A CRITICAL ANALYSIS OF THE CUSTOMER
LOYALTY PROGRAM BEING RUN BY
PANTALOON RETAIL INDIA LIMITED WITH
SPECIAL EMPHASIS ON APPLICATIONS OF
CUSTOMER RELATIONSHIP MANAGEMENT
BY: PADMANABH BOSAMIA
BACHELOR OF SCIENCE AND BUSINESS
ADMINISTRATION WITH EMPHASIS IN
When I started with this project I never knew anything about retailing
industry in India. The only thing I knew was going on weekend shopping to
various places. The moment at which I started to know about the retailing
industry I soon realized that it was a daunting task to gather the data and
analyze it. Especially the data about the customer who is a member of any of
the shopping loyalty clubs in India.
At some stage while doing the project I almost lost the focus and the drive to
complete the project on this topic. The moments I have shared with different
people while relating to them on this project would always be a memorable
experience in my life.
I admire the way in which Miss Vaijyanti Veeraghavan, Skyline Business
School has helped me. She has been an inspiration to me. I believe that
without her interest I would have never been able to do this project.
I would like to also add that people at Pantaloon (Gurgoan) Mr. Pradeep
Gupta, Mr. Sunny and other staff working in the stores were very polite
and helpful when I was doing my research.
A project is never complete if the primary research hasn‟t been done
correctly. I would like to convey my regards to all the people who helped me
fill the questionnaires during my research.
The organized retailing in India is expected to cater 3% of the total market
sales in Retailing in India by 2006.
In my dissertation I have highlighted the major facts about the organized
retailing in India. I have highlighted the major retailers and have presented
their Loyalty programs. Most of the organized retailers in India have similar
loyalty programs compared to international retailers that have differentiated
loyalty programs. As the CRM process in the Indian retailing sector is still at
a initial phase so I cannot really predict the future of organized retailing in
India. Yet, it has to be granted a status of an Industry by Government of
India. In my questionnaires I have tried and highlighted the need of changing
the loyalty programs for attracting higher number of footfalls. I hope this
contributes to the loyalty of major organized retailers in India.
Retail Sales, which amounted to about Rs 7,400 billion in 2002, expanded at
an average annual rate of 7% during 1999-2002. With the upturn in
economic growth during 2003 retail sales are also expected to expand at a
higher pace of nearly 10%.
In a developing country like India, a large chunk of consumer expenditure is
on basic necessities, especially food- related items. Hence, it is not
surprising that food, beverages and tobacco accounted for as much as 71%
of retail sales in 2002. The remaining 29% of retail sales are non-food items.
The share of food related items fell over the review period, down from 73%
in 1999. This is to be expected as, with income growth, Indians, like
consumers elsewhere, spent more on non-food items compared with food
Retailing as in the other parts of the world will be taking a major shift in
India. Therefore, there will be advent of lot of retail chains in all sorts of
retailing. Indian Retail is gearing up to provide customers an international
shopping experience. Loyalty programs, which give consumers rewards for
repeat purchases from particular stores are common in the market today.
The retail industry is very large. Retail is the country‟s largest source of
employment after agriculture, has he deepest penetration into rural India,
and generates more than 10% of India‟s GDP. With close to 12 million retail
outlets, India has the highest retail outlet density on the world. In spite of
this, retail is also India‟s least evolved industry. In fact, it has not even been
accorded the status of an industry.
Defining Retail Trade: The retail trade sector comprises establishments
engaged in retailing merchandise, generally without transformation, and
rendering services incidental to the sale of merchandise. The retailing
process is the final step in the distribution of merchandise; retailers are,
therefore, organized to sell merchandise in small quantities to the consumers
and not for resale.
The Indian Story: For almost half a century, a paternalistic regime of
control in India manifested itself in licensing laws that restricted the
production of consumer goods and in regulations that limited the size of
manufacturing plants. For a long time, the Indian consumer could buy any
car as long as it was outdated Ambassador or a Fiat, any toothpaste as long
as it was Colgate, any watch as long as it was from HMT, and any radio as
long as Phillips produced it. The story is no longer the same. The past
decade has witnessed a tremendous revolution in the Indian Retail scenario.
Market liberalization and an increasingly assertive consumer population is
now sowing the seeds of a retail transformation that has started bringing in
bigger Indian and multinational operators on the scene. With the advent of
these players, the Indian consumer is on his way to become what his
counterparts in the more developed countries of the world have been for
Fiigure 2:: Indiian Rettaiilliing Opporttuniittiies
F gure 2 Ind an Re a ng Oppor un es
Through my dissertation I would be studying how the Indian retailing sector
and consumer demographics are shifting. I would be then be laying
guidelines about developing a loyalty program. I would be analyzing the
various customer loyalty programs of five companies that is Lifestyles,
Pantaloon, Westside, Shoppers Stop and Ebony. After studying the loyalty
programs I would be comparing it with Pantaloon and then identify the gaps
if there are any in the CRM1 process of the company. I would be then
seeking for opportunities of strategic alliances to increase customer loyalty
traffic opportunities in Pantaloon stores. At last I would be relating future of
CRM: Customer Relationship Management
Evolluttiion off Indiian Rettaiill
Evo u on o Ind an Re a
The concept of retailing in India dates back to ancient times when it was
mainly in the form of weekly markets and the village fairs (Melas).
Changing socio-economic patterns and consumption levels shifted the focus
of retailing to mainly convenience stores for daily needs with few prominent
retailers on the high street in each city. While talking of Indian retail, a
special mention must be made of the role played by the PDS 2 outlets,
cooperatives and Khadi stores. The Indian government‟s PDS Outlet chain is
amongst the largest retail chains in the world, but hardly does it find a
mention anywhere in the Retailing literature.
Big commercial plazas with prominent nationwide and big city based
retailers were the next step. However, these complexes has nothing much to
offer other then all-important location. Shops offering wide variety of goods
and services were merely clubbed together without any stress on providing
any value-added services to customers. Shoppers had to cope up with lack of
parking space, absence of toilets and improper maintenance observed in such
With the opening up of the economy in the early nineties, India saw the
entry of the big international brands that opened their exclusive stores.
Reebok, Nike, Lacoste, United Colors of Benetton were a few of the first
retailers to set up their shops in India. This marked the beginning of the
retail revolution in India.
Over the past decade, corporate, both Indian and multinational have started
recognizing the immense potential that the Indian retail sector provides. But,
due to government restrictions, most foreign players still haven‟t been able
to enter the Indian market. Amongst the Indian corporate, there have been
three categories of Indian businesses that have ventured into retailing as their
a) Real Estate Developers
b) Corporate Houses
PDS: Print Display Shops
Due to scarcity of space and stringent provisions of rent control act, it was
not possible for many players to start their operations from main markets or
high street. This explains the natural progression of developers like Rahejas
to kick start their retail venture Shopper‟s Stop, as they had understanding of
real estate, one of the most critical component of the business.
Retail also presented an excellent opportunity for corporate houses like Tata,
RPG3 and ITC4 profitably invest their excess funds as well as extend their
business lines or brand reach. RPG‟s tie up wit Dairy Farm International was
the first Joint Venture in organized retailing in the country. It led to the
establishment of specialty retail stores like Foodworld in grocery, Health and
Glow in Pharmacy and Musicworld in music. The manufacturers and
exporters also saw a potential for forward and horizontal integration of their
respective business lines. This saw the emergence of the brands like
Pantaloon, Provogue and Planet Fashion.
The past 6-7 years have been especially exciting for the Indian retail
industry. Sweeping changes have affected both the supply and the demand
fronts of the market. On the demand front, customer spending has been on
the rise and brand consciousness has also increased substantially. Consumers
have started demanding a better shopping experience as global media
exposes them to different lifestyles, consumer research shows that
households is metropolitan cities are gravitating towards supermarkets and
other modern retail channels.
On the supply front, a number of organized retailers have entered the trade
in the last 5 years. These include large Indian business groups such as the
Tatas, RP, the Rahejas and Piramal, as well as MNC brands in apparel,
footwear and durable. The entry into retailing by MNC brands has driven the
growth of specialty chains and upgraded the standards of existing multi-
brand outlets. South India- most notably Chennai, nearly 20 percent of food
sales now flow through supermarkets and an equal share of “durables” is
sold through specialty chains such as Viveks. Until now, competition in the
sector has been largely local with large global retailers such as Carrefour and
RPG: R P Goenka Group
ITC: Indian Tobacco Company
F gure 2
Historic/ Rural Reach Traditional/Pervasive Govt Supported Modern
Exclusive Brand Outlets
PDS Outlets Khadi
Mom and Pop/ Kiranas
Weekly Markets Village
Source of Entertainment Neighborhood Stores Availability low costs Shopping
Convenience Costs/Distribution Experience
Rettaiilliing In Indiia
Re a ng In Ind a
Retailing in India can be classified under two heads: organized and
unorganized retailers. Unorganized retail is the dominant mode of retailing
in the country with organized retailing contributing to roughly around 2% of
the whole market.
