An Investigation Into The Consumers Predisposition Towards Enrolling Into Retail Loyalty Cards

By

Dr. Sapna Rakesh, Professor, Institute of Technology and Science, Ghaziabad

Retailing in India is growing at an incredible pace. Each player in the industry is trying to be a pioneer in various activities related to retail expansion and establishing a firm foot. Companies are geared to become first in the retail format type , largest in the retail chain type , grab the best locations available in the cities across India and also various innovations at the back end including supply chain,  services and customer management. To please the customer companies are working hard with various types of tools and technologies available and which can somehow help them generate customer delight. This paper investigates consumer attitudes and behaviors with industry intent and practice with respect to the use of loyalty card to generate repeat visit of the customer. Through this research I have attempted to find answers to questions like Do consumers feel "rewarded" for using a Loyalty card? Are these cards effective in "driving" consumers to the store? 

Generating Retail Addiction:  There are two key specifics when it comes to customers: acquisition and retention. Customer relation management aims at retention by focusing on generating superior customer equity culminating in the higher repeat visits of the customer.  Generating loyalty is an important result of all CRM programmes.  In retail, addiction to the store plays a key role in making a retailer more competitive than others, by the very nature of business sustainability of the business is based on the addiction of the customers to the store.

Customers addicted to the store may be termed veteran customers, and they are also the ones who introduce several new customers to the store. They are also the most supportive group in the research efforts of the organization. Loyalty card is a string which loosely attaches retailer with the customer. How the string is pulled with what efforts depends on the creative ability of the retailers. By enrolling customers to become a part of the organizations loyalty card programme one can generate huge data base with requisite details about the consumer. Ever since the advent of the smart loyalty cards, loyalty programmes (LP) have been transcending their traditional role as creators of exit barriers by transforming themselves into facilitators of customer data collection. Apart from demographic and socio-economic data, behavioural (transaction) as well as psychographic (survey) data are being collected for known LP members.

Loyalty programs are structured marketing efforts that reward, and therefore encourage, loyal buying behaviour - behaviour which is potentially of benefit to the firm a loyalty card, rewards card, points card, or club card is a plastic or paper card, visually similar to a credit card or debit card, that identifies the card holder as a member in a loyalty program.

Purchaser-Purveyor Loyalty Card Model

 The Purchaser-Purveyor Loyalty Card Model shows five major loyalty card strategies available to a retailer: Pure, Push, Pull, Purchase and Purge.

• Pure - involves spending and accruing benefits only with the card-issuing retailer. An example would be purchasing groceries from a specific retailer to gain a discount on future grocery purchases from the same retailer.(Club west from Westside )
• Push - involves spending at several retailers and accruing benefits with the card-issuing retailer. An example would be a card-issuing retailer linking with a bank to gain access to many retailers through the use of a common payment scheme (e.g. Visa or MasterCard).
• Pull - involves spending at the card-issuing retailer and accruing benefits outside the retailer's everyday range. An example would be purchasing petrol from the card issuer in order to claim gifts from a catalogue provided by a third party (IOC’s Petro Card )
• Purchase - involves spending and accruing benefits across many retailers. An example would be the use of general credit cards in order to claim gifts from a catalogue.
• Purge - involves no loyalty card. Customer gets a straight discount on all purchase on producing the card. Like discount cards of restaurants 

Loyalty cards in Indian retail stores: As an effort to integrate customer data to customer interaction management number of Indian enterprises have launched loyalty cards programmes in different formats and forms to woo the consumer.In India BPCL's PetroBonus program is a pioneering program and also one of the largest in the country with about 2 million members for the fuel card program. It also has variants for Fleets and Convenience store customers. Likewise IOC's Fleet Card Program XTRAPOWER has recently crossed 1 million mark. IOC has launched a loyalty program XTRAREWARDS for retail customers. Along with reward points it offers other benefits through its alliance partners.

