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Chasing loyalty

business Updated: Jul 22, 2012 23:20 IST
Pooja Biraia
Pooja Biraia
Hindustan Times
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Anand Jaiswal owns several loyalty cards from different brands, but rarely uses them. “I hardly got anything substantial after redeeming my points. The last time my siblings and I shopped for shoes at Metro’s Gorakhpur outlet, we spent Rs. 14,000, but got a discount voucher for just Rs. 500.”

Anaggh Desai, CEO, The Bombay Store, said that his loyalty cards are just a collection of points, left untouched. “Between my wife’s and my cards, we had around 60,000 points from one branded retailer which, we were told, would get us only Rs. 50 per 1,000 points, which seemed ridiculous.”

Girish Mallya, editor of a popular magazine, grumbled: "When I wanted to redeem on my Reliance Fresh loyalty card, I had no idea how to go about it. There was no communication, no e-mailers and no updates on offers. Moreover, they assumed that the card would be redeemed at other Reliance properties such as Reliance Trends, which I was not interested in." http://www.hindustantimes.com/Images/Popup/2012/7/23_07_biz2.jpg

While consumers don’t seem to be too happy with loyalty programmes, retailers seem to be enthusiastic about them. Loyalty or privilege club membership programmes are tools to offer discounts/rewards to consumers to encourage them to frequent a store and spend more. Consumers accrue reward points by shopping up to a certain limit, which they can redeem through discounts or gifts via the loyalty card.

Shoppers Stop claims to get 73% of its business from its over 18 lakh First Citizen members.

According to Caroline Papadatos, senior VP, Loyalty One, India will see big growth in the loyalty market, which is estimated at Rs. 5,000 crore. “By our projections, in the next three years, it’s going to touch at least Rs. 8,000 crore.”

This growth seems to be out of sync with customer expectations, given the high shopping limits, cumbersome redemption processes and low value on reward points. But points are not the only thing a customer looks for in a loyalty programme, said Vinay Bhatia, senior VP - marketing & loyalty, Shoppers Stop, which charges Rs. 300 for entry to their First Citizen club.

“There are many more privileges such as a separate counter for First Citizens, a magazine, exclusive sale previews and sometimes free parking too,” Bhatia said.

"Shoppers Stop is one of the best-in-class loyalty programmes in India – an exception to the standard programmes that suffer from low engagement and low redemption,” said Papadatos.

Vijay Bobba, CEO & MD, Payback India, however, observed: "When brands claim they have a huge number of members in their loyalty programmes, it may not mean much. Their programme may benefit a small chunk of members who are active shoppers. However, the majority do not spend as much, hence do not earn sufficient points to see it as a meaningful programme."

Nishank Joshi, head (marketing), Inorbit Malls, felt that it is better to base a loyalty programme on discounts than on points. “We offer loyal customers Inorbit gift cards – essentially prepaid debit cards. Those get added offers from individual stores at Inorbit where redeemers use the card.”

A possible game changer for India, suggested Papadatos, is the multi-partner coalition loyalty programme. “In a standalone programme, single buys would hardly get any meaningful return. A coalition programme, where the customer collects points across a number of retailers or brands, is a better idea,” she said. HPCL has partnered with Payback for such a loyalty programme.

Another idea that’s drawing interest is the location-based loyalty programme, or geotagging, which rewards consumers when they check into a store – on the lines of Foursquare – and also when they go to specific sections inside. “For instance, you get 25 points for entering the store and another 20 points for checking out the menswear section. This is the future of loyalty and will come to India soon. We are looking at piloting it at Inorbit in Malad (Mumbai) this year,” Joshi said.

According to the 2011 Colloquy Cross-Cultural Loyalty Study, conducted on shoppers in India, 83% of non-members who were not yet part of any loyalty programme, were willing to join a programme. Often, signing on is also free. It’s sustaining and growing member commitment that still needs to prove itself in India at this nascent stage.