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Do Indian Retailers Know Loyal Customer ?

February 8, 2013


Know Your Loyal CustomerLoyalty is not just a programme, it’s a device to identify customers. Once the retailer knows his customers, he can start to build some understanding of how they shop. Every time a customer uses the loyalty card, not only is he getting some rewards but his buying pattern is also being detected by the retailer. So, instead of doing mass campaigns and trying to assume that everybody who is 25 wants the same things, a retailer can now say that he has a segment of customers who came in to buy utility goods, another buys only luxury goods, and so on.

The retailer can thus have differentiated experiences for different customer profiles. He can actually organize his store accordingly, based on what he knows about his customers. In India, people think of loyalty as offering their customers a bunch of points that will make them happy. But loyalty is much deeper than that. It’s a strategy for knowing your customers. A loyalty card is just the first step in identifying them and then learning more about them. You can see every transaction they do, and when you have that, you can do many things like rewarding customers differently.

The second thing is recognition. If somebody is your best customer, the worst thing you can do to him is to fail to recognize him when he comes to your store. It is absolutely necessary for a competitive retailer to know his best customers. Also important is creating communication that is relevant to the customers. If a retailer knows what his customers buy, he can send tailor-made messages to them.

India vs the Americas Loylaty Matters Most
In India, retailers are still relying on very basic information like anniversaries and birthdays, but in the new world of retailing, you need to know 20-30 things about a customer, otherwise it won’t be possible to have an effective relationship with him. All these things require only one thing – data – and retailers need to invest heavily in collecting it. Loyalty programmes are a very good way to do that.

Use of Analysts and Data Analytics
What’s missing in India compared to the matured markets in the West is the fact that retailers here are yet to learn to use the customer information properly. They are using market segmentation in terms of SEC A, B, etc. They analyze these in the way that “each segment will be having roughly around 300 million customers, which will be growing over the next five years.” I think this type of segmentation and market information is too large to be targeted effectively by the Indian retailers. It is not going to be enough. In the United States, the average food-and-grocery retailer would have 50 or 60 analysts at a time analysing customer data. That information helps them decide which products to buy and where to put them on the shelves, who to target, and the pricing strategy.

What Kind of Customer Loyalty Card will Work in India ?
One of the major holes is that Indians are accumulating small number of points on different Loylaty Cards which can neither be redeemed nor used. To solve this problem, a loyalty programme with a single currency that can be used with multiple retailers. It’s something like the Euro a common currency used all over Europe. Take that analogy and use it in terms of a coalition of retailers – imagine if brands like Tanishq and Shoppers Stop got together to offer a common loyalty programme. This would mean a customer will be able to collect more points quickly.

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