The unorganized retail formats are typically mom-and-pop stores, with very
basic offerings, fixed process, zero usage of technology, and little or no
ambience. These are highly competitive outlets, drawing on free land
(unregistered kiosks or traditional property), unpaid/cheap labor (family
members or village children paid below minimum wages) and zero taxes.
Many of them also leverage the low or no cost of family labor to provide
services like home delivery that would be uneconomic for any organized
Traditional formats such as rural counter stores, kiosks, street markets and
vendors have low productivity potential because of their unorganized
systems and processes. These formats have emerged largely due to the
absence of alternative employment and typically require employees with
very low skills. These formats can, and do, serve to absorb agricultural
labor. They are; however, very important as they account for two-thirds of
the sector‟s output.
Organized retailing in India is gaining wider acceptance. The development
of the organized retail sector, during the last decade, has begun to change the
face of retailing especially, in the major metros of the country.
Experiences in the developed and developing countries prove that
performance of organized retail is strongly linked to the performance of the
economy as a whole. This is mainly on account of the reach and penetration
of this business and its scientific approach in dealing with the customers and
their needs. In spite, of the positive prospects of the industry, Indian retailers
are facing some challenges (see Appendix: Evolving Real Estate) which
have stymied its growth.
Rettaiill Formatts iin Indiia
Re a Forma s n Ind a
Rural counter stores: Indian retail is dominated by family- run counter
(kirana5) stores that stock a range of branded / unbranded items. Rural
counter stores are multi-purpose stores that sell items of essential need, both
food and non-food. These stores are often located in rural homes and serve
to supplement the family‟s income from agriculture.
Kiosks: These small, pavement stalls stock a limited range of food and
beverage items. Kiosks are convenient for impulse or emergency purchases,
and are located in busy commercial and market areas.
Street Markets: held at fixed centers in urban and rural areas on a daily or
weekly basis, street markets comprise multiple stalls (often more than 200)
selling a wide range of food and non-food products. These markets compete
on both variety and price, and also sell counterfeit goods and smuggled
items. Street markets have traditionally acted as a place in social gathering.
The bazaars in Poland and open-air wholesale markets in Russia are the
foreign equivalents of this format.
HyperMarkets: These are large (20,000 square feet plus) self-service stores
selling a variety of products at discounted prices. The best practice chains in
this format are Carrefour (France), Wal-Mart (US), Kroger (US), Tesco
(UK) and Metro (Germany). Supermarkets tend to be located in key
residential markets and malls, and offer competitive prices due to economies
of scale in logistics and purchasing. This format is new to India and only
three supermarket chains of note exist – Foodworld, Nilgiri‟s and Subhiksha.
Indian supermarkets are smaller than those in other countries are, with fewer
cash register and sizes that are at least a fifth of the global players selling
area (3,000-4,00 sq. ft versus 20,000-25,000 sq. ft) are
Department stores: These large store primarily retail non-food items such
as apparel, footwear and household products. They stock multiple brands
across product categories, though some of them focus on their own store
label. (E.g., Mark & Spencer‟s St. Michael). Department stores are found on
high streets and as anchors of shopping malls. Several local department store
chains have opened shop in India in the past 5 years (e.g., Shoppers Stop,
Westside and Ebony)
Kirana: Near by shops in a particular locality
Specialty chains: These retail outlets focus on a particular brand or product
category, usually non-food items, and are located on high streets and in
shopping malls. While most specialty chains compete on service a segment
called “category killers” offers price as an advantage (Toys „R‟ Us is a good
example of a category killer). Examples of specialty chains include Gap,
Levi‟s and Benetton. This format has seen the highest levels of adoption in
India, with several chain s establishing a strong presence, typically through
franchising, e.g. Lacoste and Benetton.
Urban Counter stores: These small family run stores dominate food and
non-food retailing and are found in both residential and commercial markets
in towns and cities. The food stores stock a wide range of branded and
unbranded food items. They typically have a loyal clientele bound to them
by personal relationships and the convenience of credit and home delivery.
Non- food counter stores typically stock multiple local brands. Even though
urban counter stores have existed for decades, I have included in the
category of modern formats given that they have more organized systems
and processes (Kiosks) and provide stable employment.
Discount stores: These are giants such as Wal-Mart, the largest retailer in
the world, and warehouses such as Costo. Originally set up to serve
members only, the deep discounts now fact competition from category
killers, non-membership warehouses, and mass merchandisers like Ross.
Even more alarming is the growing realization among their harried shoppers
that traipsing through endless aisles of merchandise just to a roll of tape and
some underwear isn‟t worth the savings. In India, Pantaloon group in the
name of Big Bazaar has recently started.
Category Killers: These are the giant retailers that dominate one area of
merchandise (office Depot, Tower Records and The Sports Authority). They
are able to buy bathroom titles; file cabinets; electronic goods or pet food in
such huge volume that they can then sell them at price even fairly large
competitors can‟t match. The outlook for this category is better than for
many of the more general discounts, but the same employment caveats
apply. For most job seekers, these companies offer earn- and-learn
experiences with vendors and distributors before you move onward and
F gure 3 Source:: KSA Technopark
Source KSA Technopark
The Changiing iin Indiian Consumer
The Chang ng n Ind an Consumer
There is distinct evidence to suggest that the Indian Consumer, irrespective
of her socio-economic origin, be on a self-appeasement mission. Greed is
good and she wants more of the best that life has to offer. As she traverses
this path, we find that she defines fulfillment “materialistically and
emotionally” no different from her more moneyed counterpart. SEC- based
classifications notwithstanding6; the Indian consumer is out to seek pleasure
and lifestyle. 177 million households in India are at various stages of
defining their “self” from the “common”. The asset acquisition rate of the
average Indian consumer has been on the rise ever since India opened its
markets in 1991, and is expected to grow at an even greater rate.
Also, the Indian consumer is more discerning and demanding than ever,
especially due to the increased levels of exposure to international lifestyles
and better levels of education. Shopping is increasingly becoming a family
experience, showing a clear shift from the need-based shopping trends of the
pre-liberalization India. Also, a whole segment of post-liberalization
children, constituted by a whopping 100 million 17-21 year olds is coming
of age, and the segment is spending like never before.
One noticeable trend in this regard has been the rise in the spending capacity
of the Indian middle class. The Euromonitor retail survey estimates that
there has been close to a 20.9% growth in the real disposable income of the
Indian middle class in the four-year period of 1999-2003. Complementing
this growth in income is the rise in the middle and high-income population
itself. This demographic segment, which is widely believed to be a main
driver of the global retailing industry, has been rapidly growing at a pace of
10% per annum over the past decade.
Also of significant importance is the rise in the affordability of the Indian
consumer. A host of their related factors like falling interest rates and easier
availability of consumer credit have facilitated the Indian consumer‟s
affordability. Also, the increasingly competitive nature of the Indian market
in categories like FMCG7 and consumer durables has increased consumer
spending, by ensuring availability of a greater variety and quality of
products at never before price points.
SEC: All India SEC Classifications in Appendix
FMCG: Fast Moving Consumer Goods
This change in consumer spending patterns has turned out be a major driver
of the rapid retail revolution that we have been witnessing over the past few
years. Refer to ( Appendix: Evolving Consumer Demographics)
Custtomer Rellattiionshiip Managementt ((CRM))
Cus omer Re a onsh p Managemen CRM
CRM is a management approach that seeks to create, develop and enhance
relationships with carefully targeted customers to maximize customer value,
corporate profitability and shareholder value. CRM leverages information
technology (IT) to implement relationship-marketing strategies. Already
customers are getting actively involved, either directly or indirectly with
production processes. They make suggestions, they ask for smaller, brighter,
CRM is not a tool that is specific to any industry type, so there is no one
single definition of Customer Relationship Management. It is up to the
organization to formulate one for itself in order to achieve the CRM goals
that it sets for itself. Companies that have adopted CRM regard every
customer as an individual with specific needs and tailor their services
accordingly. Information Technology comes into the picture to help manage
Customer relationships in an organized way.
