How to loy­al­ize your cus­tomer base

Pro­gres­sive Gro­cer speaks to re­tail­ers with hands-on ex­pe­ri­ence in run­ning and de­vel­op­ing loy­alty pro­grams to find out about the ways of mak­ing them into a pow­er­ful plat­form for mean­ing­ful en­gage­ment with cus­tomers and win­ning their trust in the brand.

Progressive Grocer (India) - - Contents -

Re­tail­ers with ex­pe­ri­ence in run­ning and de­vel­op­ing loy­alty pro­grams speak about the ways of mak­ing them into a pow­er­ful plat­form for mean­ing­ful en­gage­ment with cus­tomers and win­ning their trust in the brand.

A suc­cess­ful loy­alty pro­gram is one that builds cus­tomers’ faith and be­lief in the brand, and re­tail­ers should aim to cre­ate such loy­alty pro­grams. — Shibani P Shourie Re­tail Con­sul­tant

What do think is the op­ti­mal ap­proach for re­tail­ers to run their loy­alty pro­grams and how are you do­ing it in your or­gan­i­sa­tion?

Shibani P Shourie, Re­tail Con­sul­tant: Cus­tomer en­gage­ment is the key to run­ning a suc­cess­ful loy­alty pro­gram. Of all the loy­alty pro­grams that I have run or been a part of, the most im­por­tant thing I have fo­cused on is to de­velop a bet­ter un­der­stand­ing of the con­sumer. It is im­por­tant to un­der­stand the cus­tomer’s shop­ping be­hav­ior and what they ex­pect from the brand. The way to do it is through the var­i­ous for­mal and in­for­mal in­sights and de­tailed analy­ses, which a re­tailer gets from the data avail­able. Based on the analy­ses and data, a re­tailer can craft well thought out strate­gies and tactical plans. As there are dif­fer­ent seg­ments of cus­tomers, each one has to be en­gaged dif­fer­ently. Loy­alty pro­grams are de­signed to con­vert shop­pers into ad­vo­cates of the brand. A suc­cess­ful loy­alty pro­gram is one that builds cus­tomers’ faith and be­lief in the brand, and re­tail­ers should aim to cre­ate such loy­alty pro­grams.

Manoj Jain, Vice Pres­i­dent – Mar­ket­ing, Loy­alty & VM, HYPERCITY Re­tail (In­dia) Ltd.:

Hypercity’s loy­alty pro­gram is called the Dis­cov­ery Club. Apart from adding value through the point sys­tem wherein cus­tomers earn points by spend­ing, it has been our con­stant en­deavor to re­main rel­e­vant to our cus­tomers and pre-empt their needs. With this ob­jec­tive, we have in­tro­duced many mean­ing­ful ser­vices for our cus­tomers. We want our cus­tomers to ex­pe­ri­ence the “wow” feel­ing and we are do­ing it by ad­dress­ing the day-to-day is­sues in their lives. For ex­am­ple, we re­al­ized that most of the cus­tomers find it dif­fi­cult to drive to- and -from the store dur­ing peak hours. So we formed an al­liance with a taxi ag­gre­ga­tor and of­fered flat rates to ferry cus­tomers to- and -from the store. An­other ex­am­ple is that we now send a box of sam­ples of the stuff that we sell in the store to our loyal cus­tomers’ houses ev­ery month. This way the cus­tomers get to sam­ple the stuff be­fore pick­ing it up at the stores. We have also added a lot of value of­fer­ings in terms of ‘Wine Tast­ing’ ses­sions and ‘Free Passes’ to events (Justin Bieber/

IPL/ etc). Be­sides, we have cre­ated a plat­form for our cus­tomers to be­come food en­trepreneurs by launch­ing an ini­tia­tive called “Hy­per Bud­ding Chef”, which al­lows the win­ners to sell their stuff from HYPERCITY stores. We strongly be­lieve that for any loy­alty pro­gram to be suc­cess­ful, it has to be rel­e­vant to the ev­ery­day life of the cus­tomer. With the launch of our omni-chan­nel en­gage­ment, we plan to am­plify our loy­alty pro­gram across all chan­nels.

Shibu Philips, Busi­ness Head – Lulu In­ter­na­tional Shop­ping Mall Pvt. Ltd.:

Lulu Mall launched its loy­alty pro­gram – Lulu Hap­pi­ness Loy­alty & Re­wards – on 9th Novem­ber 2015. The pro­gram was launched to re­ward the thousands of reg­u­lar cus­tomer who have been vis­it­ing the mall right from its open­ing. Lulu Hap­pi­ness is avail­able in Lulu Mall mo­bile app across An­droid & IOS plat­forms. Through Lulu Hap­pi­ness, ev­ery cus­tomer who vis­its the mall and spends at any of the out­lets is re­warded with loy­alty points, which can be used to re­deem gift vouch­ers from their pre­ferred brands.

