CASE 3

Customer Loyalty – The Ultimate Objective of Every Marketer

As we speak, consumers in India are going through a transformation. They have become empowered, quite experimental, highly quality conscious and are buying intelligently. It is reflecting in their buying behaviour, they are more vocal, expressing their views and demanding better experience. A huge change in consumer dynamics is being witnessed, with a large-scale shift from offline to online consumption of goods and services. Also, rapid movement is being witnessed in new and unconventional categories like furniture, health and beauty care, apparel and groceries, as opposed to traditional online categories of books and consumer electronics.

In today’s world where loyalty is becoming a rare phenomenon, be it your friend or a job, brand loyalty also seems to be fading. Brands operating in mature markets face intense competition making it difficult to sustain. Therefore, it is important for companies to know how to retain their existing customers.

REPURCHASES MOST COMMONLY LINKED TO LOYALTY

Brand has come to play a very important role in today’s global and intensively competitive world. Brand loyalty is the consumer’s conscious or unconscious decision—expressed through intention or behavior—to repurchase a brand continually. In common parlance, customer loyalty refers to the repeated behaviour of purchasing a specific product/brand over time. This behaviour can be self-induced by a satisfied customer and also many a times induced by the marketer to drive sales.

Amazon India launched its flagship membership programme, Amazon Prime, in 2016 to boost repeat transactions on its platform, and this effort is already paying off. Amazon Prime membership provides free and priority delivery, additional quality check for the consumer creating higher customer confidence for a small fee. As per latest declaration by Amazon, two out of three daily essentials transaction on Amazon Pantry, and one in every three orders in the second highest selling fashion category, is from a Prime member. Overall, Prime members already account for one-third of all the orders placed on Amazon India. This success can be attributed to typical behaviour of consumers who, after committing once, tend to first visit Amazon before exploring other options. Thus, Prime will make an impact in the long run in making people stick to a single online marketplace. Major impact will be seen in the FMCG category which offers a selection of about 1.9-million products from 9,000 sellers on the platform, and frequency of buying in this category is higher and will drive sales in other segments also. Amazon is also waiving off the box fee of ₹ 20 (for every 15 Kg box) for Prime customers. Very recently in May 2017, Amazon had a four day “Great Indian Sale” where Prime members accounted for 35 % of the orders and purchases made by them grew 100 % over a similar sale in January.

CUSTOMER ACQUISITION AND LOYALTY

Innovation and brand consultant, Anisha Motwani, believes that free trials or sampling as a strategy is mostly prevalent and successful in categories that have deep-seated habits and have high frequency of consumption Brand switching in this category require attitude and behaviour changes and free sampling influences customer to try new brands and thus increasing the probability of purchase. Such categories could include newspapers, food products, etc. Free trials can also be found in case of expensive offerings where consumers prefer sampling before making a final commitment.

In March, 2017, a unique trial-driven marketing experiment in the unusual category of apparel was done by women’s denim brand, Jealous 21. It offered free jeans to its customers in Delhi, Mumbai, Bengaluru, and Chennai. The process to avail the offer involved registration by interested women on the company’s website, get a unique code to visit its store, uploading a selfie in a Jealous 21 garment at the store, and tagging @jealous21 and #freejeansday on Instagram or on Facebook to walk away with a free pair of jeans. The brand made sure that there were no hidden terms and conditions which made it a very enjoyable experience for its customers. Total 30,000 people registered for participation and 5,000 free jeans were claimed. Though jeans as a category does not quite fit into this kind of trial-driven marketing, but this brand achieved spread of positive word of mouth leading to referrals. “The real impact of this is the viralization of such an activity. The brand is earning this buzz—rather than paying for advertising—and is being talked about,” says Motwani.

Trial-driven marketing is based on the assumption that once the prospective customers experience the product/service, they might get ready to make a lifetime commitment to the brand. “A consumer is more likely to buy a product after trying it. Typically, food products have tried sampling stations while cars invite you to go on a test drive,” says Alpana Parida, managing director at brand strategy firm, DY Works.

