Understanding Retail by the husband-wife duo Dr NVR Nathan and Suma MA is a Trainer’s Handbook for customer service associates says the Foreword by Nagesh Satyanarayana, founder TRRAIN and chairman Shoppers Stop Limited. A country of nearly 50 million retail staff in both the organised and unorganised sector with little or no training or understanding of how to be a part of the retail front-end, this book could serve as a ready reckoner for retail trainers as also students keen on a career in retail. An extract from the book

Customer Relationship Management: History of CRM

Customer Relationship Management originated years before the start of the first millennium in Mesopotamia. Farmers who were eager to sell their surplus produce became the first initiators of the customer oriented processes are now familiar with.

With the passage of time and the first millennium an accurate record of transactions was kept by the merchants accounting for what was sold and whom it was sold to. This list of customers provided the first comprehensive customer oriented data and proved to be the beginning of customer oriented strategies. The advent of the 1990’s however saw a more refined customer oriented implementation taking place, laying the ground for the CRM strategy as we now know it.

Tesco was instrumental in bringing this about. Dunnhumms collaboration with it due to the influence of Edwina Dunn and Clive proved to be the foundation for CRM. Since these two individuals had realized the importance of knowing and understanding their customers, they understood the supreme need for adopting the right customer approach.

Tesco, the second largest grocer in the UK implemented a customer loyalty program used in 12 of their stores. Known as the Tesco Club Card Program it focused entirely on the customer and implemented the necessary business activity changes with the customer in view. While doing this it assisted in the collation of the information about customer preferences and the net result was amazing. Profits soared, competitors complained and Tesco reigned supreme. Its additional focus on customers proved to be the focal point of success. Watching competitors realized that this was but the right approach to adopt and that it generated huge funds. They realized that customer retention and customer loyalty were but a natural by-product. Realization that this approach was the right one and its subsequent implementation by Tesco was CRM’s launch in the world wide market. From then on it was smooth sailing for CRM. Hailed as the customer strategy of the decade CRM was the new option for organizations. Initially CRM focused less on big industries and far more on small and medium industries. Since the revenue from large corporate was higher it was felt that these industries should be the focal point. With the passing of time this notion changed and the importance of focusing on medium and small industries was noted. Today CRM solutions have turned CRM into a necessary commodity for medium to small businesses and are being implemented in a wide range of industries. Various vendor solutions have been improvised catering to a vast area.

15.3 CONSUMER BEHAVIOUR & CRM

‘What’ products and services do we buy, ‘why’ do we buy, ‘how often’ do we buy, from ‘where do we buy, ‘how do we buy, etc. are the issues which are dealt with in the discipline of consumer behaviour. Consumer behaviour can be defined as those acts of individuals (consumers) directly involved in obtaining, using, and disposing of economic goods and services, including the decision processes that precede and determine these acts. Just by human nature, consumers can be spontaneous, unpredictable, and selfish.

One thing that we have in common is that we are all consumers. In fact everybody in this world is a consumer. Everyday of our life we are buying and consuming an incredible variety of goods and services. However, we all have different tastes, likes and dislikes and adopt different behaviour patterns while making purchase decisions. One may preferred to use Colgate toothpaste, Dove soap, Head & Shoulder shampoo while your spouse may prefer another type for same requirement. Similarly, you may have a certain set of preferences in food, clothing, books, magazines, recreational activities, forms of savings and the stores from where you prefer to shop, which may be different not only from those of your spouse but also your friends, neighbours and colleagues. Each consumer is unique and this uniqueness is reflected in the consumption behaviour and pattern and process of purchase. The study of consumer behaviour provides us with reasons why consumers differ from one another in buying and using products and services. Customers and their behaviours comprise of many attributes and differentials. These differences are not just associated with demographics, groups or any one particular item. There is a complex development of behaviours that exist in the consumer markets.

In the world we live today, businesses and top Marketing executives must understand what differentiates their companies or their products from others and must understand the needs of the consumers in their markets. If they able to understand their product and consumer’s need, than it’s very easy for them to develop a strategic plan and create a market niche and develop their customer base with very good customer relations. Customer Relationship Management can help them to take competitive advantage in the market. Customer Relations depend on understanding the customer and their reactions to the environment which will at last prolong the life of customer relationship between company and their customers. Understanding the customer need can be a starting point for majority businesses. There are possibilities of gap occurs between customers expectation and what businesses think customers expect. It results into overlook or not understanding customer’s perceptions and real requirement. Profiling the market should be a top priority while setting up a retail shop. Even or existing store it is important to continuously monitor the market if the store has to stay in touch with the customer. It might also be useful to look at any changes in marketplace before contemplating changing the direction or focus of a store. This will help to gauge the chance of success or simply show if there are any emerging markets in the geographical area.

