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“Customer Retention efforts by Shopping Malls in India.”

ByMRITUNJAY SHARMA

A PROJECT REPORT

Submitted toBHARATI VIDYAPEETH UNIVERSITY

In partial fulfillment of the requirementsFor the award of the POST GRADUATE DIPLOMA

InRETAIL MANAGEMENT

Bharati vidyapeeth University-Amplify DITM

APRIL 2010

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Bonafide Certificate

Certified that this internship report titled Customer Retention efforts by Shopping Malls in India is the bonafide work of Mr. Mritunjay Kumar Sharma who carried out the internship under my supervision from 11th of January to 20th march

Date: Project guidePlace: Brig.Gurmeet singh

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ACKNOWLEDGEMENT

The making of project report has been a great support to me in understanding the concept of Customer Retention efforts by Shopping Malls in India. Though it seemed a very difficult task in the beginning but with the sincere support and help of our project Guide Brig.Gurmeet Singh I successfully completed the project.

I would like to thank the continuous effort and support of our project guide without whose support it was impossible to accomplish my work. It has been a great learning experience for me.

I, Mritunjay Sharma (PGDRM/08/31) would like to thank all the people who have helped me.

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Executive Summary

Dissertation Title: A study on Customer retention efforts by Shopping Malls in India. Faculty Guide: Brig.Gurmeet Singh

Name of student: Mritunjay Sharma PGDRM/08/31

India is the most attractive retail industry in the world. Retail formats of organized retail industry are getting affected by this boom, favourably as well as unfavourably. Number of Shopping Malls in India is growing at electric rate and thus the challenge or opportunity of retaining the existing customers is also growing faster. This study focuses on the need of customer retention efforts such as loyalty programs etc., which enables the Indian Shopping Malls to be competitive and better than others existing and upcoming Malls. The study of existing loyalty programs and other customer retention efforts helps in understanding the current situation and strategies better. Their analysis provides a view of the relationship between the nature of the utility offered and the customer experience cycle by using Buyer Utility Map.

It was found that loyalty card programs have not worked as well as expected, but the most important benefit of having loyalty program is that retailers can quantify new customer losses and introduce programs designed to retain or encourage the most profitable customers. i Some of the major Recommendations are:

o Introduction of shopping mall loyalty card.

o College Savings Scheme

o Customized Loyalty Programs

Mritunjay Sharma Date: 20/03/2010

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Contents Page. No.

Ch. 1. Introduction 1

Ch. 2. Research Framework 6

Ch. 3. Literature Review 10

Ch. 4. Common features among Indian Shopping Malls 16

Ch. 5. Loyalty Programs by Indian Shopping Malls 20

Critical factors for successful loyalty programs 21

Loyalty program of Globus Mall 24

Loyalty program of Forum Mall 25

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Loyalty program of Shoppers Stop 26

Ch. 6. Customer Retention efforts by Indian Shopping Malls 29

Forum Mall 32

Garuda Mall 34

Gopalan Mall 35

Ch. 7. Analysis 37

Success and failure factors for Shopping Malls 37

Application of Buyer Utility Map 38

Analysis of Buyer Utility Map 39

Ch. 8. Do loyalty programs really work well? 43

Ch. 9. Findings 46

Ch. 10. Conclusion 47

Ch. 11. Recommendations 48

Ch. 12. Further Research 52

Ch. 13. References 53

Ch. 14 Annexure 56

Introduction

Customer retention

In today's challenging economy and competitive business world, retaining their customer base is critical to organization success. If they don't give their customers some good reasons to stay, organization’s competitors will give them a reason to leave. Customer retention and satisfaction drive profits. It's far less expensive to cultivate organization existing customer base and sell more

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services to them than it is to seek new, single-transaction customers. Most surveys across industries show that keeping one existing customer is five to seven times more profitable than attracting one new one.

A customer-focused approach among its employees is still not present. In this era of intense competition, it is very important for any service company to understand that merely acquiring customers is not sufficient because there is a direct link between customer retention over time and profitability & growth. Customer retention to a great extent depends on service quality and customer satisfaction. It also depends on the ability of the organization to encourage customers to complain and then recover when things go wrong. Complaints are natural part of any service activity as mistakes are an unavoidable feature of all human endeavor and thus also of service recovery. Service recovery is the process of putting things right after something goes wrong in the service delivery.