On an average a company has only a 5 to 20 percent probability of making a
successful sale to a new prospect but has a 60 to 70 percent probability of
selling again to active customers. It would be wiser to invest in encouraging
an existing customer to purchase again. Companies that followed up lapsed
cases experienced 20 to 40 percent successful sales. Without a doubt
customer retention is vital to every company's long-term profitability and
success and CRM, through target selling and customer loyalty programs, can
help to motivate the best customers and to remain loyal as a method of
increasing revenues internally.
Rising customer expectations have stiffened the competition among
companies to improve their customer support services. Today‟s customer
has access to the latest technological devices that give him instant
information, allows him to make instant transactions, buy, sell or transfer
money, he has access to it all over his palm top, PDA, mobile phone or
desktop. Today‟s customer is knowledgeable, he knows what he wants and
the Internet is a powerful tool in his hands.
More than ever, customers today have an important role to play in the
product lifecycle. Customers are continually pressing for improved support
services in terms of product coverage, business-ease, response-time and
price (or at least value-for-money!).” With a wide variety of services
available at competitive prices and easily accessible at the click of a button,
improved customer services are becoming the need of the day. Customers
are driving companies to migrate from being purely product-centric to
purely customer-centric, taking care of all customer requirements even
before they are demanded.
From current customer trends, it is easy to define the future customer. The
volume of information available via the Internet will make the future
customer a knowledgeable one. As more customers and businesses go
online, the Internet will foster a global community that communicates at
real-time. Customers will have access to a wider variety of products and
prices to choose from. To stay ahead of competition, companies will have to
anticipate customer needs even before a need arises. As more and more
women began to drive two wheelers in India, the smarter manufacturers
realized that one factor that might hold a sari-clad woman back, would be
having to kick-start her bike. Along came the self-starter button and presto, a
surge of women two wheeler drivers! The success of companies will depend
on how well they are able to predict customer behavior, anticipate
requirements and provide for them. The future customer will have a larger
stake in the company‟s project plans, his input will have value and his
feedback will be consequential to the development of products or the way a
service is delivered. This implies a significant alteration in the supply chains
that we see today.
F gure 4
The CRM strategy should include:
(a) Operational CRM: Automating interaction with the customers and sales
(b) Analytical CRM: Sophisticated analysis of the customer data generated
by operational CRM and other sources like POS (Point of Sales)
transactions, web site transactions, and third-party data providers.
A typical retail organization has a huge customer base and often customer's
needs are fairly differentiated. Without the means to analyze voluminous
customer data, CRM Strategy is bound to be a failure. Hence, Analytical
CRM forms the core of a retailer's customer relationship strategy. Marketing
and sales functions are the primary beneficiaries of Analytical CRM and the
Main touch points from where the insights gained about the customer is
absorbed in the Organization. Analytical CRM uses the key business
intelligence tools like data warehousing, data mining, and OLAP to present a
unified view of the customer.
Following are some of the uses of Analytical CRM In Retailing
Customer segmentation is a vital ingredient in a retail organization's
marketing recipe. It can offer insights into how different segments respond
to shifts in demographics, fashions and trends. For example it can help
classify customers in the following segments
1) Customers who respond to new promotions
2) Customers who respond to new product launch
3) Customers who respond to discounts
4) Customers who show propensity to purchase specific products
Campaign/ Promotion Effectiveness Analysis
Once a campaign is launched its effectiveness can be studied across different
media and in terms of costs and benefits; this greatly helps in understanding
what goes into a successful marketing campaign.
Campaign/ promotion effectiveness analysis can answer questions like:
Which media channels have been most successful in the past for various
Which geographic locations responded well to a particular campaign?
What were the relative costs and benefits of this campaign?
Which customer segments responded to the campaign?
Customer Lifetime Value
Not all customers are equally profitable. At the same time customers who
are not very profitable today may have the potential of being profitable in
future. Hence it is absolutely essential to identify customers with high
lifetime value; the idea is to establish long-term relations with these
customers. The basic methodology used to calculate customer lifetime value
is - deduct the cost of servicing a customer from the expected future revenue
generated by the customer, add to this the net value of new customers
referred by this customer, and discount the result for the duration of the
relationship. Though this sounds easy, there are a number of subjective
variables like overall duration of the customer's relation with the retailer, gap
between intermediate cash flows, and discount rate. We suggest data mining
tools should be used to develop customized models for calculating customer
Customer Loyalty Analysis
It is more economical to retain an existing customer than to acquire a new
one. To develop effective customer retention programs it is vital to analyze
the reasons for customer attrition. Business Intelligence helps in
understanding customer attrition with respect to various factors influencing a
customer and at times one can drill down to individual transactions, which
might have resulted in the change of loyalty.
Retailers use the vast amount of customer information available with them to
cross sell other products at the time of purchase. This effort is largely based
on the tastes of a particular customer, which can be analyzed using BI tools
based on previous purchases. Retailers can also 'up sell' - sell more
profitable products - to the customer at the time of contact.
Pricing is one of the most crucial marketing decisions taken by retailers.
Often an increase in price of a product can result in lower sales and customer
adoption of replacement products. Using data warehousing and data mining,
retailers can develop sophisticated price models for different products,
which can establish price - sales relationships for the product and how
changes in prices affect the sales of other products.
Retailers can optimize the overall marketing and promotion effort by
targeting campaigns to specific customers or groups of customers. Target
marketing can be based on a very simple analysis of the buying habits of the
customer or the customer group; but increasingly data mining tools are being
used to define specific customer segments that are likely to respond to
particular types of campaigns.
F gure 5
Fiigure 6:: Dynamiics off Rettaiill Busiiness and Rettaiill Mappiing
F gure 6 Dynam cs o Re a Bus ness and Re a Mapp ng
Fiigure 7:: How CRM Delliivers and No Takers ffor CRM
F gure 7 How CRM De vers and No Takers or CRM
Desiigniing a custtomer lloyalltty program
Des gn ng a cus omer oya y program
Customers' expectations are increasing. They want: service, products that
meet their Needs, value for money and added benefits. In response to this,
retailers are stepping up. Their promotional activity to the extent that sales
and special offers have become Everyday affairs, rather than end of season
stock clearances. As a result margins are Being eroded to dangerously low
levels. Some retailers have introduced card-based collector schemes that
give electronic points According to the customer's spend, which are
subsequently exchanged for gifts or Discounts. The more strategically
minded retailers are introducing systems that monitor Customer behavior in
order to respond better to their increasing demands. Both Approaches are
commonly known as customer loyalty programmes, however, the latter
Approach is the only one that is sustainable and really merits being
considered as such.
The basic electronic points schemes are just another way of delivering a
promotion and rely upon giving a higher value incentive to differentiate
from the competitors. The objective should be to maintain the customer's
loyalty, not by bribery, but by offering a Better service, thus preserving
margins and profitability. This section examines the elements that need to be
considered when designing a customer loyalty programme. It defines the
strategic objectives and examines what components of the scheme are
needed to achieve the benefits, including mechanics and customer rewards.
Finally, it reviews some data analysis techniques that can be used to refine
the scheme in the light of experience gained from running targeted
What is Customer Loyalty?
Customer loyalty involves building a long-term relationship between the
supplier and the individual customer in order to improve profitability. To
achieve this the supplier needs to understand the customers' spending habits
and know what products they currently buy (and don't buy) so that any
communication can be meaningful. Customers respond better to someone
who understands their special needs - a personalized approach offering
products that are really relevant is more likely to produce the required result.
Ideally, all customers need to be approached with something that motivates
them to spend more if maximum growth is to be achieved, which is not
possible from a single, all encompassing campaign. If traffic through the
store needs building or a supplier has a new product, the focus will be on
ways of attracting new customers. In all cases there is an essential need to
know and understand the spending habits of existing customers and what
entices new shoppers into the store. A successful scheme is one that
engenders sustainable, long-term loyalty at an affordable cost. This cannot
be achieved with bribery alone, the customer needs to feel wanted and
special. It should be embraced with a comprehensive customer care
Objectives and Benefits
When designing a customer loyalty programme it is, first, important to agree
the strategic objectives. These will differ from scheme to scheme. To
increase profit the aim will be to change customer behavior and, in
particular, they‟re buying habits. In a declining market customer retention
may be the only objective. A number of key objectives and the benefits to
expect are discussed below:
increase the turnover and profit
establish long term relationships
improve product awareness
cross sell departments
improve the effectiveness of direct marketing
Increase Turnover and Profit
In any business, other than a declining market, the key aim of a customer
loyalty scheme must be to increase profitability - there is no point in
rewarding customers for their loyalty and getting nothing additional in
return. To be worthwhile increased loyalty must result in increased spend
(i.e. turnover), whilst retaining reasonable margins, thus improving profits.