15.4 ROLE OF LOYALTY CARD AS A CRM TOOL

In marketing generally and in retailing more specifically, a loyalty card, rewards card, point’s 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 commercial incentives programme. Loyalty cards are a system of the loyalty business model. In the United Kingdom and India it is typically called a loyalty card, in Australia a rewards card or a points card, and in the United States either a discount card, a club card or a rewards card. Cards typically have a barcode or magstripe or an EPROM chip that can be easily scanned, and some are even chip cards. Small key ring cards are often used for convenience. There are generally six types of loyalty programmes:

•Appreciation: Giving customers more of a company’s product/service

•Rewards: Rewarding customers unrelated to a company’s product/service

•Partnerships: Marketing to another company’s database and allowing loyal customers to choose their rewards from either company.

•Rebate: Giving discount on the purchased product to the customers.

•Affinity: Building a lifetime value relationship with a customer based on mutual interests and not on the use of rewards

•Coalition: Teaming up with different companies to share customer data to jointly target a specific customer demographic.

•A customer loyalty card is instrumental in bringing some advantages. It works for:

•Repeat purchases: When an apparel brand announces special discounts on its products or services, customers using the brand’s loyalty cards are informed about the benefits of the scheme. This in turn maximizes the chance of repeat purchases as a customer who gets special benefits will definitely choose to shop repeatedly with you.

•Customer Data: It enables a business owner to capture customer information and track purchase history. A retailer can design the marketing strategy keeping those data in his mind. This also helps him in differentiating his customers for these special offers.

•Cross selling opportunities: Customer loyalty cards guarantee cross selling opportunities for a retailer. When the business owner has every detail of his customer’s buying patterns, he can surely persuade him to buy something costlier.

•Enhance brand image: A customer loyalty card enhances brand image and also reinforces brand position. Loyalty cards in customers’ wallets are a constant reminder of the brand.

•Enhances your corporate image and brand recall: These loyalty cards also work towards brand recall. Cardholders see your logo and brand every time they use their cards, and recall it more often.

•Increase communication: Cardholders receive a monthly statement containing promotions, news, and information about the company’s new products. This provides a direct communication channel between the company and its customers that would otherwise be too expensive to operate.

•Co-branding opportunities: A loyalty card also brings the opportunity of tying up with a suitable partner whose target customer is from the same social rung, for example, the First Citizen Citibank MasterCard, a co-branded card launched by Shoppers’ Stop in association with Citibank and MasterCard.

A retail establishment or a retail group may issue a loyalty card to a consumer who can then use it as a form of identification when dealing with that retailer. By presenting the card, the purchaser is typically entitled to either a discount on the current purchase, or an allotment of points that can be used for future purchases. Hence, the card is the visible means of implementing a type of what economists call a two-part tariff.

The card issuer requests or requires customers seeking the issuance of a loyalty card to provide a usually minimal amount of identifying or demographic data, such as name and address. Application forms usually entail agreements by the store concerning customer privacy, typically non-disclosure (by the store) of non-aggregate data about customers. The store as one might expect uses aggregate data internally (and sometimes externally) as part of its marketing research.

Where a customer has provided sufficient identifying information, the loyalty card may also be used to access such information to expedite verification during receipt of cheques or dispensing of medical prescription preparations, or for other membership privileges (e.g., access to a club lounge in airports, using a frequent flyer card).

Critics see the lower prices and rewards as bribes to manipulate customer loyalty and purchasing decisions, or as a case of infrequent spenders subsidizing frequent-spenders. Others worry about the commercial use of the personal data collected as part of the programmes. It is also possible that consumer purchases are tracked and analyzed toward more efficient marketing and advertising (in fact the very raison d’etre of the loyalty card). There also remains the possibility that law enforcement agencies could be granted access to the stored information during an investigation of a customer’s activities.

A loyal customer leads to repeat customers and builds brand value, so it should be a surprise to find that loyalty programs are on the top of most retailers’ strategy map than any other single marketing program, the commercial benefits of loyal customers are well known by brand managers. With all the different companies offering new strategies in loyalty programs it is very important not to lose sight of the basic strategy behind implementing the loyalty program.

This article was first published in the April 2021 edition of the print magazine.