We be­lieve in hav­ing a “first-hand ex­pe­ri­ence” with the cus­tomers by of­fer­ing them an ex­pe­ri­ence they would like to enjoy again and again. A loy­alty pro­gram has a short shelf life in the cus­tomer’s mind if it fails to keep the cus­tomer en­gaged with the pro­gram. We be­lieve that the ba­sic for­mula for en­hanc­ing cus­tomer en­gage­ment is only through an ex­cit­ing re­wards cat­a­logue. So we have added gift vouch­ers from all the ma­jor brands to our re­wards cat­a­logue. Ad­di­tion­aly, we of­fer the brands in the re­wards cat­a­logue at a bar­gain on se­lect of­fer days, which are var­i­ously des­ig­nated as ‘Deal of Week’, ‘Women’s Wed­nes­day Sale’, ‘Flash Sale’ on Fri­days and ‘Week­end Sale’. Cus­tomers look for­ward to these of­fers, which en­able them to uti­lize their loy­alty points to re­deem any brand gift voucher of their choice pro­vided they have suf­fi­cient points in their loy­alty ac­count.

Shan­tanu Saha, Vice Pres­i­dent, Re­liance Mar­ket: The loy­alty pro­gram of Re­liance Mar­ket – the cash & carry for­mat of Re­liance Re­tail Ltd. – is called Rishta. The pro­gram runs for the B2B cus­tomers of Re­liance Mar­ket. The other loy­alty pro­gram that is run by the other re­tail for­mats in the Group is called the R-one pro­gram. This pro­gram runs across all other Re­liance Re­tail for­mats, is a very ro­bust and pop­u­lar pro­gram, and is tar­geted to­ward B2C cus­tomers.

Do the loy­alty pro­grams of­fer good value to the cus­tomers?

Shibani P Shourie: Value is not es­sen­tially through points. Con­trary to what one be­lieves, there is very lit­tle value at­tached to the per­cent­age that the cus­tomer gets back on spends. It is im­por­tant to give cus­tomers ‘in­no­va­tive’ re­wards, which en­cour­ages them to keep com­ing back for more. While a 10% cash­back works in some months, an en­gage­ment pro­gram run over a fixed pe­riod lead­ing to in­stant re­wards on spend slabs works well in oth­ers. The cus­tomer needs to have a rea­son to choose you over your com­pe­ti­tion and it is there­fore im­por­tant that each seg­ment of cus­tomer is given some­thing mon­thon-month so as to make you their first choice. Manoj Jain: The great­est value that HYPERCITY has cre­ated with its cus­tomer base is per­son­al­iz­ing the pro­gram and mak­ing the re­la­tion­ship based on en­gage­ment rather than trans­ac­tion. Driven by this in­sight, we have ex­tended the pro­gram to add value on travel, en­ter­tain­ment, events, in­sur­ance, etc. So much so that the cus­tomer now re­lates with us not only as a store with a loy­alty pro­gram but as some­thing that is de­liv­er­ing value to them in their ev­ery­day life. I have pur­pose­fully not spo­ken about bonus points and other ac­cel­er­ated points earn­ing/ burn­ing op­tions as these are a part of ev­ery other gar­den va­ri­ety loy­alty pro­gram. Shibu Philips: Lulu’s loy­alty pro­gram has helped to es­tab­lish a direct re­la­tion­ship with cus­tomers, which goes beyond their vis­its to the mall. Shop­pers can use their smart­phone to scan pur­chase re­ceipts in ex­change for points that can be

The great­est value that HYPERCITY has cre­ated with its cus­tomer base is per­son­al­iz­ing the pro­gram and mak­ing the re­la­tion­ship based on en­gage­ment rather than trans­ac­tion. — Manoj Jain Vice Pres­i­dent – Mar­ket­ing, Loy­alty & VM, HYPERCITY Re­tail (In­dia) Ltd.