Recent tests have shown that a spend related reward scheme can increase
average spend by 30%, however, a realistic target would be 10 to 20% on a
long term basis.
Clearly, one approach to retaining existing customers is to offer a suitable
reward scheme. However, giving away something to those customers who
would have made the purchases anyway is not cost effective. Instead of
expensive "give-away's" the customer needs to be given special privileges as
a member of an elite and prestigious club. By raising the self-esteem of the
customer and communicating on a personal level with worthwhile
information, and making offers which are relevant, the perceived value can
be made to appear high but at a relatively low cost.
Establish Long Term Relationships
By definition, this should be one of the aims of all customer loyalty
schemes. It is widely Accepted that it is a lot easier (and more cost effective)
to sell to the existing customer base. Also, some organizations establish a
dialogue with their customers in order to obtain regular feedback on its
products and services rather than conducting ad-hoc customer surveys. It is
vitally important to know the customer's view of new and existing products
and to gauge their reaction to targeted promotions.
Improve Product Awareness
A loyalty scheme that restricts redemption to November and December will
increase the frequency during the key months when Diwali products are on
display, therefore increasing awareness. Also, the availability of a new
product can be communicated to those customers likely to be interested with
the aid of a suitable customer marketing database.
Personal recommendation is the best way of attracting new customers - a
genuinely loyal Customer will become an advocate for the organization.
Two recent trials demonstrate the pulling power of a loyalty scheme. With
no advertising other than point of sale within the stores dramatic increases in
club membership were seen. In both cases a loyalty scheme was devised for
members of a long established club.
Out of town stores normally have a higher average spend than high street
stores because Customers want to make it worthwhile to travel the distance.
Consider the gain to be made with one additional visit per customer where
the average spends is RS 300 and the annual frequency is 4. This situation is,
again, often related to the customer segment and suggests targeted offers
would be beneficial. An appropriate reward scheme might be visit related
for, example, spend over RS 300 on 4 occasions within a month to earn a
reward, or a free instant win prize on each visit.
Cross Selling Departments
High street chemist chains stock a wide variety of products and often enjoy
high frequency but very low averages spend. This is partly as a result of an
association certain customer groups have with a particular product, for
example, ladies may buy cosmetics on a regular basis but nothing else. If
this situation can be identified there is an opportunity for cross-selling
These days mark-downs have increasingly become a standard way of selling
rather than a Mechanism for clearing unwanted or ends of season stock. This
has resulted in eroded margins and reduced profits. A loyalty scheme will
reduce the need to employ these tactics. Where stock needs to be cleared an
alternative to price reductions is to make special offers to loyalty customers.
This has the added benefit of increasing the value of the loyalty scheme to
existing members and providing a powerful reason for new customers to
Improving the Effectiveness of Direct Marketing
Mails are costly. Indiscriminate mass mails are wasteful and even more
costly. Whereas there is, perhaps, little scope to reduce the cost per person of
direct marketing, 'hit' rates can be improved dramatically by targeting those
customer groups most likely to respond to the product(s) on offer. This
means a bigger return from the campaign or an equivalent return from fewer
mailed customers. To achieve this we need to understand what products are
likely to appeal to particular customers groups.
Elements of a Successful Scheme
Since, by definition, a scheme needs to be long term and cost effective, the
customers' interest needs to be maintained. To achieve this it is important to:
Make the scheme understandable and easy to use
Offer a reward with wide appeal and a high perceived value
Communicate with the customer in a way which is meaningful to them
Establish a way of "locking-in" the customer
There is no universal reward mechanic that will work for everyone. It has to
be designed taking into account the:
Frequency of purchase
Value of purchase
Customer types and groups
Whatever is appropriate it is essential to communicate to the customer what
he/she has Earned. In a reasonably high frequency outlet this will normally
mean telling the customer his/her cumulative "points" balance at the point of
sale at every purchase. Statement based schemes where the customer is
informed at three monthly intervals are only appropriate for low frequency
operations. Constantly reminding the customers of the benefits that are
accruing will maintain interest and motivate them to reach their target even
quicker. Depending upon the objectives the "points" can be related to one of
To increase average spends. There may be a minimum purchase necessary
and increasing Level of points or discounts earned for an increasing spend.
Particularly useful for low value products. For example: 1 point for every RS
50 done by most of the retailers in India.
Appropriate to build traffic through the store, where the propensity to spend
is already high for visitors. Also, useful to make customers aware of new
products on display in the store at the start of a new season. For example:
spend RS 300 on 4 separate visits in a month and receive 100 bonus points.
Special offers to attract customers on light days. For example: double points
Provides the means by which suppliers can participate in the scheme by
funding special offer points.
To motivate the customer to participate the choice of reward is vitally
important. Of course, it is highly dependent upon the type of customer, but
in all cases it should be:
Attractive and desirable to the target audience.
Achievable in a reasonable timescale whilst bearing in mind that the
customer should be made to work for his/her reward but not feel that it is
only appropriate for the very high spenders. Increasing value rewards for
increasing spend enables the impatient to receive some reward quickly to
get them "hooked".
A range of rewards to give broad appeal to a wide range of customers.
A high perceived value to make it a genuine reward for loyalty.
Low actual costs. Can be achieved by offering shelf products, which have
A cash-in dates so that the liability can be calculated and cleared down.
Interestingly, a Cut-off date does increase spend as customers strive to
maximize their points before
Types of Reward
These fall into four categories:
For example: gift vouchers, discounts or services. Generally low cost
because the reward has a built-in margin. Applicable when the product is
desirable and is not replacing genuine purchases that would have been made
anyway. Perhaps surplus product can be used (as long as it is still desirable).
Not appropriate if there is no direct benefit to the customer or his/her family
such as free petrol to a company car driver.
For example: Most of the airlines use in India Free Air Miles, which can be
used for discount travel, holidays, car hire, hotels etc. Provides a good
mechanism for broadening the appeal and providing a range of rewards
Gifts as in terms if Vouchers given by Retailers to their customers.
Increasingly popular for schools, charities etc. The reward has to be
appealing to the charity concerned. Though hardly any retailers use it in
Funding the Reward
It is important to understand from the outset how the reward is to be funded
and to calculate the likely cost (and the benefit). Again, the strategy will
depend on the individual retailer's circumstances and objectives.
Examples are as follows:
Increased frequency (and hence spend)
Offer spare capacity (e.g .hotel rooms, travel seats etc)
Increased privileges (at little or no cost)
The aim should also be to retain customer's loyalty through the relationship
marketing by making full use of the database. The reward can be reduced
over time. Some retailers look to their suppliers to fund their promotions by
offering rewards based entirely on individual product purchases. However, it
is important not to confuse supplier led brand switching schemes, which
have no place in a customer loyalty scheme. The purpose is to increase
spend not switch it from one product to another.
Capturing Customer Data
In the right hands a marketing database presents an exciting opportunity to
increase the value of existing customers as well as providing a means of
attracting new ones. However, as many retailers, suppliers and service
providers have already discovered, it can be an embarrassingly expensive
millstone if not properly thought through. Storing data is expensive. Before
embarking upon the building of a marketing database it is important to have
Categories of Data to Capture
It has already been pointed out that storing data is expensive so it is
important to capture only that which is really needed. The category of data
detailed below is a comprehensive list of what can be collected.
This is fairly static data including:
Name and address
Family and ages
Job and income level
Residence (own, rent)
Credit cards held
Special needs etc. etc.
Not all customers will give all this level of information on first asking. It is,
however, possible to deduce certain details later. For example: if payment
method is captured on each purchase we can soon learn what credit cards are
held, if toys are purchased we can gain details of the children from the
guarantee registration card, etc.
How often does this person visit the store? On what days of the week? Hour
of the day? Is the frequency increasing or decreasing? Do certain types of in-
store promotions or mailing campaigns effect the frequency?
When did the customer last visit. Is this potentially a lost customer?
Is this increasing as required? Does it vary by customer profile? Do
particular types of promotions affect it?
Is the customer loyal to a particular store? What distances are traveled, on
what days? Will this customer travel give the right incentive?
Offers what special offers are taken-up?
Departments what is the level of spend by department?
How does this vary by season and promotion?
