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Loyalty Programs in Retail
Benchmarking Indian against International Retailers
Team Name ? In Sanity
Vivek Bhandari [email protected]
Executive Summary
Today, with the tremendous growth of the retail market, customers are spoiled for choice. With stores vying for footfalls, companies have resorted to offering more for less ? more quantities, better prices and better services available at the same cost to the consumer.
The focus of marketing efforts has also changed today. From merely increasing footfalls, and then focusing on top-line growth, the focus of firms has now changed to customer lifetime value. Customer lifetime value (CLV) is the value the customer generates over the whole period of association with the firm. It considers all the future cash flows of that customer arising from him consuming in the future. CRM should lead to increased CLV. When one thinks of maximizing CLV, one has to take a long term perspective and hence focus on customer retention rather than just making a sale. This, coupled with the concept of the Pareto principle ? that 80% of a company's sales come from 20% of their customers ? has made firms have realized that retaining that 20% is integral to their increased profitability.
The design of the loyalty schemes is important as small changes can often have a large impact. Standard approaches, while being inexpensive and the easiest to conceive and implement, run the risk of being ineffective. For an effective scheme, it is necessary to take advantage of ...