club Card. Boots Advantage Card on the other hand tends to be preferred by those in the professional AB social classes. The contrast, though, is most pronounced with the Nectar card. A preponderance of Nectar cardholders belongs to the professional AB consumer category. It would appear to be less popular amongst C1 to DE shoppers. That should speak volumes about Vodafone's corporate strategy. Vodafone is not that interested in general customer acquisition anymore - it is instead concentrating on capturing what it sees as higher-spending users. Whether Nectar members defect to Vodafone remains to be seen. However, Vodafone investors should be prepared for lower growth in terms of customer numbers but perhaps a higher growth in existing customers' average monthly spend. The writer has a beneficial interest in Vodafone Group.