Lines what is the typical shopping basket of this
Capturing the data can be relatively straightforward but it is unlikely that
anyone will really need to maintain a history of each and every product item
purchased by each and every customer. For a large supermarket chain this
would amount to approximately 500 gigabytes per annum!
Monitoring, Measuring and refining the Scheme
As has been stated earlier in this paper it is important to define the objectives
at the start and design the scheme and system around achieving those
objectives. The dichotomy is that in order to design an effective scheme
there needs to be a good understanding of the customer and one of the
purposes of the system is to capture data to achieve this.
Therefore, designing a successful scheme has to be an iterative process:
1. Design basic scheme
2. Implement system
3. Monitor customer behavior
4. Measure response and performance
5. Refine the design in the light of experience
6. Return to 2. Above
It is not the purpose of this paper to examine ways of analyzing customer
data, however, two statistical techniques (regression and cluster analysis) are
mentioned as examples for targeting and segmentation. Considerable
advances are being made in this area with the emergence of "intelligent"
techniques, which are self-learning (e.g. neural networks).
Targeting customers is a way of improving the response rate to promotions.
Measuring the size and characteristics of the target audience and the
response and behavior to various offers, and then using the data to improve
A common technique for this is regression analysis, which is based on past
Identify customer purchasing characteristics or attributes
Score individuals according to the characteristics
Target the high scoring individuals in future promotions
Customer characteristics are purchase related (e.g. frequency, average
Departments/products purchased, stores visited etc.) but can also be linked
to lifestyle data.
The high scoring individuals (i.e. those with common characteristics) are
expected to yield a higher response rate.
Segmentation involves defining customer groups and devising separate
marketing approaches to each group. Customers within a segment are as
similar as possible and customers in different segments are most dissimilar.
It is expected that customers in the same group will react to promotions in a
Cluster analysis is a statistical technique for segmentation. This again relies
upon identifying like characteristics, which can be lifestyle based but
preferably uses purchasing data:
Identify customer purchasing characteristics or attributes
Divide into large number of segments
Reduce segments to a manageable number by combining segments with
Characteristics (nearest neighbor method)
Market to customers in same segment
This technique enables appropriate and relevant offers to be made to
customer groups, which builds stronger relationships since the marketing is
more meaningful to the individual customers.
Whereas there is every likelihood that in five years time most retailers will
have a customer loyalty scheme of some form, it is important to carefully
analyze the objectives and the benefits that are expected. And then to
constantly review the benefits that is actually being achieved and refines the
In summary, you should only embark on such a system if one or more of the
following is true:
You can benefit from knowing your customers and they‟re purchasing
You have an attractive proposition that is sustainable over the long term
There is a competitor threat emerging that can be defended by locking in
Into long term loyalty programme
Your competitors are implementing a scheme (?)
It will retain your share of a declining market
The cost/benefit analysis shows that profitability can be increased as a result
Custtomer Loyalltty Programs off Rettaiilliing iin Indiia
Cus omer Loya y Programs o Re a ng n Ind a
A loyalty programme is an advanced stage of a well-managed CRM process
and must be graduated to and not jumped into. Launching a loyalty
programme depends on the Life State of a mature CRM system, data
maturity and organizational preparedness. It needs some amount of
investments in technology, specialized software, statistical tools and
logistics. Earned rewards program by most of the retailers in the form of
vouchers in India are actual cash payoffs, differed or otherwise and need
efficient management. The best loyalty programmes are driven out of
customer anaytics that work on mature data.When customers opt in to a
permission-based loyalty programme, they are more milling to share
information as well, enabling retailers to create a dialogue with customers.
Clearly, there is no one, right way to market through any one channel,
but there is a right way to market to customers across several
channels, and a loyalty marketing programme can help. A successful
programme assumes that all channels are included in the customer
relationship that measurable objectives have been established, and
that promises are kept. With this foundation in place, a programme can
boast the following characteristics:
1. Visibility: A loyalty programme must be highly visible regardless
of the channel. A Web site can show special offers for programme
members, a catalogue can feature the programme prominently and
shoppers in the store should be asked if they'd like to join.
Cross-promotional materials should be present and easily obtainable.
2. Simplicity: To succeed, a loyalty programme must be easy to use in
all channels. Minimize the fine print; the more the customers have to
figure out, the less they like the programme.
3. Value: The balance of reward and recognition must establish value
in the customer's mind and motivate incremental purchases. Programme
rewards should be credited regardless of where the customer prefers to
shop. And while the price of merchandise should be consistent across
all channels, don't be afraid to offer incentives to encourage
customers to try a new shopping experience.
4. Trust: Keep the promises made by the loyalty programme. If the
promise is for a personalized, highly valued service, don't bombard
program participants with meaningless offers that obviously are
available to everyone.
Recent studies indicate that customers who shop more than one of a
retailer's channels - perhaps looking online and buying in the store
or reading the catalogue/leaflet and buying online-spend more money
with that retailer than single-channel shoppers.
The best way to coordinate marketing objectives across channels is to
build a knowledge base of customer behaviors and preferences.
Retailers cannot afford to let legacy systems interfere with building
this knowledge base. A well-conceived and executed loyalty programme
can be the key to turning invisible shoppers into hand-raising
volunteers and profitable customers
The organized retailers in India have started with their loyalty programmes
for instance Pantaloon: Green Points, Shoppers Stop: First Citizen, Ebony:
Elite club, Lifestyles: The Inner Circle and Westside: Club West these
loyalty programmes are in built up with the CRM strategies for each
companies. Though every loyalty club has its pros and cons to the program
but the main reason of worry for the organized retailers in India is the
amount of average Walk Ins purchasing from the stores. The people visiting
the Malls or specific store locations unlike, Wal-Mart in US these companies
haven‟t yet been able to fulfill the need of the customers towards the loyalty
As part of my dissertation research shows that most of the loyalty clubs in
India are similar in their purchase schemes and privileges. I would further
support in other sections of the dissertation.
Loyalltty Program off Organiized Rettaiillers
Loya y Program o Organ zed Re a ers
Trent LTD‟s Westside stores promise customers an international shopping
experience and value-for-money. High quality, contemporary designs and a
plethora of products have been successfully balanced to create the ultimate
What began as just one store at Bangalore, has now expanded to other cities,
such as Mumbai, Hyderabad, Chennai, New Delhi, Pune, Kolkata, Nagpur
and Ahmedabad. All merchandise at the store, except cosmetics and
perfumes, bears the Westside label, with the range being constantly updated,
and contemporaries. The Westside stores have several departments to meet
the varied shopping needs of customers. These include the menswear,
womenswear, lingerie, kidswear, household accessories, cosmetics and
perfumes sections. Complementing the shopping ambience, is a coffee shop,
Café West, managed by the Taj Group.
The store enjoys a unique positioning as a 100 per cent private label
merchandise store. It comes out with 35,000 new designs every year. In
house brands include Richmond and Urban Angels, besides store brands
Westside and Westsport. The customer loyalty program is discussed in detail
in the Appendix.
The loyalty programme Club West has a membership of 200,000 customers,
who are offered services like Privileges.
Name of the Loyalty Club: Club West.
Aim: To provide customers with the finest shopping experience with
Enrolment Same day purchase of Same day Purchase of
RS 2000 or cash RS 5000
payment of RS 150
Associate Membership YES YES
Profile form 1 point for every RS 50 1 point for every RS 40
Gourment West YES YES
Special discounts at
Treasure West YES YES
Special offers from our
Privileges West - YES
at Café West
Exclusive Shopping YES YES
Invites for Special - YES
Home Delivery after - YES
Alternation ( on
minimum purchase of
RS 2500 )
1) Exclusive shopping hours only for members during sales
2) Advance intimation of all in-store promotions and special offers through
3) Special discounts on dining at select restaurants
SWOT Analysis on Loyalty Program
Exclusive customer friendly staff
Loyalty follow up through different customers is excellent
Exclusivity to brand building done on televisions and media. Using brand
endorsers like Yuvraj Singh is a fruitful effort. The company should also
mention about loyalty club benefits
No extra value added questions asked unlike other retailers
Online up gradation unlike other retailers for loyalty club members not
High cost on sending mailers to different addresses
Importance of card designing not taken properly compared to other
Up gradation to new technology to enhance customer shopping
The gap between customer relationship management and customer
loyalty needs to be updated towards organization core values in terms of
Expansion plans to towns above 1 lakh in population could be a good
Competition is catching up with the retailers in the same industry
USP needs to be carefully guided in order to gain competitive and
The linkage between what a customer wants and prefers If not satisfied
would transfer customers to different retailers
Lifestyle, the department stores chain from Dubai based Landmark Group,
started operation in India in the year 1998, with the mission to be market
leader in the large format-retailing segment.
