Ishan Deep Report

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“Marketing of XTRAREWARDS and

EASY FUEL Loyalty Program of IOCL”

Summer Project Report

Submitted in partial fulfillment of the requirement of Bachelors

degree in Business Administration (Oil & Gas Marketing)

2008-2011

Under the guidance of

Mr. Ankit Gorwara (Officer Fleet Marketing)

Mr. Naresh Salodia (Officer Xtrarewards)

Submitted by:

Ishan Deep

R050208038

College Of Management and Economics Studies

University of Petroleum and Energy Studies, Dehradun. (2010)

and Energy Studies , Dehradun| 1

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PREFACE:

In the broader sense training is necessary to make the students of

professional institutions familiar with industrial environment .This not only helps

professionals to speedily accommodate themselves in industries but also to have

better usage of their studies.

To be dynamic, strategic and work aggressively they need to know the policies ,

procedures and trends going in the present industrial environment apart from their

studies The training fulfils all these needs . Whether it is the question of

demonstrating a modernized procedure, step by step to an old production hand or

guiding a new division head through the intricacies of preparing his own budget, the

responsible supervisor or manager must make the trainee learn and communicate.

The purpose and objective of the study is to analyze the different aspect of financial

and marketing position of the organization and list out the suggestions,

recommendations based on the studies.

The various modern and standard tools to achieve the objectives of the study carry

out the analysis of the data.

ACKNOWLEDGEMENT:


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I would like to thank my project guides Mr. Ankit Gorwara (Officer Fleet

Marketing) and Mr. Naresh Salodia (Officer Xtrarewards). I shall always be grateful

to them for spending their valuable time on my project and their inputs and constant

encouragement during my internship at IndianOil Corporation Limited.

Finally, I thank University Of Petroleum And Energy Studies, Dehradun for giving me

this wonderful opportunity to pursue internship at IOC.

The stint at IOC was very useful in terms of gaining valuable hands on marketing

experience and understanding consumer behavior.

Thank You

Date: 16th August, 2010

LEARNING EXPERIENCE:


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This project has been a great learning experience for me. It has provided me

learning opportunities about loyalty program. By handling the project under guidance

of my respected officers I have gained knowledge about organizational culture and

environment. On the whole, I am able to understand the prospective and current

trends of the market and able to understand the psychology of customers. In the

beginning of the project I was bit uncomfortable as I was unfamiliar about marketing,

but this project has made me realize that to reach heights of success and position

you have to start from the begining.

Executive Summary:


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To retain the customers in this highly competitive world companies come out

with their loyalty programme and show how they could be beneficial to the customers

if they remain with them for a long term. A specific methodology was adapted to work

on the project which included literature review, data collection through retail outlets,

Internet, survey, study of different loyalty programmes. This data was then analyzed

and was implemented as per the methodology. Activities were performed with the

customers at the retail outlet and other parties reveal that there are few problems

and issues, which are both operational and structural, related with the cards. In fact

as we approached customers for cards, it gave us firsthand knowledge of why

acceptance is low.

The major reason for low acceptance amongst customers is lack of proper

communication, around 70% of the customers who are using the card are not aware

about all the benefits of the cards. We tried to train RO attendants, to make them

understand all the aspects related with the programme. We also took some

suggestions from them to improve the programme.

We approached many corporate customers for Easy fuel and for XtraRewards

programme but Cost of the cards was main factor according to the consumer

response. In order to promote XtraRewards cards, Alliance partners were

approached to facilitate our customers with their products and services. To improve

the existing programme feedback was taken from customers; pump attendants,

Dealers and Alliance partners. Their valuable suggestions were taken in

consideration and have been mentioned in report for further development of the

programmes.

CONTENTS:


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Serial no.

Particulars Page no.