A loy­alty pro­gram has a short shelf life in the cus­tomer’s mind if it fails to keep the cus­tomer en­gaged with the pro­gram. We be­lieve that the ba­sic for­mula for en­hanc­ing cus­tomer en­gage­ment is only through an ex­cit­ing re­wards cat­a­logue. — Shibu Philips Busi­ness Head – Lulu In­ter­na­tional Shop­ping Mall Pvt. Ltd.

re­deemed against gift vouch­ers. So ev­ery time you spend your money within the mall – from spend­ing money to park your car or to watch a movie, you will earn loy­alty points, which is as good as money within the mall. Shan­tanu Saha: The big­gest value our loy­alty pro­gram has to of­fer is that of quan­tity pur­chase dis­counts. We are a cash and carry for­mat and our prices are of­ten lower than those of the lo­cal whole­sale mar­kets. So the value that our pro­gram has to of­fer is a ‘Good Price’.

What per­cent­age of your shop­per base is cov­ered by your cus­tomer loy­alty pro­gram?

Shibani P Shourie: In the or­gan­i­sa­tions I have worked with, we were able to build loy­alty pro­grams where the base was from 70% to 90% of the busi­nesses.

Manoj Jain: About 55-60% of the walkins we have in store ev­ery sin­gle day are part of Hypercity’s DCC pro­gram. We in­tend to grow this num­ber to 75% in 2017-18.

Shibu Philips: Close to 25% of the Mall sales are re­flected in the loy­alty bill sub­mis­sions. But the cus­tomer base forms a much larger per­cent­age.

Shan­tanu Saha: Can­not di­vulge.

What im­pact do loy­alty pro­grams have in terms of sales, cus­tomer vis­its, etc?

Shibani P Shourie: In my last in­de­pen­dent as­sign­ment, by build­ing ad­vo­cates through the loy­alty pro­gram – in a pe­riod of four months – one was able to in­crease ac­qui­si­tion to 2X and in­crease re­peats by 40%. Manoj Jain: Sixty per cent of our sales comes from our loy­alty base cur­rently. We add 25,000 new cus­tomers ev­ery month to our pro­gram. The av­er­age bill value of DCC cus­tomers is 40% higher than a non-dcc mem­ber. We have an av­er­age re­peat of 1.8 times from the loy­alty base. Shibu Philips: It’s never easy to quan­tify the im­pact of any loy­alty pro­gram. How­ever, the im­pact is ev­i­dent when we an­a­lyze the buy­ing be­hav­ior of our loy­alty base. Sev­enty-eight per cent of our cus­tomer base shops at least once a month and the av­er­age bill value of a cus­tomer who has re­deemed a gift voucher is three fold of the gift voucher de­nom­i­na­tion. It means that if a cus­tomer picks up a gift voucher worth Rs. 1,000 he will end up shop­ping for Rs. 3,000. As our loy­alty runs through a mo­bile-based plat­form, we even reach cus­tomers out­side the city who see it as a medium to stay con­nected with the Mall and which, for us, means es­sen­tially cre­at­ing new cus­tomers out­side the ge­o­graphic bound­aries. Shan­tanu Saha: Our loy­alty pro­gram has helped to in­crease the stick­i­ness of our cus­tomer base thus re­sult­ing in an in­crease in the fre­quency of vis­its and also an in­crease in the bas­ket size.

Which ele­ments of the cus­tomer re­ward ac­tiv­i­ties and loy­alty pro­gram are most pop­u­lar with the shop­pers?

Shibani P Shourie: As I men­tioned ear­lier, cus­tomers are dif­fer­ent. One size does not fit all. It is im­por­tant to have the rel­e­vant mes­sage com­mu­ni­cated to the right cus­tomer seg­ment, oth­er­wise it is all spam. Cash­backs work for some seg­ments whereas be­ing part of a pre­view sale works bet­ter for oth­ers. Get­ting a gift on their birth­day works for yet an­other set and invit­ing them to be a part of the de­ci­sion mak­ing process on new prod­ucts works for yet an­other group. The key is un­der­stand­ing what ex­cites the cus­tomer and giv­ing them that.

Manoj Jain: Most of our ac­cel­er­ated point-earn cam­paigns are very pop­u­lar with the cus­tomer. Prop­er­ties like Fri­day Booster, Mid-week Cam­paigns, Dou­ble Re­ward Points, Hy­per Bud­ding Chef, etc, are all very pop­u­lar. To cite one in­stance, a loyal cus­tomer (who had shifted base), when she heard about Hy­per Bud­ding Chef, came from the UAE to par­tic­i­pate in the event. The value-adds we of­fer as part of the pro­gram, have turned out to be a huge dif­fer­en­tia­tor for us when com­pared to any other pro­gram. Shibu Philips: Re­wards Cat­a­logue is the most ex­cit­ing fea­ture of our loy­alty pro­gram as we keep adding the most pop­u­lar brands within the mall to the list. We are proud to say that the loy­alty re­wards of­fer gifts and gift vouch­ers from nearly 70% of the brands within the mall. Shan­tanu Saha: Price dis­counts re­main the most pop­u­lar fea­ture of our loy­alty pro­gram at Re­liance Mar­ket.