Customer retention is the maintenance of continuous trading relationships with customers over the long term. Customer retention is the mirror image of customer defection or churn. High retention is equivalent to low defection. Customer retention is about keeping the customers organization has spent that money to acquire. And if you’re in an industry where they make multiple purchases over the years, organization entire team should be very focused on retaining those customers:

Delivering service that’s consistent with your value proposition and brand

Cross-selling, up-selling and asking for referrals from existing customers

Developing programs to increase customer loyalty and decrease turnover

Knowing the lifetime value for different segments and using that data to

improve your marketing

Prioritizing retention as a major focus in your annual marketing plan

Studies say it costs ten times more to generate a new customer than to maintain an existing one. If organization has a small number of customers, losing a few could cripple company. Even if you have a large number of customers, a small increase in retention rate should dramatically increase profits.The maintenance of the patronage of people who have purchased a company’s goods or services once and the gaining of repeat purchases. Customer retention occurs when a customer is loyal to a company, brand, or to a specific product or

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service, expressing long-term commitment and refusing to purchase from competitors. A company can adopt a number of strategies to retain its customers. Of critical importance to such strategies are the wider concepts of customer service, customer relations, and relationship marketing. Companies can build loyalty and retention through the use of a number of techniques, including database marketing, the issue of loyalty cards, redeemable against a variety of goods or services, preferential discounts, free gifts, special promotions, newsletters or magazines, members' clubs, or customized products in limited editions. It has been argued that customer retention is linked to employee loyalty, since loyal employees build up long-term relationships with customers.

Customer retention has always been an important topic for the marketing. For sure, the advantages of loyal clients are obvious. In the last years the concept had a renaissance because of the new term CRM (Customer Relationship Management). However, CRM comprises nearly every customer oriented activity from a complaint hotline to client cards and client clubs. Often CRM is only implementing new systems for data mining and client segmentation or operational systems like a complaint management. But the thing is: data mining systems or client clubs are not the basis. They are the cherry of the cake called client retention. A company like Porsche needs no client club to tie up the customer to the brand.

A key principle of relationship marketing is the retention of customers through varying means and practices to ensure repeated trade from preexisting customers by satisfying requirements above those of competing companies through a mutually beneficial relationship This technique is now used as a means of counterbalancing new customers and opportunities with current and existing customers as a means of maximizing profit and counteracting the "leaky bucket theory of business" in which new customers gained in older direct marketing oriented businesses were at the expense of or coincided with the loss of older customers. This process of "churning" is less economically viable than retaining all or the majority of customers using both direct and relationship management as lead generation via new customers requires more investment.

The cost of acquisition occurs only at the beginning of a relationship, so the longer the relationship, the lower the amortized cost.

Account maintenance costs decline as a percentage of total costs (or as a percentage of revenue).

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Long-term customers tend to be less inclined to switch, and also tend to be fewer prices sensitive. This can result in stable unit sales volume and increases in dollar-sales volume.

Long-term customers may initiate free word of mouth promotions and referrals.

Long-term customers are more likely to purchase ancillary products and high margin supplemental products.

Customers that stay with you tend to be satisfied with the relationship and are less likely to switch to competitors, making it difficult for competitors to enter the market or gain market share.

Regular customers tend to be less expensive to service because they are familiar with the process, require less "education", and are consistent in their order placement.

Increased customer retention and loyalty makes the employees' jobs easier and more satisfying. In turn, happy employees feed back into better customer satisfaction in a virtuous circle.

Importance of Customer Retention

Why are customers more profitable for service firms over a period of time? There are a number of reasons for this. To begin with, to acquire a customer a company incurs promotional costs like advertising, sales promotion etc. It is said that it costs five times more to attract a new customer than retaining one. The operating cost decreases when a customer stays. Services being rich in experience and credence qualities, it takes some time for customers to get accustomed to it and once they are used to the service and

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are satisfied with the service provider ,they tend to purchase more over a period of time.