Currently the company has 9 stores across 4 cities in the country. These
outlets together occupy 320,000 square feet of retail space. While Mumbai
has three Lifestyle stores, Chennai, Hyderabad, Bangalore, and Gurgoan
have one each. Sizes of the stores vary between 27,000 square feet and
55,000 square feet. One distinct advantage is that the stores leverage upon
global supply chain of over 300 stores in the Middle East for the Indian
operations. Private labels contribute about 10 percent of the total sales.
Lifestyle stores have arranged their merchandise under five different
sections. Namely Splash men‟s and ladies wear, Shoe Mart footwear and
leather accessories, Baby shop kidswear, toys, infant basics, nursery
furniture, Home Center home furnishings, gifts, Lifestyle perfumes and
cosmetics, health and beauty accessories and adult gifts. The customer
loyalty program is discussed in detail in the Appendix.
The Inner Circle, boasts of a 240,000 strong membership and it contributes
to about 40 percent to total sales.
Name of the Loyalty Club: The Inner Circle
Aim: Provide extended value to customers who frequently shop at Lifestyle
A customer who makes a purchase of RS 2500 on a single visit or Payment
of RS 150 towards the loyalty club. For every RS 50 worth of goods
purchased by the customer, a customer earns 1 point. Every 100 points
collected entitles you to get a Gift Voucher of RS 100.
1) Haute and Spicy In house fashion magazines by world of fashion
2) Every outlet has a coffee island managed by Qwiky‟s
3) Discounts and exclusive invitees to get together events
Most admired large format retailer at IFA 2003 and 2004
Distinctive image about Lifestyle as a brand on consumer perceptions
No 1 retail company by Business World for year 2003
Customer oriented programmes like SMS, Made for each other and Shop
a surprise would help walk ins in the store
Manually handled loyalty program apart from the auto generated card
Nothing about the store on the Website
Data feeding and sending the reports daily to the central office in
Chennai needs a lot of hard work for official use
A consumer can redeem the same points twice in a day if he happens to
walk in different Lifestyle stores on a single day
Development of Customer Loyalty program yet to match with the
Customer Relationship management towards the specific company goals
Advantage to competitors in the form of Loyalty simplicity
Online up gradation is a necessity for Customers as well as the company
The price ranges of products is for the elite class urban consumers who
need extra benefits other then the simple loyalty program unlike other
Explore and compare the loyalty program of US retailers to out smart the
A group of K Raheja‟s Shoppers Stop LTD is considered the pioneer in
providing Indian consumer a taste of international class shopping when it
opened its first department store in Mumbai in 1991. Today, it is a chain of
more then 16 stores across 9 cities in India. It covers about 600,000 square
feet of retail space.
The chain is also credited for being the largest retailer for hi end popular
fashion brands like Levi‟s Strauss, Pepe, Arrow, Zodiac, Ray-Ban and
Shoppers Stop was the first retailer in the country to have bar coded
garments, co branded credit cards and retail ERP. It acquired “Superbrand”
status in 2003. The company has also been recognized as “best IT user in
retail by NASSCOM- Economic Times.
Shoppers stop has a vibrant loyalty programme First Citizen with more than
Name of the Loyalty Club: First Citizen
Aim: Experiencing the loyalty to total commitment by the company towards
its customers in terms of value for money
Benefits Golden Glow Silver Edge Classic Moments
First Citizenship - - RS 150
First Citizen 1 Reward Point 1 Reward Point 1 Reward Point
Reward Points ( for every RS 34 for every RS 50 for every RS 100
on net purchases) purchased Purchased purchased
Extra Reward 2% 1% -
points on Stop!,
Program Partners 1% 0.5% 0.25%
Associate Card 2 free ( 3rd RS YES (RS 100 for YES ( RS 100 )
100 ) upto 2)
Regular updates YES YES YES
Exclusive Cash Exclusive YES YES
Counters Golden Glow
Free Parking YES- reserved YES YES
parking on first
cum serve basis
Valet Parking YES YES YES
Free First Update YES - -
Home Delivery YES - -
Out Store offers YES YES YES
Exclusive YES YES YES
Best IT supported Customer Loyalty program in India
USP of the company being in high regard as one of the best retailers
Product Authenticity of World Famous Brands in house
Complicated points Systems but, very well supported by statements
Follow up to customers unlike other retailers isn‟t done to match with the
standards maybe because of lack of skillful manpower in the organized
Being a market leader in the use of IT supported systems the company
should also start building on new technologies like finger print customer
Introduction of new cards relating to college goers should be introduced
to attract them to shop
Smart card to be used like swipes to enhance the card exposure
Loosing out on urban middle level consumers to Pantaloon
Expanding the stores to semi urban areas is necessary otherwise other
retailers would catch up with the sales and brand presence
Need to promote shoppers stop as a brand on television commercials like
A unit of Delhi- based Ebony Retail Holdings, the Ebony store is one of the
new retail companies in India. Ebony started its first department store in
October 1994, and by March 2004 it had eight operational stores covering
150,000 square feet of retail space. The stores aim to provide customers an
experience of world class merchandise at affordable prices across all the
Ebony sells menswear, womenwear, lingerie, kidswear, household
accessories, cosmetics, perfumes, books, music, personal care, cosmetics,
jewellery and luggage. The store‟s private label, ETC contributes about 22
percent of the apparel sales. It has also come up with a new concept of
Studio Ivory collections of designerwear for the middle income segment.
Besides, the company also has a concept bookstore called Wordsworth
Ebony runs a successful loyalty programme, Ebony Elite Club, which has
enrolled 50,000 members.
Name of the Loyalty Club: The Ebony Elite Club
Aim: To provide customers with online shopping experience as well as
enhance value shopping to employees
An applicant becomes eligible to apply for Elite Club Silver Membership
when he/she has purchased merchandise worth RS 2000/-* or above from
any Ebony store, or on payment of RS 100/- as enrolment fee.
An applicant becomes eligible to apply for the Elite Club Gold Card
Membership when he/she has purchased merchandise worth RS 20,001/-*
within his/her Silver Card Membership tenure (2 years).
B2C business model for the Website for Customer Loyalty
Strong market presence in North India
Outlets specifically suited towards Market Areas
To small as a retailer to expand the areas of business
The brand is loosing out in identifying its customer relationship program
compared to other retailers
Up gradation of skillful people working in the organization necessary
With the B2C Website the company should look to expand and tie up
with other web portals like India Times to gain customers
Expand operations in other parts of India
Small retailers near by to the areas of the shop like Big Jobs in South Ext.
Need to introduce Category Management in the store formats
In 1999 Kishore Biyani, CEO of Manz Wear Pvt. LTD changed the
companies name to Pantaloon Retail (India) LTD. The company now
operates with 37 stores in 4 distinct retail formats across the country –
lifestyle (Pantaloons), food and grocery (Food Bazar), discount hypermarket
chain (Big Bazar) and seamless mall (Central). In all they cover 954,000
square feet of retail space.
Today, Pantaloon is the largest retailing company in India in terms of value..
Pantaloons loyalty programme Green Card has an impressive membership of
about 400,000 and the company is clearly a leader in the industry when it
comes to retail knowledge base and supply chain management practices,
which is focus area for a retail.
Name of Loyalty Card: Pantaloon Green Club
Aim: Enhance the value of shopping through a family store
Privileges One Star Two Star Five Star
Green Points 1 point for RS 50 1 point for RS 40 1 point for RS 25
Green Bonus NO YES YES
Green Statements Every 3 Months Every 3 Months Every 3 Months
ADD- on- Card 1 ADD- on Card 2 ADD- on Cards 3 ADD- on Cards
for Family free free free
Green YES YES YES
Green Offers YES YES YES
Green Drop NO YES YES
Green Exchanges Upto 60 days Upto 90 days Upto 90 days
Green Service YES YES YES
Green Events NO 2 Events per year 6 Events per year
Green News YES YES YES
Green Channel No YES YES
Additional ADD- RS 100 per card Rs 100 per card Free
on Cards ( Max 3
Capturing the largest market share among retailers in India
Fast value creation and realization in semi urban markets
Enhanced Brand image in the form Big Bazars, Food Bazar and Gold
The Website Recently launched has not been properly managed in terms
of Customer Loyalty Program
Website yet to be fully integrated with the support systems
Customers only able to check points on stores from where card has been
Follow up on customers not properly managed unlike rival firms like
Marketing functions can be enhanced with the official launch of Website
Modernization of Customer Loyalty Service Desk
Corporate Social Responsibility can be done with the word green to
enhance customer values
Special Theme based launches can be done in order to generate higher
The shoppers stop customer loyalty program is very well organized.
