East Coast

FoI Request 1: Popularity and Viability of EC Rewards

The reply to my Freedom of Information Request for East Coast Rewards is here (PDF).

As East Coast was owned by Directly Operated Railways (owned by the government) until the takeover of Virgin Trains East Coast on 1 March 2015 it was subject to the Freedom of Information Act which allows members of the public to find out more information about government owned organisations. We used the opportunity to find out more about the popularity and business case for East Coast Rewards.

Please note that questions 1-4 are related to the previous East Coast Rewards scheme which had higher entry requirements. Questions 5 and beyond relate to the final East Coast Rewards scheme introduced in 2011.

Some key points

  • The scheme was growing quickly. There was 671,000 Rewards members in January 2015. In the 2014 financial report the number of members was 587,000
  • In the first year of launching the current East Coast Rewards scheme online sales increased by 25%
  • 23% of sales on eastcoast.co.uk were for travel on other operators, with the new scheme there's no reason for booking on this site
  • The commission earned on bookings with other operators is 5%, this commission is gone if people stop booking third party tickets
  • Information about the performance of the Rewards scheme was available to bidders via DfT
  • Virgin Trains East Coast had access to the sales data from eastcoast.co.uk so they could make an informed decision regarding the loyalty scheme
  • East Coast did not consider any 'off the shelf' loyalty schemes such as Nectar or Tesco Clubcard
  • Expenditure on non-East Coast rewards (i.e. rewards that cost East Coast real money to provide such as wine and gift cards) was £527,731 for the year to date. The amount earned by East Coast in commission during the same period was £2,759,041

Conclusions

The East Coast Rewards scheme was extremely successful and was growing quickly. A survey of under 2000 random customers is not a good way to gather the feeling of the Rewards members. As I discovered in "Why Nectar isn't as sweet as they say" Barclaycard made almost identical mistakes in 2002 when they changed Barclaycard Rewards to Nectar. Barclaycard eventually realised they made a mistake and ditched Nectar in 2005.

Earning a 5% of commission is a good deal for East Coast and as shown the cost of the rewards earned is significantly lower than the commission earned. There's now no good reason for booking 3rd party tickets on the current Virgin Trains East Coast website.

All I can say is Nectar is a gamble. Slashing the benefits did not work well for Barclaycard and they dropped out the scheme. This could have a significant hit on the online sales channel. The figures show that they were not making a loss on East Coast Rewards, there was certainly no reason to immediately pull the scheme they could have kept it running while a proper investigation into changes to the rewards scheme were made,