1. Acknowledgement 3

2. Leaning experience 4

3. Executive summary 5

4. Introduction 7

4.1 About the company 7

4.2 Background 8

4.3. Scope of the project 20

5 Methodology 21

5.1 Study of existing system 22

5.1.1 Process of XTRAREWARDS 22

5.1.2 Process of XTRAPOWER EASYFUEL Card 23

6. Objective of Loyalty programme 24

7. Our reach and findings 25

8. Result and Analysis 26

9. Suggestions 27

10. Conclusions 29

INTRODUCTION:

About the Company: and Energy Studies , Dehradun| 6

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IndianOil began operation in 1959 as Indian Oil Company Ltd. The Indian Oil

Corporation was formed in 1964, with the merger of Indian Refineries Ltd.

Indian Oil Corporation, or IndianOil, is an Indian state-owned oil and

gas company. It is India’s largest commercial enterprise, ranking 105th on the

Fortune Global 500 list in 2009. IndianOil and its subsidiaries account for a 47%

share in the petroleum products market, 40% share in refining capacity and 67%

downstream sector pipelines capacity in India. The Indian Oil Group of Companies

owns and operates 10 of India's 19 refineries with a combined refining capacity of

60.2 million metric tons per year.

IndianOil operates the largest and the widest network of fuel stations in the country,

numbering about 17606 (15557 regular ROs & 2049 Kissan Sewa Kendra). It has

also started Auto LPG Dispensing Stations (ALDS).

Indian Oil is the highest ranked Indian company in the Fortune Global 500 listing, the

116th position (in 2008) based on fiscal 2007 performance. It is also the 18th largest

petroleum company in the world and the number one petroleum trading company

among the National Oil Companies in the Asia-Pacific region. IOCL was featured on

the 2008 Forbes Global 2000 at position 303.

BACKGROUND:


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In the present world where there is intense competition, it becomes very

necessary to retain loyal customers. The commercial benefits of loyal customers are

well-known by the brand managers. The cost of acquiring a new customers is always

more than retaining an old customer.

Loyalty programs are structured marketing efforts that reward, and therefore

encourage, loyal buying behavior (behavior which is potentially of benefit to the firm).

Loyalty cards are a system of the loyalty business card.

Loyalty cards are promotional marketing tools used by many businesses across

several industries. In marketing generally and in retailing more specifically, a loyalty

card, rewards card, points card, advantage card, or club card is a plastic or

paper card, visually similar to a credit card or debit card, that identifies the card

holder as a member in a loyalty program. Businesses usually distribute them in

stores, online or through the mail. The main purpose of loyalty cards is to encourage

repeat purchases from new or existing customers.

Cards typically have a barcode or magstripe that can be easily scanned and some

are even chip cards. Small keyring cards (also known as keytags) which serve as

key fobs are often used for convenience in carrying and ease of access.

It enhances customer loyalty directly by offering rewards as an incentive to shop

regularly at a particular supermarket group. Most loyalty cards also generate

considerable information for supermarkets, including a customer’s name, address

and purchase preferences. Multiples can use this information to tailor product

offerings, promotions, investment and advertising to the needs of their customers,

thereby indirectly enhancing loyalty.

Loyalty programes are initiated by businesses with two main goals. The primary goal

for most loyalty programs is the acquisition of information relating to their customers,

spending habits, while the secondary goal is to actively cultivate loyalty amongst


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customers to ensure day continued patronizing the businesses. While some

companies do reserves the priorities , the above hierarchy holds true for most.

XTRAREWARD LOYALTY PRORAMME:

IndianOil XTRAREWARD is India”s first online rewards programme that seeks to

inculcate the habit of redeeming points. The loyalty programme rewards customer

paying by cash, credit and debit cards.

Each transaction is confirmed online through a charge slip and customers can earn

points on fuels / lubes purchases at participating IndianOil retail outlets.

XTRAREWARDS is currently active in Mumbai , Ahmedabad, Banglore, Mysore,

Coimbatore and Chennai. It is shortly available and other markets like delhi. Apart

from redeeming the accumulating the points instantly on fuel/ servo lubes at

participating retail outlets, the card holders can also redeem the points to get some

exciting gifts items from a catalogue.