Pantaloon needs to upgrade Information Technology in the product in
order to match with the companies customer relationship management
Anallysiis off Questtiionnaiire
Ana ys s o Ques onna re
Where do you like to shop?
Malls Markets Others
Most of the respondents go to near by areas to shop. The malls in Delhi are
mainly in Gurgoan, where weekend rush is a major pinpoint. The others are
markets like South Ex., Lajpat Nagar and Sorjani nagar.
Which Shopping stores do you
like to shop?
The preference towards the area of Mall holds the key to where people
frequently shop. The success of a store is concentrated towards the area of
the place and the brand value it holds in terms of the changing consumer
lifestyles. The average walk ins are high in Shoppers stop at Ansals and
Gurgoan because of the wholesome entertainment in the location of the
store. I believe if Pantaloon as a store can look for opportunities where there
is wholesome entertainment along with the Mall E.g. Forum in Kolkotta it
would surely add to their profits.
Are you a member of any
Shopping Store Loyalty
The Loyalty club members are less because of the number of people who
frequently shop at the same store in a particular area. The respondents I
asked questionnaire vary from places in Pantaloon, Ansals,Shoppers Stop,
Dlf Mall, Internet and marketing my mailers.
How did you come to know
about the loyalty club?
10 22 18
3 10 7
0 3 2 1 2
Ebony Pantaloon Shoppers Westside Others
Friends In store Internet
As you can see majority of the loyalty programs members are through In
store purchases. The loyalty clubs in India are at initial stage of getting the
customers. There are similar programs of every organized retailer for
membership. The criteria for Pantaloon are higher because of majority of
respondent from being collected from that area.
Which shopping club are you a
How long have you been a
20 8 4
10 18 4
5 1 8 7
Ebony Pantaloon Shoppers Westside Others
<1 year > 1 year
Rate Your Prefered Club
Ebony Pantaloon Shoppers Stop
Most of the people who frequently shop at the same stores are members of
two or more loyalty club programs. Most of the common is being Shoppers
Stop and Pantaloon. Lifestyles as part of others have recently started their
loyalty program in Gurgoan. Shoppers Stop is most preferred loyalty club
with members getting updates and knows how about the store regularly.
Pantaloon loyalty program isn‟t followed in terms of its CRM processes
unlike Shoppers Stop. Westside stores follow up is very punctual in terms of
their reminders to their selected customers.
What offers do you get by those
Discounts Promotions Points Gifts
All the loyalty programs provide similar offers. They invite you to different
events depending upon your membership relating to the card you hold.
Pantaloon Loyalty club in terms
20 bonding with
10 services of the
The respondents who were members of pantaloon loyalty club were 24. The
graph clearly shows that the staff of pantaloon is very good and helpful in
terms of the services. Unlike most of the shoppers people aren‟t satisfied
enough with the kind of reward structure the company provides. But, the
best part of the people is the kind of promotion offers differs from the rivals.
I think this can be a Unique Selling Preposition for pantaloon stores all over
Why aren't you a part of any
shopping store loyalty
44% Don‟t shop
frequently at the
34% Not interested
Most of the time the shoppers aren‟t interested in any sort of loyalty program
because it doesn‟t add to much to their value. The criteria for the shopping
stores to have a loyalty program is to increase the frequent purchases of the
store but, somehow it isn‟t able to cater the services of the respondent who
is at an age where he or she is doing her graduation or about to start his or
Would you consider being a
part of a loyalty club?
Out of the 31 respondents most of the people aren‟t willing to be a member
of any loyalty club as such probably because of shopping at different places
in different areas. One of the mains reason being said by few customers is
they don‟t add to the overall value to their purchases.
Ratio of Respondent
SEC Classification Total
B2 14 00 27A2
Loyalty Club Members
B2 2 0 19 A2 Series1
As you can clearly see from the above graphs the loyalty club members are
usually high-end A1 customers who frequently shop at a particular place.
Most of the people are working executives and businessmen who find
ambience and latest fashions the key dominants to shop and enroll for the
Fiindiings ffrom Questtiionnaiire
F nd ngs rom Ques onna re
1) People respond better to Internet mailers then courier. I think that this
suggests the loyalty club members are technosavy so, there is a need for
all the loyalty clubs to start their online ventures in relation to their CRM
2) Most of the organized retailers in India are offering similar services on
customer loyalty programs. From a customer‟s stand he or she would
only be differentiated by the brand name of the company.
3) Shoppers Stop is the number one retailer whose Customer loyalty
program is very well integrated compared to the other retailers.
4) Pantaloon as a store appeals more to the working class and family
oriented people especially in Gurgoan.
5) Lifestyle is at a initial phase of launching the Customer loyalty program.
6) The average number of walks ins in a store is generally on the place of
7) The CRM strategies of all the organized retailers are still very less
integrated in terms of the international players like Wal- Mart and other
multi chain outlets in the World.
8) I think the changing consumer patterns are not tapped by the retailers for
the Customer loyalty programs
9) Banks provide cash back credit card in form of an extended discount to
various organized retail outlets.
10)The Reward structure needs a revision to tap in more customers so that
the profit margins can be increased
11)Overall, the companies should start looking for means to attract people
coming in at the store in the form of extended shopping hours, double points
on off days etc.
12)The pantaloon store should have a small area specified to the
entertainment segment inside the store in the form of contest etc.
Limitations of the Project
1) Most of the questionnaire filled by the customers are suppose to be a
loyalty club member of two or more clubs
2) Organized retailing in India as an industry has just started to prosper with
the emergence of FDI8 in retailing and emergence of shopping malls9 in
3) The loyalty programmes of organized retailers mentioned in the project
are very similar compared to international loyalty programs
4) The CRM implementation in retail has just been started in retailing in the
form of supplier goods purchase and customers
5) The survey is too small to predict the initial reaction of customers
towards different loyalty clubs
6) The organized retailing in India is just 2% of the total retailing compared
to the other parts of the world.
7) Time needed to study the CRM Process along with the loyalty programs
of the retailing industry
8) In relation to customer loyalty survey the organization also needs to do
employee loyalty survey which would form a base to an CRM process
FDI: Foreign Direct Investment
Shopping Malls: Trends of Malls in India given in Appendix
Concllusiions And Recommendattiions
Conc us ons And Recommenda ons
1) To study and analyze the gaps if any in the customer relationship strategy
of Pantaloons in India Limited
The gap between the consumers and the company CRM is not very wide.
The Indian retailing industry is just opening up to the world. I think in the
coming years we would be able to see a significant development in this area.
Though my study of the loyalty program is too early I think the company
can cater to the customers in a more convenient way. The company needs to
overall upgrade the website and also the customer service desk at the store.
A person who is a privileged customer has to benefit from the purchases he
or she makes at the store. I think the frequency of the purchases should be
increased. I would recommend the following: -
a) Have in store space for counters to entertain people which can act as a
crowd pulled and also jump sales
b) Upgrade the website and make Online purchases available to start
c) Upgrade the software of Siacom so that if on a given day a store has
double points giving to customers it can fulfill the needs
d) The track of data purchased by the customers need to follow up with
e) Marketing of the best loyalty program in India could be beneficial for the
store and also increase the profits
2) To study and analyze the customer loyalty program of Pantaloon Retail
India Limited and compare with other retail outlets
The Pantaloon Loyalty program is similar to all the organized retail outlets
in India with the only difference of Adding points during the sale period. I
think its too early to predict the future of the shopping loyalty programs in
India. The only recommendation I have apart from the things mentioned
above is to identify the club with some social cause. The name itself of green
can be identified with increasing awareness about plants in the world. I think
this would prove a reason for people to buy and also cater to the services
towards the environment.
3) To assess the opportunities of strategic alliances to generate traffic
Traffic at the store can only be generated if the location and the facilities at
the nearby stores are convenient. That is, combinations of a wholesome
entertainment along with the shopping experience. The tie-ups with Bank
Credit Cards would be handful but, it should also help the company to get a
automatic privilege customer. One way to increase the traffic would be to
have in store display counters of games in the store that would always keep a
shopper wanting to walk around the stores more.