Success of Reliance Jio in the intensely competitive Indian telecom market brings forth the strength of trial marketing strategy, even in the service industry. Reliance Jio Infocomm Ltd offered free sampling of Jio’s voice calling, text messaging, and data services, and acquired stupendous 100 million subscribers, of which it continued to retain 72 million even after the free trial period ended.

Conventional wisdom suggests that brands that indulge in trials and discounts erode brand value. “Here’s the reality though. People value brands. But people also seek value for money. They prefer to buy brands, especially when they are offered at the best price or that have been experienced first-hand and generated a positive word of mouth,” Motwani says.

TRUST AND COMMITMENT – REQUISITES FOR BUILDING TRUE LOYALTY

The concept of true brand loyalty is not just limited to consistent repurchase but is broader in including all kinds of positive attitudinal elements. Commitment is a necessary condition for true brand loyalty to occur. Working with Professor Rogge of the University of Rochester, ICLP (Global loyalty marketing agency) applied Sternberg’s Triangular Theory of Love to the relationship between shoppers and brands, and defined the ideal, or “devoted” relationship, as one where shoppers feel passion, intimacy, and commitment towards the brand.

ICLP research on shoppers’ relationship with particular brands and their associated loyalty programs throws light on lot of areas which can be used to build loyalties. Some of the findings are:

Indian shoppers easily feel attached to the brands they shop, but only 21% are currently in a devoted relationship, especially in respect to the retail brands which indicates that marketers need to find ways to raise the emotions of Indian customers to the highest level of bonding with brands.

Another finding revealed that just 44% of Indian shoppers feel sufficiently rewarded for making a personal recommendation to their friends and only 47% said that the rewards received are tailored to their individual needs, which gives direction to the kind of reward programmes which marketers need to develop.

In the current data-driven world, personal data of shoppers so collected through all different channels, is not capitalised to its maximum potential as only 56% of Indian shoppers said that their chosen brand made relevant recommendations for products and services that interest them.

Even as Online retailers like Amazon and Flipkart build loyalties through the tools of customer recognition and personalization, multi-brand physical retailers like Big Bazaar and Shoppers Stop are getting consumer trust through consistent quality, value for money and respect for customers. Thus, different retail sectors in India can learn from one another as they look to build loyalty and closer relationships with their customers.

CUSTOMER EXPERIENCE AND CONNECT SUSTAINS RELATIONSHIP

Iglesias et all (2010) in their research studied that loyalty is achieved by brands capable of delivering a unique and distinctive experience by managing both functional and emotional elements. Experience adds memories and great value to the relationship. Giving customers unique experiences as rewards strengthen the emotional bond customers have with the brand, ensuring the relationship continues long after the experience itself.

OnePlus phones, which are sold only online, do carry offline plans as well. They are experimenting with different types of offline selling modes, like recently, they opened four exclusive service centres which also serve as experience centres for prospective buyers. They also came up with pop-up stores which remain for a short period. One such store in Mumbai drove in huge traffic. Pop-ups are a way to make users meet and experience OnePlus brand and meet some of their staff. Company also uses this as a way of feeling the pulse of the market. “Consumer loyalty is boosting our organic growth”, says OnePlus co-founder Carl Pei.

Connect with the customers is the key to developing loyalty. A conversation-driven sale that is high on empathy and knowledge, low on price and discounts has long been a staple of loyalty. It focuses on understanding the needs of consumers and delivering an exceptional experience. We are living in the age of “conversational commerce”, a term coined by Chris Messina, the inventor of the hashtag, which refers to the ability of a digital tool to interact and engage with a consumer using natural language. And multicultural millennials constituting nearly half of the demographic are the new set of consumers to interact with, who know what they like, and are not shy about sharing that information with their friends and contacts. According to Forbes magazine, “a good Word of Mouth marketing (WOMM) campaign generates thousands of conversations, recommendations and triple sales in just a year (even for the boring products)”. “When it comes to loyalty, multicultural millennials give as much as they get,” said Buzz Marketing Group CEO and founder Tina Wells.