How do you see the evo­lu­tion of loy­alty pro­grams of F&G re­tail­ers? Can they use the pro­grams to gen­er­ate per­son­al­ized of­fer­ings and pro­mo­tions for cus­tomers?

Shibani P Shourie: In F&G, it is im­por­tant to un­der­stand cus­tomer bas­kets and in­no­vate on how one can keep mak­ing the cus­tomers’ lives eas­ier. So if you have a monthly shop­per buy­ing com­mon items, can you pre pack her bas­ket and send her a mes­sage that it’s wait­ing for her and thus help her save time? Can you do pre-bun­dles of the fre­quently pur­chased prod­ucts ba­sis shop­ping habit and give cus­tomers a great deal on them? As a busi­ness if I’ve iden­ti­fied that I have a cus­tomer who is only buy­ing a cer­tain cat­e­gory of prod­uct, can I give them re­lated of­fers to buy from an­other cat­e­gory? For in­stance, if some­one is buy­ing di­a­pers, can I get them to buy baby food at a great deal? Through bet­ter seg­men­ta­tion, anal­y­sis and a strong IT pro­gram, it is def­i­nitely pos­si­ble to do per­son­al­ized of­fer­ings and coupons for F&G cus­tomers to keep them com­ing back for more.

Manoj Jain: HYPERCITY is not a value for­mat but an ex­pe­ri­ence for­mat store and so it will be dif­fi­cult to make a gen­er­al­ized state­ment about the loy­alty pro­grams of F&G re­tail­ers in gen­eral. How­ever, there are cer­tain ba­sic ele­ments that I be­lieve is the same for all loy­alty pro­grams. Loy­alty has to add value to the ev­ery­day life of the cus­tomer and get as far away as pos­si­ble from be­ing just an­other card in the cus­tomer’s wal­let. Adding value to the pro­gram with­out in­creas­ing its cost is the key and the way to en­sure it is to iden­tify the needs of the cus­tomers and then form a large net­work of af­fil­i­ates, which suits the pro­file of the cus­tomer base. There is only so much you can of­fer as dis­counts/ points. At the end of the day you as­pire for cus­tomer stick­i­ness and that can be achieved only if you of­fer greater rel­e­vance to the cus­tomer rather than just trans­ac­tional points.

Shibu Philips: The F&G seg­ment is yet to catch up with other seg­ments such as Fash­ion Re­tail where loy­alty has evolved into a vi­tal cog in the or­ga­ni­za­tion’s wheel. But the scope for loy­alty in F&G is im­mense given the fact that cus­tomer pref­er­ence for a brand can be in­flu­enced if the of­fer­ings can be cus­tom­ized by an­a­lyz­ing the buy­ing be­hav­ior. The in­fo­graphic data that loy­alty pro­vides can help in build­ing sig­nif­i­cant pro­mo­tional strat­egy.

Shan­tanu Saha: Cus­tomers pre­fer two kinds of grat­i­fi­ca­tion. One is in­stant and the other is a longterm one. Pro­grams run­ning cus­tomers an­a­lyt­ics and us­ing AI can to­day sug­gest an in­stant gift, which is rel­e­vant to the cus­tomer’s cur­rent pur­chase bas­ket. This can be of­fered at the cash till. Later, you can sug­gest fu­ture of­fers and sav­ings based on the cus­tomer’s long term buy­ing pref­er­ences. Loy­alty pro­grams can do this, with­out be­ing in­tru­sive, and make of­fers at the right time (based on an­a­lyt­ics of buy­ing be­hav­iour). Cus­tomers are look­ing for sim­plic­ity and direct of­fers, rather than bun­dled of­fers that re­quire too much in­for­ma­tion or re­ten­tion of in­for­ma­tion (like fu­ture pur­chase coupons, etc., even if they are e-based). Keep the of­fer sim­ple to un­der­stand, make it sub­stan­tial in value and op­er­a­tionally sus­tain­able.

The big­gest value our loy­alty pro­gram has to of­fer is that of quan­tity pur­chase dis­counts. We are a cash and carry for­mat and our prices are of­ten lower than those of the lo­cal whole­sale mar­kets. — Shan­tanu Saha Vice Pres­i­dent, Re­liance Mar­ket

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