As they remain satisfied with a service provider, they spread a positive word of mouth, which is very effective in case of services for attracting new customers. Longer the customer stays with an organization, more the organization knows about him, which enables it to offer customized services which make it difficult for the customer to defect. This may even provide opportunities to the organization to charge price premium by offering individualized services which may be difficult for the competitors to offer.

Considering the importance of retaining customers in service business, Reichheld & Sasser coined a term ‘Zero Defection’. They highlighted that companies can boost profits by almost 100% by retaining just 5% more of their customers. Further, it is also very important to understand the life time value of a customer. Further, if by a positive word of mouth, he brings just one more customer to the organization, his value to the organization doubles. Therefore, it is important for all the employees in the organization to understand the life time value of their customers. Once they understand it, they will treat the customer accordingly and will focus on building relationship with the very people who keep them in business.

Advantages of customer retention

Possibility of repeat business

This is probably the most obvious advantage of customer retention. Effective services that lead to customer satisfaction will make customer coming back to again, thus giving repeat business. Repeat business is a win-win proposition for the business / service provider and the customer. The business reduces the cost of customer acquisition, while the customer reduces the cost of finding a reliable vendor and thus also saves on costs associated with switching vendors.

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Reduced costs for customer acquisition

Acquiring a customer has certain associated costs. These include the costs associated with advertising, following up, sales demos, travel and meeting costs etc. Having a repeat customer means that the customer is already aware of your processes and can predict a certain quality of output, thus minimizing the costs involved in new customer acquisition. Having a repeat customer also has the potential to open up another channel to advertise your business – word of mouth. Word of mouth advertising / recommendations are perhaps the most important outcome of having a satisfied customer.

Fostering greater interaction between business and customer

Today’s markets are increasingly moving away from mass produced standard products and services, towards a more customized market, where products and services are tailored to meet customers’ specific requirements. Having a repeat customer is an opportunity for you to build a more focused relationship based on your customers’ specific needs and requirements. Being ensured of having a customer who comes back, you have more confidence to suggest improvements, provide insights to better understand their needs and consequently design products and services that are relevant. Having a repeat business also provides an opportunity for the buyer and the seller to co-create products and services.

Having more delighted customers

Effective customer retention strategies allow you to move from the zone of customer satisfaction to customer delight. Studies have shown that customer delight is achieved only when there is a perfect synergy between the buyer and seller – when the seller understands exactly what the buyer needs and the buyer understands what the seller can deliver exactly what he needs. If you are able to delight your customers, you have better chances of them coming back to you, since they now know why you are different from the rest of competition.

Benefits of Customer Retention: Statistics

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Acquiring new customers can cost five times more than satisfying and retaining current customers

A 2% increase in customer retention has the same effect on profits as cutting costs by 10%

The average company loses 10% of its customers each year A 5% reduction in customer defection rate can increase profits by 25-125%,

depending on the industry The customer profitability rate tends to increase over the life of a retained

customer Companies can boost profits anywhere from 25 to 125% by retaining merely

5% more existing customers. Only one out of 25 dissatisfied customers will express dissatisfaction. Happy customers tell 4 to 5 others of their positive experience. Dissatisfied

customers tell 9 to 12 how bad it was. Two-thirds of customers do not feel valued by those serving them.

Type of customer retention rate

1. Raw customer retention rate:

This is the number of customers doing business with a firm at the end of a trading period, expressed as percentage of those who were active customers at the beginning of the period.

2. Sales-adjusted retention rate:

This is the value of sales achieved from the retained customers, expressed as a percentage of the sales achieved from all customers who were active at the beginning of the period.

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3. Profit-adjusted retention rate:

This is the profit earned from the retained customers, expressed as a percentage of the profit earned from all customers who were active at the beginning of the period.

Best customer retention strategies

Customer retention rate: -- The customer retention rate refers to the number of customers lost over a period of time. It is normally calculated by the percentage of lost customers versus existing customers over a quarterly or annual period, without tallying new customer acquisitions.

