MINOR PROJECT

What are loyalty programs?

Why are they relevant?Comparative study of various retailer.

How to design loyalty programs?

Relationship marketing programs to foster usage loyalty and a commitment to their company’s products and services.

Aim is to create strong, lasting relationships with a core group of customers.

Set of actions devised so as to stimulate and keep up with some customers, and so as to minimise loss, namely the rate of lost customers, and increase the amount of purchases

Emphasis is on developing long-term bonds with customer.

A marketing initiative for :

Developing long lasting relationships with most valuable customers.

Creating and delivering unique, consistent and memorable engagements.

Developing better business understanding for driving footfalls and increasing ROI.

Managing customer churn.

Their use is widespread among:- retailers, airlines, car rental companies, film developers…

That is to say in all the sectors that deliver a good or a service in regular use and of a relatively high unit value.

Fostering ongoing communication with customers

Furnishing loyalty by building extras like upgrades and other peaks

Stimulating a sense of belonging by providing a “club membership” format.

Within the field of retailing, most companies have developed loyalty programs build around the concept of loyalty cards.

“It is easier and less expensive to make an additional sale to an existing customer than to make a new sale to a new customer”

•Products/services•Individualized attention•Continuous information•Price offers•Customer services•Extras and peaks

•Repeat purchase•“Extra” loyalty•Goodwill•Positive word-of-mouth•Lower cost for the firm

The Firm provides The Customer provides

Trust And

Promises

Caracteristics of loyalty programs:- Contact frequency- Importance of granted advantages- Nature of the rewards- Information density

Psychosocial states:- Attitude- Trust- Attachment- Commitment- Information research- Risk reduction

Internal behaviours- Buying frequency- Buying regularity- Food rate- Purchase diversity-Customer Retention

External behaviours- Positive word of mouth- Advocate’s function

Environment:- Consumer’s experience- Competitive environment- Marketing pressure

A

B

C

Keeping one’s customers and therefore preserving one’s market shares, keeping up the purchase, margin and profit levels.

Provide the firm with a stable turnover basis. Guarantee of future profit; calculations of lifetime-values.

Increasing the customer’s loyalty and value, notably through additional sales or crossselling.

Writing off the cost of investing in the customer’s acquisition.

Cutting operational costs of subsequent transactional flows.

Developing and recruiting customers at a lower cost.

Liu, Yuping, (2007)- “Long-Term Impact of Loyalty Programs” Heavy buyers at the beginning of a loyalty program claim

their qualified rewards but the program did not prompt them to change their purchase behavior.

Consumers with low or moderate patronage level gradually purchased more became more loyal to the firm.

consumers with initial low patronage levels gradually purchased more became more loyal to the firm.

Conclusion:-Thus there is a need to consider patronage to decide rewards

for loyalty programmes.

Meyer-Waarden, Lars; Benavent, Christophe. (2006) “Impact of Loyalty Programmes on Repeat Purchase Behaviour”

The double jeopardy phenomenon was present and loyalty programmes did not substantially change market structures.

When all companies had loyalty programs, the market was characterized by an absence of change of the competitive situation.

They are intrinsic to most marketing strategies, however? Proliferation of programs questions

their differentiating capability Value addition to customers is

debatable?

Is it the kind of product new marketers should consider?

India is a nascent market for loyalty programs, holds tremendous potential.

Consumer choices are being shaped through unparalleled access to information

Becoming increasing sophisticated Exposure to modern retail

formats Increasing awareness of fashion

and brands Time of higher value than money Becoming more experiential Plethora of choices Want to be served when they

want and where they want

76% of US retailers and 75% of US shoppers are engaged in loyalty programs

Shopper’s Stop claims more than 60% of sales from loyalty members.

Subhiksha claims 80% of sales comes from loyalty members.

Also a credit card research has shown that 75% of college going student keep their first card for 15yrs and 60% keep that card for life.

First Citizen Card   Program type:

Earn up to 3.5% every time you shop with your First Citizen Citibank Credit Card - For every Rs. 100 purchase, earn up to 5 Reward Points at Shoppers Stop and 1 Reward Point anywhere else.

Benefits: a)Reward Points for every time you shop at Shoppers Stop stores or shoppersstop.comb) Exclusive benefits & privilegesc) Exclusive offers ever so oftend) Updates on what you can look forward to shop for at Shoppers Stope) Exclusive cash counters at Shoppers Stop so you can spend more time shopping than waiting in a line

Green Cards Program type:

Membership & 12 month Purchase-based Upgrading System Three Star Card - Upgrade to a 3 star status by shopping for Rs.

