NEW MEDIA: SPOTLIGHT ON NECTAR - Nectar's crash reveals danger of creating too much demand

Online registration fiasco is bad news for the founders of Nectar, Mark Sweney writes.

The high-flying launch campaign behind Nectar, the new customer loyalty reward scheme with £50 million in backing from its founders Sainsbury's, BP, Debenhams and Barclaycard, has come down to earth with a technical crash.

All online registrations for the scheme, which were encouraged with the carrot of 100 bonus points, have been suspended because high levels of demand caused key parts of the website (www.nectar.com) to grind to a halt.

Richard Campbell, the marketing director at LMUK, which runs the Nectar operation, claims that the company did undertake extensive testing of its web capability.

"We did a lot of testing and due diligence and anticipated the number of online registrations from our experience with other LMUK operations in Canada, Holland, Spain and the Middle East," he says.

Campbell adds that despite a year of planning, demand outstripped the company's most "bullish" traffic forecast by a factor of four times. He blames the security and encryption checks required within the registration process as the culprits for the closure. He says it has been a regrettable but unavoidable incident that was out of Nectar's control.

However, Steve Adams, a senior consultant at Dragon Brand Consulting, which specialises in web usability, disagrees. Adams, who has undertaken studies of the websites of brands including Sainsbury's, Tesco.com, Heinz and Haagen-Dazs, puts it down to poor media planning.

"The problem was caused by a mixture of poor planning and time scales. The launch budget was huge, material was already at the partner outlets and then the television advertising comes in - it is hard to plan testing for that but I think they may have cut corners," he says.

In Adams' experience, Nectar's problems are relatively uncommon, meaning that for the most part other companies have adequately planned for such eventualities.

"The Government had many problems when it made the 1901 census information available online, but really a crash like this isn't a widely spread problem," he comments.

"They should have been able to anticipate the demand because Nectar is replacing other loyalty cards. There is no excuse, it should have been obvious."

The successful launch of the online travel portal Opodo earlier this year is an example that lends weight to the poor planning argument. Like Nectar, Opodo came to market with a new name as the consumer brand for a group of high-profile companies - it is backed by nine European airlines including BA, Lufthansa, Air France and KLM.

With a £19 million launch budget in Germany, the UK and France, Opodo had the backing to launch an all-singing, all-dancing campaign such as Nectar. But the critical need to make sure its online offering ran smoothly meant that the company adopted a cautious approach.

Lorraine Twohill, Opodo's head of market development, says the online platform, on which all three country operations run, underwent 23,000 hours of testing before the launch in Germany, with another 7,000 before the UK debut and a further 5,000 in the run-up to unveiling the French property.

Opodo's ad campaign strategy was designed to build with a staged roll-out of activity to make sure the website could handle the traffic.

"All of our country launches involved online-only marketing campaigns for two months because we didn't want to risk website teething problems with a full cross-media campaign," Twohill says. "Nectar was probably too early with offline advertising - television drives bursts of traffic and these can easily take down a website. It was a mistake for it to be so aggressive from day one."

Nectar's website was built by a combination of an in-house team and a third-party developer that Campbell refused to name, but that, he says, has experience in large-scale website building. However, he refused to comment on whether the developer would be retained by Nectar once the problems with the website had been rectified.

The technical shortcomings suffered by Nectar have implications far beyond its own brand. With a degree of internet scepticism in both the business and the wider consumer world, such a high-profile failure reflects poorly on all companies looking to use the website as a key part of a campaign.

"The incident is unfortunate and obviously damaging for the new brand and for the four founding companies," Twohill says. "And it is no good for consumers, they are used to problems with the internet and it is bad for business and the internet market."

Campbell says Nectar has a timeline for reintroducing the online registration service, but he would not provide any further details. In the meantime consumers have to phone its call centres.

When the problems are eventually ironed out, Nectar may eventually benefit from the added press coverage. "One silver lining to it all may be that all the bad press has raised the profile of the new brand name," Adams says. "Maybe a year down the line it might help consumers to remember the brand name and not the incident."