The program continously provides the card holder with privileges, benefits and

offers from our alliance partners like dominos pizza , havmor , planet health, sun

photo , jai hind sweets, bakers den etc


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ALLIANCE PARTNERS (XTRAREWARDS):

We are giving promotion to our alliance partners at our retail outlets and in

return they are providing discounts to our customers on their valuable items or

products in order to satisfy customers and continuous increase in sales of

XTRAREWARD programme.

Following are the Alliance partners with XTRAREWARDS:

Havmor

Jai hind sweets

Bakers den

Sun photo

Parsana gym and fitness center#

Dominos pizza

U.S pizza


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Gujarat holiday pvt ltd.

Hello Taxi

Abhiruchi Restaurants

They all are participating with XTRAREWARDS for facilitating Indianoil customers

with their valuable products and services.


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XTRA POWER EASYFUEL LOYALTY PROGRAM:

IndianOil XTRAPOWER Easy Fuel Program. XTRAPOWER Easy Fuel is a Smart

Card based program, which facilitates paperless gifting of fuel & lubricants from

designated retail outlets of IndianOil.

Xtrapower Easy Fuel is India’s first smart card based fuel voucher. This enhances

the security of the cards and in this respect is different from the Gift Cards that the

banks have introduced in the recent past which operates on a magnetic stripe card.

The gift cards introduced by banks are for single recharge only meaning the card

becomes useless once the amount pre-loaded in the cards is used. However,

Xtrapower Easy Fuel Card comes with an option of multiple recharging or topping-

up. Upon exhausting the amount once loaded you can recharge the card which is

ideally suited for reimbursement, repeat incentivization etc.

These smart cards come with the added security feature of a user defined 4-digit PIN

which needs to be punched in for undertaking transactions on the card. This PIN can

be changed by the card holder at any point through our Point Of Sale Terminals.

Forget worries of your voucher being misused due to loss or misplacement.


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ADVANTAGE & DISADVANTAGE OF LOYALTY

CARDS:

Advantages:

Customer Relationship : Loyalty card programs can help retain

customers, increase traffic and improve sales. Exclusive deals, discounts and

incentives attract customers. Loyalty card incentives improve customer

service and relationships with customers.

Marketing Campaigns : If a company requires registration to distribute

a loyalty card, it can collect data that will help drive effective marketing

strategies. Keeping records of past purchases can help design better

promotions and advertising campaigns. For example, offering an instant

discount to loyalty card holders can encourage customers to register or make

frequent purchases. In return, the contact information can be used to

advertise directly with customers who are more likely to buy

Business Growth : Reduced advertising costs and increased return on

investment (ROI) on marketing campaigns are two main business growth

advantages. Loyalty cards can attract customers to a business and away from

the competition. They also can improve customer lifetime value--the amount a

customer spends during the lifetime of their relationship with the business--

toward consistent business growth


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Disadvantage :

Customer Stalking : Loyalty cards potentially endanger business growth

if a company does not develop the correct strategy. Excessive advertisements

can be a turn-off and may be disregarded as junk advertisements.

Furthermore, customers may feel offended if they are uncomfortable sharing

sensitive information in order to get the incentives of the program.

Reduced Profit : Overuse of the loyalty card program causes other

marketing campaigns to lose effect. Difficulties arise in attracting more

customers willing to purchase at regular prices. As a result, customers may

refuse make purchases unless there is a reduced price or other incentive. If

the average customer chooses this behavior, the business can suffer a

reduction in long-term and short-term profits.

Decreased Brand Value : When used ineffectively, loyalty card

programs actually can reduce the value of the product or service offered

because customers can make assumptions about the value of brands based

on the price.

Customer Resistance : Some savvy consumers may resist signing up

for customer loyalty cards because they don't want companies collecting

information about their purchases. They view this as an invasion of their

privacy as a consumer. Inc.com reports that more and more customers are

aware of the fact that using their customer loyalty cards help businesses

collect information on their buying behavior that they may use to create future

promotional offers.