8000/- immediately preceding 12 months of current shopping date. Five Star card - Upgrade to a 5 star status by shopping for Rs.

20000/- immediately preceding 12 months of current shopping date. Seven Star - Upgrade to a 7 star status by shopping for Rs. 40000/-

immediately preceding 12 months of current shopping date. Benefits:

Instant discounts for every time you shop at pantaloons. Exclusive shopping days to get hold of latest merchandise Regular updates on collections and promos via catalogues, sms and

email Special invites to the most happening events Extended exchange periods and complimentary drops for alterations Exclusive billing counters and much more

Privilege club   Program type: The Globus Privilege Club card, based on the concept of

instant gratification has ensured 100% card to benefit ratio. Members are immediately rewarded for purchases at any of the Globus stores, in addition to a host of other privileges such as exclusive tie ups, promotions and special shopping hours. Globus offers two different card categories, each with it own benefits.

Member ship criteria: Benefits: Privilege points accumulated on the membership card translates into

gift vouchers for a host of items as also value adds like special offers, discounts, exclusive movie screenings, special invites, get together events, and more. Some of the pleasant surprises included special screening of the movies Kyun Ho Gaya Na and Spiderman. Tie-ups with Pizza Hut, Water Kingdom, etc. bring in their own set of benefits. Sometimes just stepping into a Lifestyle store can fetch one a free cup of cappuchino coffee at Qwiky's who have a presence within the store.

Club west Program type: CLUBWEST is a two-tier program, which

comprises Clubwest Classic and Clubwest Gold.

classic A purchase of Rs 2000 on the same day entitles you to a

complimentary membership into Clubwest Classic. Alternately, you can enroll by paying a nominal one-time fee of Rs 150.

Gold A purchase of Rs 5000 on the same

day entitles you to a complimentary membership into Clubwest Gold.

Member ship criteria: Benefits:

Store Name Pantaloons Lifestyle Westside Max

Format Type Multi brand Multi brand Trent group Multi brand Landmark group

Positioning Family store Style & affordability

Family shopping destination & value pricing store

Categories Apparel &accessories for men, women & children

Apparel & accessories for men, women

Stylized clothes, footwear & accessories

Foot wear, accessories, home furnishing

Average billing per customer

Rs.1800 Rs 800 Rs199-1999 Rs750 to 1450

Average footfalls

1000on weekday & 1500 to 2000 on weekends, holidays

1200 in week days & 6000 during week end

25-45 per hour 450 per day & Weekend 1200

Loyalty card Programme

Yes Yes Yes Yes

Media used Hoardings, print , electronic (SMS, E-mail),POP

Hoardings, In store Print, electronic, hoardings, In store

In store

Promotion type

Price off, free gifts, exchange offer

Lucky draw, discounts, contests, free gifts

Cause related, gift vouchers, discount, contest , combo, coupons

Lucky draw, free coupons, discounts

Evaluation of promotion

Sales, Quarterly profit

Sales Sales,Quarterly profit

Sales, average bill size, conversion (footfall)

Usage of sales promotion activities has direct impact on behavior.

It motivates a consumer to: buy now rather than in future; reinforce or reward loyalty etc.

Broadly, objectives set for these activities are

i)to generate store traffic ii)to enhance store image and iii)to create a price image( high or low).

Setting the expectations from the program.

Determining what customer information and buying behavior data to gather.

How to gather data, analyze, run campaigns and monitor ROI?

Identifying your loyal customer and their buying behavior.

Using customer data for new product campaign and new outlet identification.

Improving margins and revenue through direct marketing campaigns.

Why do customers buy this brand?

Why are customers dissatisfied?What is the current buying

behavior? By time, day, season etc. Existing customer segment. Brand or price conscious. Product and/or service.

Designing a comprehensive loyalty management tool which provides: Data gathering Data analysis Direct marketing campaigns Information access for customer

and brand Monitoring ROI from campaigns

Outlets

Customers

Direct Marketing

Profile Consumers

Direct MarketingPrograms Data Base

Customer Purchase Gather

CustomerPurchaseData

AnalyzeData

CustomerCampaign

Enrollment: Design custom forms and enroll on live database, issue cards, manage member grades.

Data Gathering: Online (over GPRS) rewards, redemption, query.

Analysis: Value, frequency, recent visits, customer personal data correlation.

Marketing Campaigns: Email, SMS, Mailers, Events to customers selected from analysis.

Monitoring ROI: Correlating campaign to customer repeat buying.

Support: Customer and outlet support for program management.