Customer loyalty programmes lose steam | business | Hindustan Times
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Customer loyalty programmes lose steam

business Updated: Jul 20, 2008 22:09 IST
Saurabh Turakhia
Saurabh Turakhia
Hindustan Times

Competition may have got more retailers into the fray, but it has also affected customer loyalty programmes, meant to get a customer to come again and again to one particular retailer.

While loyalty cards worked well in the beginning, today they have been reduced to just another goodwill gesture on part of the retailer.

Harish Bijoor, CEO, Harish Bijoor Consultants, says that loyalty programmes are not that effective. “It is very likely that the customer owning the loyalty card of one retailer will also have that of its competitors. There is no exclusivity,” he said, adding that many customers who own a loyalty card use it very reluctantly. His observations come after a study of 16 different loyalty programmes.

Even top retail industry executives say loyalty cards are losing their sheen. “Introducing a loyalty card is a costly affair,” said Rajan Malhotra, CEO, Big Bazaar. “The costs of technology coupled with costs of discounts and promotions can together add up to 5 to 7 per cent of sales.”

“The key, would be to use the loyalty programme to study the pattern of consumer spending and then offer something valuable and relevant to the consumer, which is not happening now,” he said.

Customers’ loyalty is only till their purpose is served.

Vinay Bhatia, customer care associate and VP marketing & loyalty, Shoppers Stop defended their loyalty programme. “Whether it is the large contribution to sales (65 per cent of our sales come from Shoppers Stop First Citizen Members) or high redemptions of 90 per cent, the superiority of our programme is established,” he said. Shoppers Stop, which introduced its loyalty programme ahead of others, has 1.1 million first citizen members. Future Group and Vishal Retail don’t have any loyalty programmes in place yet, though both the retailers are planning to launch them soon. Future Group is likely to launch a loyalty programme after six months.