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.
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