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Types of Cards:

Basically there are three types of cards that are used in loyalty program. These are

as follows:

Barcode card

Magnetic stripe card

Chip card

1. Barcode Card: It is a card having a barcode which is an optical machine-

readable representation of data, which shows certain data on certain

products. Originally, barcodes represented data in the widths (lines) and the

spacing of parallel lines, and may be referred to as linear or 1D (1

dimensional) barcodes or symbologies. Barcodes can be read by optical

scanner called barcode readers, or scanned from an image by special

software.

Barcodes are widely used in shop floor control applications software where

employees can scan work orders and enter the time spent on a job.


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2. Magnetic stripe Card : A magnetic stripe card is a type of card capable of

storing data by modifying the magnetism of tiny iron-based magnetic particles

on a band of magnetic material on the card. The magnetic stripe, sometimes

called a magstripe, is read by physical contact and swiping past a reading

head. This card is also commonly used in petroleum sector for their loyalty

program.

3. Chip Cards : A smart card, chip card, or integrated circuits card (ICC), is

any pocket-sized card with embedded integrated circuits. There are two broad

categories of ICCs. Memory cards contain only non-volatile memory storage

components, and perhaps dedicated security logic. Microprocessor cards

contain volatile memory and microprocessor components.

Smart cards may also provide strong security authentication for single sign-on

within large organizations. It also can provide identification, authentication,

data storage and application processing.


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Loyalty card in Petroleum Sector:

Now loyalty card in petroleum sector is gaining momentum as all major

companies are focusing on Customer Relationship Management (CRM) so that they

could develop and retain customers.

The immense competition is making loyalty programs an integral program for the

day-to-day functioning of petro-retailing. Of course, right now many such loyalty

programs are being run by the petro-retailers like Smart Fleet (BPCL), XtraPower

(IOCL), Drivetrack (HPCL), Transconnect (Reliance), Petrocard (BPCL) and others.

However, these programs are mainly focused at the bulk consumers and the small

consumers are left unnoticed more or less. But in present, such differentiation is

minimized and loyalty program is made available for every segment of consumers.

IndianOil's loyalty programmes are designed exclusively to benefit the large number

of its customers who have been patronising the brand for over five decades. In order

to do that IndianOil launched XTRAPOWER fleet card for fleet operators and

corporate for cashless purchase of fuel & lubricants from designated retail outlets

(petrol pumps) of IndianOil through flexible pre-paid and credit facilities,

XTRAREWARDS card is India's first online rewards programme that seeks to

inculcate the habit of redeeming points to develop and retain customer and

XTRAPOWER easy fuel gift card facilitates corporate in paperless gifting of fuels and

lubricants to their employees, customers and other stakeholders, that too from select

IndianOil retail outlets numbering over 6,000.


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Bharat Petroleum Corporation Limited introduced "PetroBonus" Programme to

meet the changing needs and desires of the customer. The Programme offers its

members the convenience and rewards while purchasing the fuel using the “Petro Card”.

The proposition of “Earn while you spend” articulates BPCL’s desire to deliver more value

to its customers. For customers the key benefits of the Petro Card are: cashless

convenience, acceptance at over 4300 outlets across the country, Quality assurance at

Pure for Sure outlets, managing and tracking of fuel spends.

HPCL also introduce many program to maintain loyal customer Drivesmart fleet Card

offers cashless secure payments for fuel purchases across highways at select HPCL

dealer outlets, Drive Track plus fleet card is a pre-paid (debit) card with expurse cum

loyality applications for fleet operators (mainly highway segments). HPCL has introduced

e-purse cum loyalty card CLUB HP Smart1 for the benefit of our prestigious customers at

select Retail Outlets in Metros and Major cities. This Card gets you Convenience in

addition to Rewards which are unmatched to any similar card scheme.


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Comparative Study:

47.00%

26.50%

24.00%

1.50%

Market share

IOCLHPCLBPCLOthers

Sources: Indian Oil and Gas and CRISIL Research- July 2010.

It is clear from the chart that IOC is the biggest player in the petroleum

retailing business in India, followed by HPCL, BPCL and other private players.

