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Loyalty programmes: Value-add to customers holds the key

10-May-2004
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Loyalty programmes: Value-add to customers holds the key

At a time where customer loyalty towards products is slippery, loyalty programmes are the main weapon in the arsenal of companies. However, the concept has to move beyond stripes and points into an integrated marketing approach, feel companies. Therefore, the mantra is to build loyalty and drive sales. And the lesson learnt is points does matter, but beyond that, it is the value-add (which the customers derive) which builds loyalty.

Arrow business head Janak Dave said for a loyalty programme to be successful, the player needs to be clear on the definition. It’s become fashionable for companies to start loyalty programmes and then leave it midway given the long gestation period. “The objective has to be clear. The return on investment (ROI) on such programmes is typically three to four years. Therefore, it is important for companies to sustain it for that much period of time,” added Mr Dave.

Citing the example of the Arrow Aristocracy Programme started in November 2002—it now has over 7,000 members—Mr Dave said the modus operandi was to adopt an unobtrusive approach towards members.

E City Entertainment India Pvt Ltd CEO Atul Goel said point collection was adopted in Fun Republic in Ahmedabad, but the customer feedback was that they expected rewards to be instant rather than wait for the points to accumulate. “In nine months, we have changed our approach and are launching the Republic Reward Programme in Ahmedabad and Mumbai. The idea is instant reward for a particular spend,” added Mr Goel.

The players felt that loyalty programmes have to be sustained and supported till a time they reach critical base to justify the costs which are involved.

Mr Dave said by next year the Aristocracy Programme will touch a base of 10,000-15,000 members, thereby reaching the mass at which the returns will start accruing. “The quantifiable parameter is the difference in the purchases between them and the average customers. Once the base is made, the costs are justified,” he said.

Agreed Shoppers’ Stop VP-operations Sanjay Bhade. The First Citizens Club, which is 10 years old and has 2.3 lakh members, contributes almost 50 per cent of the sales. Points, although important, become secondary in the long run, he added.

“Initially they may be important, but after a certain period of time, other areas—as to how are the members treated and handled—become critical,” he said.

To add a personal touch, if Shoppers’ Stop has a First Citizens Lounge at its Malad Store, Arrow has sent out bouquets to 400 women members of the Aristocracy Programme for Women’s Day. “That’s how we feel the concept of loyalty works. Arrow customers are men, but the idea was to treat the women members on the same plane,” explained Mr Dave.

Also the data base of customers becomes a repository of information for companies to track and understand consumer behaviour. There fore, the information becomes the necessary fodder for companies in their marketing blitzkrieg.

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