By Sangita Ghosh and Sarimul Islam Choudhury
12 June 2009
The sustainability of any business depends – to a large degree – on loyal customers who come back again and again for more shopping and organised retail is not an exception to that. This is a part of strategic management where the retailer has to think on the pointers of his business model; this includes service that leads to customer satisfaction, which leads to customer loyalty and which in turn leads to profitability. The factors related to retailer-customer relationship and the customer’s satisfaction help retailers to have a better understanding of the shopping experience.
The factors that help to integrate and influence customer satisfaction demand a quick and continuous flow of information and analyses of customer behaviour. Consumer purchase data is one of the most important tools to measure customer satisfaction in relation to overall sales and market performance of a particular retailer. Therefore, besides developing a new customer base, retaining the existing customers is also a challenge for most retailers.
To have an understanding of the subject, IndiaRetailing posted a poll on the theory that "Customers don’t return because retailers don’t stay in touch with them." This question was angled to scrutinise if for retailers it is enough to just stay in touch with customers to drive sales, or are there other factors that impact customer retention?
Out of the total votes cast, around 78 per cent of the respondents negated the statement, whereas only 22 per cent of their counterparts believe that not staying connected with customers can be a major contributor of customers not staying with a retailer.
When IndiaRetailing put the question to individual retailers, most agreed that not staying in touch can be a reason, but can never be the only reason.
Samar Singh Sheikhawat, VP, marketing, Spencer’s Retail Ltd said that with the economic downturn and constrained demand, customer experience is the first line of defense in sustaining a long-term customer relationship. "For that matter a favourable customer experience is fundamental in building consumer loyalty and improving consumer retention. Therefore, retailers would have to look at ways and means of being in touch with consumers – understand their shopping needs, design retail strategies around them and ensure that consumers get what they want," he stated.
Anup Jain, head-marketing, Pizza Hut, stated, "The statement is partly right but in the retail business, customers don’t return frequently when they don’t get much value for the money spent. At Pizza Hut, we don’t have loyalty programmes as such, but we do have online programmes where VIP (Very Into Pizza) members can access offers on our delivery channels. They can also get to know the latest information about the products from the site."
Harkirat Singh, MD, Woodland believes that it is not possible to keep in touch with the customers regularly unless there is a structured loyalty system in practice. But the retailer claims that very often he finds his customers returning repeatedly to his stores, even though he does not run a loyalty programme. Clearly, a mere showcase of a customer loyalty programme without value added services and cutting edge products on offer can’t retain customers in the long run.
As to what these other determinants may be, Devangshu Dutta, chief executive of Third Eyesight states that frequent visits of a customer to a particular store are guided by various elements. Sometimes it is the nature of the product – something like furniture will feature long gaps between purchases. In such cases, measuring loyalty can be a challenge. But there are other reasons that play a part. For instance, the location may be not the most convenient, or the store may not be distinguishing itself from its competitors, and may be selling a generic product, at average prices and with an indifferent service.
So, in that case, customers may be drawn back to the store more often by making sure the merchandise is updated frequently, especially if the retailer is not selling staples such as groceries, which draw the customer in at predictable intervals. "This is as true of books and music, as it is of fashion," Dutta notes.
However, a retailer has to distinguish between loyalty that is earned and loyalty that is bought, he points out.
"Earned loyalty is based on a store consistently performing better than other stores that are competing for the customer’s attention. On the other hand, in the short-term, loyalty can also be bought through discounts. But even in loyalty discounts there is an underlying feeling of ‘being recognised’ that keeps the customer tied to the store," Dutta says. "I believe loyalty that is earned is more lasting. All the elements that make up the store – the product, the pricing, the location, the knowledge and attitude of the store staff, the infrastructure – must work together to provide an experience that is truly distinctive and memorable, and that make a customer loyal. Therefore, it is much more difficult for a competitor to replicate the unique combination of product and service that makes a store special to the customer."
Having said that, Dutta believes that loyalty schemes do have a role to play in both cases — whether a retailer wants to earn the customer’s loyalty or buy it. "If structured well with a well-developed information system, a loyalty scheme can enable a retailer to not only to be in touch with its customers more regularly, but also to distinguish between customers and service the individual customers much better," he concludes.