Offering a hook to spend more

Offering a hook to spend more
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First Published: Fri, Dec 02 2011. 12 27 AM IST

Shyamal Banerjee/Mint
Shyamal Banerjee/Mint
Updated: Fri, Dec 02 2011. 12 27 AM IST
Colloquy, the research arm of the North American loyalty card company LoyaltyOne, has come up with a white paper on what consumers think and feel about loyalty to their brands and retailers. The study, conducted online with another research firm, covered three developed economies: Australia, Canada and the US and three emerging economies, Brazil, China and India. Predictably, the survey discovered what it calls “profound” differences in these consumer environments and, therefore, in the behaviour of the consuming classes it targeted.
Shyamal Banerjee/Mint
Even though the sample size of respondents in the emerging economies of China, India and Brazil was small and responses were sought only from the socio-economic classes A, B and C, the findings on Indian consumers are interesting. The insights assume importance in view of the ongoing hysterical debate on the merits and demerits of opening up the retail sector to foreign entities. Last week, the Indian government allowed 51% foreign direct investment (FDI) in multi-brand retail and 100% FDI in single-brand retail, albeit with accompanying riders.
Little surprise, then, that Bryan Pearson, president of LoyaltyOne and retail marketing and customer relationship management expert, who was in Mumbai last fortnight, views this country as a high opportunity market for his business. He included India in his global consumer research as he is getting ready to roll out his coalition loyalty programmes in the country in collaborations with seven to eight major retailers and brands. LoyaltyOne acquired a 26% stake in the Indian company Direxions earlier this year.
India is exciting because its retail market is expected to touch $450 billion by 2015. And organized retail or modern trade, which accounts for 5% of the market, currently is expected to expand to 14-18% by 2015, the Colloquy report says.
The white paper—the research for which was conducted four months ago—found a high level of consumer optimism in India. For a start, compared with consumers in the US, Indians are more optimistic about their economic prospects in the next 10 years. Overall, 34% of respondents feel good about their future compared to 17% in the US. In SEC A, a high-income socio economic class, 55% people say the economic outlook is positive.
Surprisingly, consumers in India trust both domestic and global companies that they do business with; 56% of respondents voted for “most businesses can be trusted” versus “you can’t be too careful with businesses.” That’s not all. The same number (56%) said they trust foreign brands more than Indian ones. Competition from foreign companies is a good thing, they believe.
While trust in companies may be high, consumer loyalty is fickle. Only 1 in 5 Indian consumers (a mere 20%) say they are “extremely loyal” to their favourite brands. This means that the remaining 80% consumers are available for loyalty programmes.
In the survey, only 42% people in India owned a rewards programme compared with 74% of Americans who have an average of 2.8 programme enrolments per person. However, in the high income classes in India, consumers have an average of three programmes. Obviously, people with money shop more.
Fewer people in the SEC C, the mid-income socio-economic class, have loyalty card memberships since they are, by and large, still shopping with unorganized retail or believe that they do not shop/spend enough to be eligible to join a programme. The SEC B respondents are concerned about privacy in parting with personal information to enrol in loyalty programmes.
The study found that consumers in the age group of 26 to 34 years are best suited for loyalty programmes since they are more optimistic than any other consumer segment. Also, class distinction in this age group is irrelevant. The positive outlook is shared across socio-economic categories.
A sense of patriotism is visible among them as they say “my/my family’s economic prospects will improve over the next 10 years”. As early adapters they are open to new experiences and willing to fork out premiums for new and better offerings, the study says. Needless to say, they can drive trends and influence others.
Of course, all customers would enjoy special perks but 40% of this age group (26-34) wants to be looked after well with special treatment. Surprisingly, the consumer expectation to be treated well reduces with age.
Clearly, as companies operating in India chalk out their loyalty strategies in an environment that will only get more competitive in view of retail sector liberalization, insights on consumer behaviour and quirks would be much sought after.
Bryan Pearson claims that coalition loyalty can help in carving a richer picture of consumers and their habits and offer them a hook to spend more and more with a host of brands. With the cost of living going up, aggregating everyday expenditure on petrol, grocery, credit cards, clothing, online travel and getting returns and rewards on this spending may not be such a bad idea.
Shuchi Bansal is marketing and media editor with Mint. Comment at whatwebuy@livemint.com
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First Published: Fri, Dec 02 2011. 12 27 AM IST