The statistics available upto 2007-08 suggest that IOC has a market share of

50%. While the share of other PSU’s has also shown an increasing trend,

share of the private player has decreased. This is because of the fact that

they aren’t given the kind of subsidies and oil bonds issued as in case of

public sector oil companies.

It is clear that IOC is still the biggest player in the market. It is trying hard to

regain its lost share.

As explained above the major player in the petroleum retailing business are

IOC, BPCL, HPCL, IBP, RIL, ESSAR, SHELL.


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SCOPE OF THE PROJECT:

FOR XTRAREWARDS LOYALTY PROGRAMME:

Approach customers.

Reactivate the existing inactive customers.

Enroll non-existing customers to increase activation rate.

Interaction with existing customers for feedback.

Approach Alliance Partners to facilitate Indianoil’s customers.

FOR XTRAPOWER EASYFUEL PROGRMME:

Data collection from different sources.

Analysis and short listing of data.

Contact corporate customers.

Offer features of XTRAPOWER EASYFUEL to concerned person.

Get corporate enrolled.

METHODOLOGY:


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Generate database from different sources such as Internet (yellow pages,

citizens India) and from RO Dealers.

Shortlist companies to be approached for the loyalty programmes.

Contact companies and get further details.

Contact concerned person and present the features of XTRAPOWER

EASYFUEL as well as XTRAREWARDS loyalty program.

As per their response fix up the appointment for the further process.

Train and update the knowledge of pump attendants in respect of

XTRAREWARDS programme.

STUDY OF THE EXISTING SYSTEM:


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PROCESS of XTRARWARDS PROGRAMME:

Each transaction is confirmed on-line through a charge slip and customers

can earn points on fuel/lube purchases at participating IndianOil Retail Outlets.

These points can be redeeming for Fuel/lube or some exciting gifts.

The customer earns 1 point for the purchase of Rs. 75 fuel . The points are added in

cumulative nature that is if a customer fills his tank with Rs. 50 petrol the charge slip

would show Zero points but the next time when the customer fills his tank with Rs. 25

the charge slip would show 1 point earned. On 334 point customer get Rs 100 worth

of fuel.

One of the unique features of this card is that the company has ties ups with different

alliance partners. Once the customer swaps his card he receives a charge slip which

states his point’s earned and his total accumulated points. With this charge slip he

also receives discount at one of the alliance partner’s outlet.

PROCESS OF XTRAPOWER EASY FUEL PROGRAMME:


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Fuel reimbursement/gifting card are single recharge. Steps in its process are as

follows:

Purchase designated number of Easy Fuel cards by applying on standard

Easy Fuel Application Form.

Make payment towards Cost of each card @ Rs 110.30/- per card inclusive

of service tax.

Validity of these cards will be 6 months or exhausting of amount on the card

whichever is earlier.

Define no. of cards and card-wise denomination on the application form

(minimum Rs.100/-).

Card wise Limits will be set based on the above.

IndianOil will create a virtual bank account in HDFC Bank.

Make payment to IndianOil for the amount to be charged to the cards through

this virtual bank account.

Logon to our website www.iocxtrapower.com using unique login id and

password.

Check whether money deposited in the virtual A/C has been credited to your

Customer ID.

Allocate amount to each card (minimum Rs.100/-) as per requirement.

Card holder approaches petrol pump and activates his card by changing

default PIN (0000) to his own 4-digit PI

Requests petrol pumps to transfer the amount on to his card.

Purchases Fuel or Lubricants for the amount on the card.

Transaction slip is generated for every transaction.

OBJECTIVES OF THE LOYALTY PROGRAMME:


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To understand the concept of loyalty program such as XTRAREWARD and

XTRAPOWER EASY FUEL.

To get the customers feedback on the program and know the reason for less

than expected use of XTRAREWARD cards.

To increase ACTIVE card usage of XTRAREWARD program.

To enroll corporate customers for the EASYFUEL gifts cards.

To train the RO attendants to increase the sale of XTRAREWARDS cards.