In India, one kind of retail channel on which a large part of population, especially the lower rung of society depend upon is the ration shop. This traditional, government-controlled retail provides basic everyday consumed commodities like sugar, oil, etc., at subsidised rates. Due to lack of proper management and leakages, the network of ration shops has come under lot of criticism. However, their wide network and strong connection with daily lives has caught the attention of Kishore Biyani of Future Group. He took up a mammoth project of giving a complete makeover to 5,000 traditional ration shops in Rajasthan. This public-private experiment is not just to revive and rebrand this channel but Biyani plans to supply FMCG products to them, train the manpower, and computerize the outlets. Other states of Chattisgarh and Madhya Pradesh are also being explored for the similar initiative. This seems to be a great way for Future Group to make inroads into the remote areas of these states which are devoid of modern retail facilities. This is creating early customer familiarity with the brand which can get converted to loyal customer base as and when Future Group’s modern retail stores make their entry in those areas.

Easyday, one of the store of Future Retail Limited, launched its very first loyalty program in September 2016 called “Har Mahine Bonus” which offers free bonuses and vouchers worth ₹ 300 to every shopper who buys goods worth ₹ 1,000. Easyday is a supermarket chain of 330 stores and has this loyalty program running across segments. On the importance of customer connect, Manish Sabnis - CEO Easyday - Future Retail Limited, puts in very beautifully, “Success of supermarkets lies in becoming the store of the community. At Easyday, we take multiple initiatives every month to become the preferred “Pados ki Dukaan”. “Har Mahine Bonus” is a program launched to incentivise loyal shoppers and at the same time attract new customers to our stores.”

In today’s world where consumers have wide choices available in all categories, loyalties have weakened. India’s retailing giant, the Future Group, is all set to pioneer into setting up “loyalty-driven convenience stores”. There are 2 basic ideas which go behind these stores. One, to provide member-shoppers with higher discounts than those offered by brick-and-mortar chains such as D’Mart, or online rivals like Amazon and Flipkart, and two, to stock each store with merchandise suited for that locality and consumer base. The concept is a hybrid between the kirana (neighbourhood) store, connected commerce, and large supermarket. It targets to have five-lakh members in the fiscal 2017–18, and has plans of opening 10,000 of such stores in next 4 years.

A strong groundwork has already been done by Future Group to ensure success of this new format. The entire ecosystem such as logistics, partnership with FMCG companies, and customer database around the stores has been built.

Big competitive advantages have been created by Biyani. While rivals have been focusing on big-box formats, he took the acquisition route and in past 5 years acquired almost all convenience-store format brands that existed in India. As a result now, the new smaller stores (loyalty driven) planned by him will have three badges—Easy Day, Heritage Retail, and Nilgiri’s. Also while rivals are pure-play retailers, Future Group itself owns FMCG and logistics company, thus, having advantage through integration in the chain. To make it more attractive it has tied up with mobile payments and commerce platform Paytm to enable the wide base of Paytm-users to shop Big Bazaar goods on the online marketplace.

CONTINUOUS INNOVATIONS—A SURE WAY TO RETAIN CUSTOMERS

Innovations give life and new energy to the brands. In order to retain the best of the customers and to influence all of its stakeholders, brands have to innovate continuously. Technology and digital media has opened up innumerable opportunities for brands to innovate. Future Group which has many new initiatives to its credit has launched a digital wallet, FuturePay, to integrate its loyalty programmes across different Future Group outlets—Big Bazaar, Ezone and Hometown.

Best experience coupled with lowest prices is what FuturePay offers its customers. “Price Match” is its one important feature, which matches items from the customer’s bill with the advertised prices of any competitor retail store. If it finds a lower price elsewhere, it credits the difference to the buyer’s wallet. Another feature is its Oxygen Services, which enables customers to make transactions at any of its retail outlets, or through credit and debit cards, and net-banking.