While there are obvious benefits to keeping customers loyal and maintaining high customer retention rates, it can be extremely challenging for management to keep retention rates up. This guide will explore some of the best customer retention strategies, important topics and common challenges related to customer retention:

Understanding customer retention Build a customer retention strategy Implementation of a customer retention program How to calculate retention rate

Customer retention strategy in retail mall

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Recently, the press has been full of articles touting the growth of Shopping Malls in India, especially in big cities and metros. Projections from F & R research: Malls in India 2009. say that India will have more than 715 Malls, operating in the country by 2015 with the retail space of 350 million sq. ft. in comparison with 47.4 million sq. ft. in year 2009. Articles suggest that the retail industry will be beneficiated greatly by this new retail space available for retailing as it will ensure more visibility and interaction with consumers and hence may result in better turnovers and profits. More retail space is a necessity to handle and cater to new retail brands (global as well as national brands) that are coming into the market.

This supports the idea that adequate retail space could be the missing link for prosperous retail industry. However, the actual examination of the influences and impacts of these new Shopping Malls opening at the arm distances has been less documented. What is the impact of these new Shopping Malls on brands’ strategies, customers’ power in the channel, customers’ buying patterns etc.?

Though, the vibrant retail boom is pushing up the number of Malls in the country but uncertainty remains about the success of these Malls. The major concern for Shopping Malls owners and its tenants is the low conversion rate. This has led to the closure of individual shops, at several Malls. Many tenants express grief about the low percentage of conversions from those who walk through the portals of these Malls. Observers routinely find shopping‐bags are missing in the hands of the supposed shoppers visiting these Malls. It is an indicator that the initial excitement about shopping in the Malls is already on decline and

that consumers are reverting to their traditional shopping‐destinations. Therefore, it becomes a marketing challenge to retain customers and encourage repeat purchase. It is a well known fact that repeat customers spend more than the average customers.

The issue of competitive rentals has already come up as there are Malls in very close proximity to each other in big cities. Success and failure statistics of the Malls in India during the past few years indicate that not all the Malls are successful. According to industry experts, only 10‐12 percent of operational Malls in India have been successful.

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These are numbers available with various retail and real estate analysts. Shopping Malls in tier II cities are still far from the kind of competition that Shopping Malls of big cities like Mumbai, NCR or Bangalore are experiencing. This state of competition helps customers as they have more options to shop, but for Shopping Malls to make people come to their Mall for shopping is becoming difficult. The solution could be by differentiating your Shopping Mall from other Malls. But the big question is, how?

India is the land of diversity; researchers have found that Indian customers prefer cross‐shopping until or unless he/she gets some ‘extra’ benefit for rebuying that product from the same place. This is mainly because, in Indian market, almost every retailer is trying to delight his customers. On the basis of these findings, it can be said that loyalty is not easy to build among Indian customers and that is the biggest challenge Shopping Malls are going to face

in the near future; especially in metros and big cities, where Shopping Malls are very close to each other.

Significance of the study

India is the most attractive retail industry in the world now; it tells the fact that the growing number of Shopping Malls in India is not going to stop or slow down in near future. The most ‘benefited’ cities from this rapid growth will be the big cities of the country like Mumbai, New Delhi and Bangalore etc. As more Shopping Malls are opening up more difficult it would be for Shopping Malls to retain customers with them. Sensing this issue some Shopping Mall developers have started spending marketing efforts for gaining customer loyalty for their Shopping Malls. The need for the hour is to attract the footfalls, convert them into customers and try to retain them as long as you can.

Today the greatest growth for customer relationship programs is in retail and Shopping Malls in particular, but effectiveness of these loyalty programs is also a major concern for multi‐branded Shopping Malls.

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Objective:

The objective of this study is to analyze loyalty programs of Shopping Malls, study the customer retention efforts adopted by Indian Shopping Malls, analyze the success factors, and to suggest ways to increase customer loyalty.

Shopping Mall in Brief:

Shopping Mall is the new and modern version of traditional marketplace. A Shopping Mall or shopping center is a building or set of buildings that contain a variety of retail units, with interconnecting walkways enabling visitors to easily walk from unit to unit or store to store.