To find out prospective alliance partners for the XTRAREWARDS loyalty

programme.

To obtain opinions and suggestions at IOC retail outlets and give

recommendations to IOC to improve the implementation of XTRAREWARDS

loyalty program.

OUR REACH / FINDINGS:


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Learned consumer behavior and how to do marketing of loyalty cards.

Research on a consumer psyche at a RO”s.

Sold XTRAREWARD individual cards at the retail outlets.

Approached corporate customers and enrolled them as corporate customers

in XTRAREWARD program.

I collected data of dormant XTRAREAWRDS customers and contacted them

through Telephonic means to know the reason why they were not using

services regularly.

Customers’ queries were solved and were advised to actively participate in

programme to avail benefits.

I approached some more alliance partners in respect to increase the sale and

activation rate for XTRAREWARD programme.

Meeting with some of the firms was arranged in order to enroll them as our

alliance partner.

I approached some corporate firms like Ambuja cements and Claris

Pharmaceuticals regarding EASYFUEL programme

Cost of the card is a major factor in negative response from the corporate.

I contacted some other pharmaceuticals firms regarding EASYFUEL but

presently they are not interested.

Promoted XTRAREWARDs at RO with SUNPHOTO promotional scheme.

Re-activated temporary blocked cards.

Training was provided to attendants regarding XTRAREWARDS program and

its newly added features.

Conducted promotion at many Retail Outlets.

XtraPower Easy Fuel Card scheme lacked in attracting corporate as there

was nothing lucrative for them.

Corporate were looking for scheme that could benefit them in monitory terms.

Most of the corporates are not aware about the XtraPower Easy fuel card

scheme; IOC should try to create awareness regarding the program by means

of advertising.


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RESULTS AND ANALYSIS:

Issues and problems

During the peak hours the server works slowly which makes customer waiting

at the pump.

Normally customers don’t get time to swap the card.

Forms were not filled appropriately, due to this card may not work properly.

The cost of the card is high and the returns is not that much attractive.

There is lot of hardware problems in a TATA Wireless phone.

There are no any benefits for the RO attendants.

Dealers also don’t help in increase the sales.

Machine sometimes got malfunctioned.

Magnetic strip gets damaged while swiping the card.

SUGGESTIONS:

What customer suggest?


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The point system is not useful for the two-wheelers or they want a card free or

in low cost.

The alliance partners are not that much attractive and moreover the particular

shops don’t provide discounts on all their items, the discounts are available

only on selective items.

Offers printed on the charge slip at the time of transaction are not noticeable

at first sight.

What pump attendant suggests?

They should be given some benefits in terms of incentives for selling cards.

When customer comes back to them with some problem they don’t have

anyone to talk directly.

What dealer suggests?

For EASYFUEL program the usage of the card should be limited to a

particular respective retail outlet.

Machine and Tata phone (FWP) should be checked at regular intervals so

that the functioning of the machines can be properly maintained.

EASYFUEL cards should be issued to individual customers also.

Minimum required number of cards should be reduced.

Cost of Single Recharge EASYFUEL card should be revised.

What Alliance Partner Suggests (for xtrarewards)?

Offers printed on charge slip are not attractive.

Signage at ROs is not properly maintained.


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CONCLUSIONS:

It was a great opportunity for me to work with Indianoil Corporation limited and

learn about loyalty programmes and other organizational operations under the


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observation and guidance of my officers. This report gives a brief review about the

Indianoil’s loyalty programme and its operational process.

As per my experience, existing programmes have a good customer base,

service and infrastructure, and loyalty programmes have proved a major factor in

increasing the sales as well as brand loyalty and preference. To generate more

turnovers from loyalty programmes, some modifications are required in terms and

conditions and operational structure of existing programmes.

BIBLIOGRAPHY:

Search engine: Google


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Wikipedia

Websites: www.iocxtrapower.com

www.xtrarewards.com


http://www.xtrarewards.com/

http://www.iocxtrapower.com/

Documents

Ishan Deep Report