Hilton & Nectar Guidance - Nectar from Sainsbury's...

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Nectar from Sainsbury's Point of View - - - - - - - - - - - - - - - - - - - - - - - - - - - - To be frank, Harvard cases have slipped in quality in the last few years in my opinion. In "Nectar" the interesting questions posed in the narrative are at the J Sainsbury level, but the data are from Nectar. Here is specific guidance on the case: You to give advice to the Board of J. Sainsbury (JS). Nectar is costing them about 120 GBPm (million Great Britain Pounds sterling) per year, or half their promotional budget (the case mis-states this as "marketing budget" on p. 1). Assume that JS has these options for 2004: A. Keep Nectar at the cost of 120 GBPm B. Go back to their own self-administered points system. Assume this would cost just 60 GBPm C. Have no rewards program. They could then use the 120 GBPm for: C.1 Use 120 GBPm for mass media advertising C.2 Drop prices and compete on price. Of course, there are blends of some mass media and some price drops, but for this academic exercise, for option C assume a “pure play”—JS either spends the whole amount on mass media advertising or uses it all to discount prices. If JS changed to no rewards program, common sense tells you there might be some drop-off in sales volume. But you don’t know how big the drop
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