The retailers also need to see how are their employees integrated to their
systems. I think they should also do a organizational employee survey in
relation to their attachment towards the organization and also integration of
new and upcoming technology in the organization.
Overall I think, The Customer Loyalty and the CRM strategies in India
should lead to a new developing concept about Customer Experience
Management. Customer Experience Management is an Extension to CRM.
Futture off Loyalltty Programs iin Indiia
Fu ure o Loya y Programs n Ind a
Think beyond the card
You cannot expect good results from implementing a loyalty program with a
standard activity and rewards aimed at everyone. So where do you start. If
you are thinking of revising you current loyalty programs you need to ask
your loyal shoppers for input on program design that can yield valuable
insights early on data driven segmentation along the multiple dimensions
can point to a wealth of new tactics for you marketing strategy. In the end,
retailers must strategize loyalty for all their consumers. Program
membership is only means of getting at loyalty and not everyone will
respond to your program. A store cannot aim to achieve much by just issuing
a numbered card and rolling out points. Loyalty programs can even be
invisibly, if necessary, the loyal customers should get special treatment
regardless of membership in the program. Retailers will need to respect
privacy, identify and enroll customers with minimal effort on the customers
part build customer knowledge incrementally and across all touchpoints and
increasingly sharpen their marketing messages to speak to the specific needs
of both card members and non card members. As the loyalty program
director of large retail outlets suggests “future of a successful loyalty
program as a transition from mass customer marketing to a more
personalized in store experience and one on one dialog with our best
customers”. It is the collection and analysis of customer data that will
enable the company to implement this futuristic vision.(see Appendix :
where retail executives want to spend money to improve their loyalty
Think beyond the price
It is an inescapable fact many customers are moved by price. But lifestyle,
complementary goods or convenience moves others. Research has shown
that although price is an important determinant for a customer choosing
among retailers, merchandise selection, quality, store cleanliness, location
and loyalty programs are also significant factors.
A single retailer concurrently serves the needs of different consumer types.
You need to invest in understanding attitudes and behavioral drivers and
tune programs so that they speak differentially according to different
customer needs. If you understand your customers, you can push the right
lever for the right customers. High value customers might not mind paying
more for a certain product, if there are other appeals to a particular store.
Conversely, low value customers might be more opt to purchase items if
they are discounted (hard benefits). Additionally, you can identify which
benefits turn off certain customers.
Next generation programs will offer tiered benefits according to deep
understanding of customer segments using advanced analytic tools, a leading
high end retailer was able to create 294 distinct segments within their loyalty
programs just by blending three dimensions of customer information. ( see
Appendix Multi dimensional customer insights lead to tiered loyalty
marketing ) taking that point of departure the retailer selected a set of
marketable segments that would receive the most enticing mix of benefits
hard and soft and targeted their interests. The prerequisite of moving beyond
this segment is to understand your customer deeply.
Think beyond the price
By leveraging advanced analytic, retailers can take into consideration
customer purchasing behavior and make predictions about future purchases.
Moreover, through similarity and consistency analyses, it becomes possible
to tweak the benefits and promotions to optimize the appeal of the store
space to as many consumers as possible. Advanced analytic also allows for
integration of household data in profiles and transactions, enabling
marketing to be geared entire household needs.
Moreover, analytic has evolved to a stage where customer micro segments
can be identified and acted upon to optimize market spend (see Appendix:
Evolution of analytic technology). Retailers can now ask: what is the value
of each customer that you cater to or that you might cater to? It is important
to remember that a loyalty program is not just about rewarding loyal
customers, it also is about gaining valuable intelligence on how customers
think and act.
Next generation loyalty programs are beginning to take that the use of data
not only for personalizing loyal shopper‟s experiences. They are making
loyalty data actionable both downstream (customization) and upstream (core
marketing strategies), across to store design, branding and merchandising.
Think beyond retention
More loyalty-marketing experts really agreed that a loyalty program is
geared towards retaining customers. An innovative program can also attract
new customers. These innovations have happened more often in non-
retailing sectors, where rewards program are a point of competitive
differentiation. Innovative loyalty programs attract new members who fall
into the following two groups:
1) Entirely new customers
2) Existing customers who are now visible as a result of program enrollment
These members in turn influence friends, family and co-workers, as
purchases spokes people influencers. Retailers are experiencing the age of
informal spokespeople, who rely on peer-to-peer communication, blogs,
online chat rooms, shopping guides and comparison sites. Positive publicity
in this environment can be a powerful marketing force. Setting up a program
that provides incentives for current members to enroll new members is one
way to increase such buzz. Involving employees to talk to consumers and
share recommendations is another. The next generation, retail loyalty
programs will be able to leverage these newer opportunities aiming to turn
loyal customers into ambassadors for the retailer, increase their share of
voice in the market and thereby attract new customers.
Think beyond the program
Loyalty programs should not be relegated to just another departmental
activity. They need to be grounded as in a firm wide commitment to
customer centricity, broadly understood (by management down to sales
clerks), managed (to bolster the customer experience through every active
and passive touchpoint) and leveraged (by using data to inform more
Accordingly, loyalty programs should take into account all of the company‟s
strengths and leverage them whatever and when ever possible all employees
from the CEO down to the sales representatives of the company. Some
retailers are experimenting with involving employee more integrity into the
program. One of caveat is that the inclusion of employees in the program
will require instating anti fraud protections, since employee fraud has been a
drain on some programs. Investment in these safeguards is well worth it.
When you consider that happy employee is by far a company‟s greatest asset
of advocacy. The power to acquire and retrain customers can be significantly
strengthen by ensuring that employees at every level enthusiastically support
the loyalty program.
10 Practical Steps for Retailers
1) Look beyond your own industry
2) Initiate a self critical discovery process
3) Start asking questions about customer value
4) Start talking to people across the organization
5) Generate ideas about enhancing the customer experience
6) Experience all the different customer touchpoints personally
7) Ask customers what type of benefits they most desire
8) Ask yourself ten things you want to get out of the relationship with your
9) Talk to customer loyalty experts
10) Dare to invest
B b ography
Kotler Philip, Marketing Management, Prentice Hall India,
Millennium Edition, 2000
Ries al, Trout Jack, Marketing Warfare, Plume, Reprint 1986
Zeithaml Valarie A, Bitner Mary Jo, Services Marketing, McGraw-
Hill, International Edition, 1996
Dunne Patrick, Lusch Robert F., Retailing, Dryden, Third Edition,
Lucas George H. Jr., Bush Robert P., Gresham Larry G., Retailing,
All India Publishers, First Edition 1997
Hasty Ron, Reardon James, Retail Management, McGraw- Hill,
International Edition, 1997
Wilson Richard M.S., Gilliam Collin, Strategic Marketing
Management, Viva Books, Second Edition, 1999
Miller Alex, Strategic Management, Third Edition, 1998
Hamel Gary, C.K. Prahalad, Competing for the Future,
James F. Engel, Paul W. Miniard, Roger D. Blackwell,
2000, Consumer Behavior
Magazines and Newspapers
The Hindu Business Line
Harvard Business Review
I am a Marketing Student from Skyline Business School. As part of a Final
Year Curriculum I would be grateful if you help me to fill this questionnaire.
Q.1. Where do you like to shop?
Malls E.g. Gurgoan, Ansals
Markets E.g. Lajpat Nagar, Sarojini
Others Specify ______________
Q.2. Which shopping stores do you like to shop?
Others Specify _______________
Q.3. Are you a member of any Shopping stores loyalty Programs?
If No, skip Q.No. 4 to 7
Q.4. How did you come to know about the loyalty club?
Ads Friends In store Internet
Q.5. Which Shopping club are you a member? How long have you been a
member? Rate your Preference towards the clubs you favor? Rate 1 to 5. 1
being the most preferred
Time Been a Member Rating
Ebony < 1 year > 1 years
Pantaloons < 1 year > 1 years
Shoppers Stop < 1 year > 1 years
West side < 1 year > 1 years
Other Specify < 1 year > 1 years
Q.6. What offers do you get by those clubs?
Discounts Promotions Points Gifts Others
Q.7.If you are a member of Pantaloon loyalty club in terms of the services if
its your preferred store
Poor Average Ok Good Excellent
1 2 3 4 5
Q.8. Why aren‟t you a part of any Shopping Store loyalty Program?
Don‟t shop frequently at the same store
Q.9. Would you consider being a part of a Loyalty Club?
Yes No ______________
Gender: Male Female
2) Distribution of Mall Space in India
Banglore Chennai Hyderabad
Pune Mumbai Kolkotta
Source: Franchise Plus