From group cards, like Green Card from Pantaloon to cards enrolling multiple sellers to cards only of a limited cash value launched by Ad Labs and PVR cinema for movie tickets, India has lapped up card technology in retailing in various formats with a high degree of enthusiasm. Modern retail outlets of India which are still taking a shape and growing at an exponential rate have already launched Loyalty cards as a quintessential strategy. Big Bazaar has joint credit cards with ICICI, Vishal Mega Mart has a joint Credit card with SBI, and Reliance has come up with its own credit card. Lifestyle, for instance, has a loyalty programme called `The Inner Circle', while Pantaloons offers what it calls a `Green Card'. Rewards programmes, such as `Club West' from Westside, and `First Citizen' from Shopper's Stop, also in competition to woo the customer. Small retail chains like Saboo, Bombay Selection CTC plaza also enroll customer in their loyalty programmes.

Results: Before taking a closer look at the sample characteristics, it is necessary to describe the sample selection procedure, which consisted seveal steps: a stratified random sample of 201 units was selected from the retailer database. Although the final result is not a perfect stratified sample due to elimination of several selected units without replacement (because of temporal and financial project constraints), it comes close enough for the goals of the proposed empirical project.  Sample characteristics closely resemble characteristics of the population of loyalty card programme. As shown in Table 1, there are 62.7 per cent males and 37.3 per cent females in the sample, with the average age of 42.9 years. The youngest cardholder is 24 and the eldest 79 years of age.

Table  SEQ Table \* ARABIC 1: Gender Structure and Age Characteristics of the Cardholders’ Sample

To define the underlying structure in the data matrix  we used a multivariate apporach specially factor analysis which enabled us to identify the separate dimensions of the structure and determine the extent to which each variable was explained by each dimension. Oblimin with Kaiser normalisation rotation method was used due to expected correlation among factors. Significant loadings were interpreted. Factor analysis was further used for data reduction by calculating scores for each underlying dimension and substituting them for the original variables [Hair et al., 1998].

Findings: Our findings suggest that loyalty card programme of a firm may be successful due to three reasons , the marketing effort related to cards of the firm. Second, is the perceived value of the card, if the customer believes that the firm will be able providing him some extra value because he is a card holder the customer will go for the card. The third factor explains that a customer will enroll for the loyalty card of a firm because he has a prior experience of shopping with the firm and is satisfied with the retailer due to his prior experience. From this, we may conclude that apart from aggressive marketing of the card, a retailer should be able to create a higher perceived value of enrolling for the card and the other experience related factors will play a key role in loyalty card acceptance amongst the customer.

 Managerial Implications: Enrolling customers for the loyalty programme is easy as compared to generating some added rupee value from the card holder, as some marginal revenue for the retailer.Using Information to one's advantage when the front end and the backend data integration of the firms is not intact, is a big challenge to all retailers, in such scenario generating data through these loyalty programs and not being able to use it, is a big opportunity loss to the retailers. To develop capability to harness value from money from loyalty programmes companies will have to consciously decide to become relationship oriented organizations and create their marketing around relationship management, Contradiction is that every one wants to become a retailer based on the type of affordability they can provide. Beyond sending mailers of the new discount sale arrival, hardly any one has used this data, which is quite surprising. Retailers believe that the data is to be used for push marketing only. Retailers need to understand that relationship management also means taking care of customer nuances like refurbishing the inventory, as per the new trends and informing the customer about the same. Seeking customer ideas on probable styles and desire they would like to buy.  Sending them gratitude mails and value added information.  Simply presenting savings alone does not earn customers loyalty the dilemma lies in what to provide to shoppers beyond a paperless coupon system; that is, programs that link to how customers live their lives and experience aspects of the store that they utilize or have an emotional connection. Card program may also help enhance satisfaction if the program includes maintaining a meaningful dialogue with shoppers that is based on a deeper understanding of "what makes them tick" and extends well beyond reciting back the name printed at the bottom of a receipt.

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