These technology-based innovations are definitely creating impact on everyone, especially on the digital millennials. The company states that they already have 60,000 downloads for FuturePay so far (by Oct 2016) and are targeting one crore downloads in the next 18 months.

There is also a flip side to the use of technology. Customer loyalty can get completely jeopardized over an unsatisfied digital experience. Indian Digital Experience report by SAP, unveiled in April 2017, stated that only 8 % of customers unsatisfied with their digital experience would continue to remain loyal to the brand. In order that the brand remains relevant for its customers a strong digital infrastructure is imperative.

There are many brands in other sectors, too, which are experimenting with different ideas, and the success largely depends on the relevancy factor that those experiments attend to. Like McDonald’s is planning to lure consumers through a new breakfast menu that will include culinary delights suiting Indian palates, ranging from masala dosa burgers with molaga podi sauce, to the familiar anda bhurji.

As part of a brand transformation, McDonald’s is moving towards a healthier menu over the past few years offering lower sodium in fries and nuggets, lower calorie sauces, and preservative-free patties. The restaurant is also launching soups and salads. All initiatives going in line with the current consumer trend towards choosing healthy food options

McDonald’s India is also launching a series of concept restaurants called “Experience of the Future” (EOTF), with features of self-ordering kiosks, table service, and healthy menu. The first one of this kind has already opened in Mumbai in March 2017, with enhanced digital capabilities to improve customer experience. It plans to open 5–10 more outlets in the city in the next 18 months.

Another big brand that is walking the health route is Nestle. This world’s largest packaged food group has made a scientific breakthrough by discovering a completely new way to use the traditional, natural sugar so that it get reduced in its candy products by up to 40% with no difference to taste.

CRITICAL FACTORS FOR THE SUCCESS OF LOYALTY PROGRAMS

Rijish Raghavan, Vice President, PAYBACK India, in one of his interviews has emphasized on factors like transparency, convenience, relevance, engagement and ease of use for the effectiveness and success of a loyalty program. A clear and transparent communication while providing offerings and benefits to the customers goes a long way in developing their loyalty.

In the online world, personalization of experiences is the key to purchasing consideration while segmentation with locational considerations is critical to offline retailers.

Consistent delivery on the promises is what turns customers into loyal ones. Brand advocates cannot be made overnight. Building an effective loyalty program and pool of brand advocates can stand brands in good stead in times of crisis.

THE FUTURE

In the current environment, loyalty to the brand has become crucial from the marketing strategy perspective where the very survival and continuity of the organization relies on loyal customers, who may be willing to pay more for a brand.

Brand loyalty generates greater market share and brings in new customers with Word of Mouth publicity. Brand loyalty is not just a marketing instrument but its strength goes beyond and influences the goal and vision of the organization.

In India, loyalty transactions have been growing consistently over the past few years due to more real-time and personalised experience being delivered to the customers. Loyalty programs are omnipresent in business and have evolved and grown beyond the discounts and coupons game. The demographics are changing and big spends are being made in all different categories from fuel, apparels, entertainment, travel, financial services and daily needs. In such a dynamic scenario, coalition loyalty program would be game-changer as it offers a diverse portfolio of partner brands with options to earn and spend points, and avail rewards. Loyalty programs which consolidate the rewards across partner brands will go a long way in ensuring customer long term retention.

QUESTIONS

1. ‘Trust, commitment and customer satisfaction are the pillars to building customer loyalty.’ Enumerate through different examples, keeping the case in context.
2. ‘Delivering customer value has a strong linkage to generating long-term customer loyalty.’ Provide arguments from diverse sectors supporting the statement.
3. Relevance, experience, engagement, personalisation are some terms gaining importance in the current age for customer acquisition and retention. Explain how these have added new dynamics to the game of building brand loyalties.
4. Customer relationship management (CRM) process aims at enhancing customer loyalty. What are the various initiatives on the establishment of customer connect, management of data, investment in technology, and people development being taken by organisations today for an effective CRM strategy?