Shopping has never been more lucrative. Even picking up your groceries today could well win you a free stay in Bangkok or Hong Kong. Or, the clothes you buy now could come packed with a free iPod or even Mont Blanc pen. And if you manage your credit cards well, the list of free goodies you get could be as long as your to-buy list.
Welcome to the world of loyalty programmes. The mantra for success here is simple: Woo the consumers with freebies and earn their loyalty with promises of more gifts in the future. And with incentives ranging from international hotel bookings to cosmetics to birthday discounts at restaurants and salons, shoppers are not complaining at all.
The retailers, too, are happy to hear the sound of cash registers ringing. Shopper’s Stop Ltd, a department store chain with a pan-Indian presence, for instance, claims that more than 60% of its sales come from customers enrolled in various loyalty programmes. In the past four years, the department store chain’s membership has been growing at a healthy 35% annually. At Shopper’s Stop’s bookshop chain, Crossword, 45% of sales come from loyalty programme members—up from 25% just two years ago. “Our book store expansion is catchment driven,” says Aniyan Nair, head of operations and marketing at Crossword. “We open a book store of a certain size only when a locality has enough people interested in reading. Customer loyalty is important for us.”
Kabir Lumba, executive director at Lifestyle International Pvt. Ltd, a national department store chain, says the response to its loyalty programme has been “phenomenal”. Half the sales at Lifestyle stores come through loyalty programmes.
Retailers use the buying patterns of loyal customers to decide what to stock in their stores or how to sell more to regular buyers by marketing what they would like to buy. “The data analysis helps us decide the brands that need to be discontinued or the ones that should be launched,” says Govind Shrikhande, chief executive officer (CEO) of Shopper’s Stop. Crossword, for instance, sends mailers for book launches or readings of the kind of books a consumer usually buys. But it is not just lifestyle stores, which have higher margins that can be crunched, that are using such programmes to retain customers. Even discount grocery stores, with their already thin margins, are taking the loyalty programme route to woo customers. At Subhiksha Trading Services Ltd, which runs one of the country’s largest discount-store chains, 80% of the sales come from such members. Trumart, which has 30 supermarkets nationally, introduced the first such programme among grocery stores and is relaunching the same now in a new avatar. “We want to differentiate ourselves on the basis of the service we provide,” says Upamanyu Bhattacharya, CEO of Trumart.
While lifestyle stores track loyalty to engage in more targeted marketing, discount stores do it to collect better customer data to help them stock stores. Trumart found through its data that a Nagpur store was selling large quantities of a locally made pickle. They now sell it at several more stores in the city.
“Retailers could be overstating the importance of customer loyalty,” says Raman Mangalorkar, who heads the retail practice of AT Kearney, a management consulting company. “Shoppers are in discovery mode right now and are fickle about where they shop. Maybe they own several cards, which they use by choice and not because they are members at a store,” he says. Crossword will soon introduce a programme to track purchases of customers. Based on their buying patterns, the computer will suggest new books for them.
Pantaloons, the department store of Pantaloon Retail (India) Ltd, relaunched its loyalty card in a unique format eight months ago. “Our programme is not point-based. Customers get discounts on all purchases if they are members,” says Damodar Mall, president of the food business at Pantaloon.
Splurging can be rewarding, after all.
Write to us at firstname.lastname@example.org