The Telegraph
Since 1st March, 1999
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Keeping customers loyal

Buy one, get one free! This familiar one liner has today become an inevitable part of our lives. Retail chains in the city today offer not just alluring discounts on modest purchases but a host of temptations, including loyalty bonus cards with special privileges for regular buyers. That’s not all. Companies are even trying to incorporate that personal touch strategy by wishing customers a happy birthday or a happy anniversary.

“Customer loyalty programmes are the in-thing in today’s retail world and we were one of the pioneers in this field in western India,” says Ivan Rodrigues, vice-president, formats and marketing, Radhakrishna Foodland, Mumbai. Foodland’s loyalty programme is called Privilege Plus.

“It is a rupee target-based redemption programme where customers get a Privilege Plus Loyalty card on a minimum purchase of Rs 500. They then need to purchase goods worth Rs 3,000 within a period of 90 days to get a gift voucher worth Rs 150. These vouchers can be redeemed on purchase of fruits, vegetables and bakery products,” Rodrigues explains.

Similar point-based programmes are offered by garment retailers like Westside, where the accumulated points can be redeemed against future purchase. Another retail giant, Pantaloons, offers the popular Green Card membership. Customers with this membership get a direct discount on their cards after they have purchased a fixed amount round the year.

While these loyalty schemes may sound good, many consumers believe that they can be more harmful than helpful. “Privilege cards and special offers are nothing but trade gimmicks and the consumer ends up spending more,” says Calcutta-based homemaker Divya Bhagat. Bhagat cites an example. She goes to a shopping mall to, say, buy a bedspread that costs Rs 300. She ends up buying three. If you are wondering why, it is evidently because Bhagat too — like so many others — is lured by an offer that says buy two, get one free. “In the process I spend Rs 600 and get goods worth Rs 900. So apparently I save Rs 300. But then, I end up spending more than my scheduled budget as well as my requirement.”

“Customer loyalty programmes cleverly manipulate what is known in behavioural psychology as the Von Restorff Effect,” says well-known psychologist Dr Raj Sethia. Sethia explains that our brain remembers anything that is outstanding. “Loyalty programmes project products or services as something different or special from the array of existing choices, thus provoking our brain to choose them over others.” Marketing strategist Suman Kar notes, “The modern consumer is a complex personality. Owing to the incessant onslaught of media, consumer behaviour patterns have changed. Today, consuming a hyped product is more important than the real worth of the product or service."

Arpita Bose, a teacher, makes the point that consumers today are also extremely impulsive. “Gone are the days when our grandparents went to shops with a specific budget and a comprehensive shopping list. If they went to buy a saree, they would never come back home with a television set.”

In any case, shops that sold sarees never stocked TV sets. Thanks to shopping malls, consumers now get everything — from utensils to electronic goods — under the same roof. “And with such offers doing the rounds, customers tend to grab more than they need,” adds Bose.

Businessman Anil Sukhani puts things in perspective. “Plastic money has added a new colour to this compulsive buying. Today’s teenagers go looking for a T-shirt and probably end up buying an expensive mobile set from a mall.” Needless to say, retail outlets make use of this consumer psyche.

Rodrigues however points out, “Loyalty programmes are based on extensive research and studies conducted among customers. If it was not assured sure profit, companies certainly wouldn’t have gone for such programmes.” He substantiates his opinion with solid statistics. Foodland Fresh as a chain has over 50,000 Privilege Plus members across 42 stores. On an average, 73 per cent of sales is contributed by 30 per cent of customers, all of whom are Privilege Plus members.

So, intelligent strategies can easily woo customers. “Such packaging of terms and conditions of loyalty programmes try to resort to the primacy effect, where we automatically tend to remember our first-time experiences,” adds Sethia. “So, initially, if a buyer is happy with a store, he is likely to be loyal to that store despite what others have to offer.”

However, not all are sceptical about such programmes. According to family counsellor Dr Kanchan Gurtu, most people are on the lookout for a reasonably priced quality product.

With a fast-paced lifestyle, the customer today needs to save on time, money and manpower. Hence fixed-price malls are more convenient and consumer friendly with special offers coming as a pleasant surprise. But Gurtu has a word of caution. “Discount sales or value cards should be used rationally and not impulsively. After all, it’s a means of intelligent business,” she adds.

Rodrigues of Foodland explains, “Maslow’s Theory of Needs classifies human needs into five categories — physiological, safety and security, love or belongingness, esteem and self-actualisation.” The transactional discounts that most retails offer are aimed at fulfiling these needs.

Even off-store programmes like distributing new year calendars, gifts, holding regular contests and lucky draws, ensuring cross promotions with other brands, offering free home delivery, exclusive cash counters, invitation to special events, wishing during festivities are all meant to pamper the customer.

“In the process, the stores win over a chain of loyal customers and stand to profit.” A consumer who is happy with a store ropes in his friends and other family members too, adding to the number of loyal customers.

Of course, who gains at the end of the day is anybody’s guess.

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