People often use the word ‘Mall’ for big stores like Shoppers stop, Westside or Pyramid, unknowingly. Actually, they are not Shopping Malls, but another format of organized retail called ‘Departmental Store’. Forum of Bangalore, Inorbit of Mumbai or Metro Walk Mall of New Delhi are some examples of retail formats which actually comes under the category of Shopping Malls. India is having 179 operational Malls which are providing a retail space of 47.4 million square feet. The number of Shopping Malls is estimated to rise by 335% by 2010 to 600 Shopping Malls.

Customer Loyalty in Brief:

Customer loyalty refers to the feelings or attitudes that incline a customer either to return to a company, shop or outlet to purchase there again, or else to re‐purchase a particular product, service or brand. A problem is often raised that some proportion of customers will still defect to competitors even if they are satisfied with the brand. Hence, customer satisfaction does not ensure customer loyalty. Customer loyalty is purely a behavioural phenomenon.

Customer may be satisfied by the offerings and services provided by Shopping Mall, but it does not mean that he will be loyal to that Shopping Mall and will come again and again

there only for shopping. The basic reason for caring about customer satisfaction is that it leads to loyalty and customer retention.

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It is possible for customers to be satisfied from the Shopping Mall environment, services etc., but not repurchase due to, among other things, poor product supply, variety seeking or multiple sourcing and large promotional deals. This is the same happening with the Shopping Malls of big cities, customers come and do not find anything excited apart from great retail stores. It turns them off about that Shopping Mall. These issues will be dealt in detail at the later part of this report.

Similarly, customers may be unsatisfied but continue to purchase, for example, when dealing with a monopoly as in the case of Shopping Malls of tier II cities.

Recently, the press has been full of articles touting the growth of Shopping Malls in India, especially in big cities and metros. Projections from F & R research: Malls in India 2009, say that India will have more than 715 Malls, operating in the country by 2015 with the retail space of 350 million sq. ft. in comparison with 47.4 million sq. ft. in year 2009. Articles suggest that the retail industry will be beneficiated greatly by this new retail space available for retailing as it will ensure more visibility and interaction with consumers and hence may result in better turnovers and profits. More retail space is a necessity to handle and cater to new retail brands (global as well as national brands) that are coming into the market. This supports the idea that adequate retail space could be the missing link for prosperous retail industry. However, the actual examination of the influences and impacts of these new Shopping Malls opening at the arm distances has been less documented. What is the impact of these new Shopping Malls on brands’ strategies, customers’ power in the channel, customers’ buying patterns etc.?

Though, the vibrant retail boom is pushing up the number of Malls in the country but uncertainty remains about the success of these Malls. The major concern for Shopping Malls owners and its tenants is the low conversion rate. This has led to the closure of individual shops, at several Malls. Many tenants express grief about the low percentage of conversions from those who walk through the portals of these Malls. Observers routinely find shopping‐bags are missing in the hands of the supposed shoppers visiting these Malls. It is an indicator that the initial excitement about shopping in the Malls is already on decline and

that consumers are reverting to their traditional shopping‐destinations. Therefore, it becomes a marketing challenge to retain customers and encourage repeat purchase. It is a well known fact that repeat customers spend more than the average customers.

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The issue of competitive rentals has already come up as there are Malls in very close proximity to each other in big cities. Success and failure statistics of the Malls in India during the past few years indicate that not all the Malls are successful. According to industry experts, only 10‐12 percent of operational Malls in India have been successful. These are numbers available with various retail and real estate analysts. Shopping Malls in tier II cities are still far from the kind of competition that Shopping Malls of big cities like Mumbai, NCR or Bangalore are experiencing. This state of competition helps customers as they have more options to shop, but for Shopping Malls to make people come to their Mall for shopping is becoming difficult. The solution could be by differentiating your Shopping Mall from other Malls. But the big question is, how?

Retaining existing customers is always the desirable situation for any business. In the situation of tuff competition, these are the only asset of the business who helps dearly by remaining with you and working as promoters through word of mouth.

India is the land of diversity; researchers have found that Indian customers prefer cross‐shopping until or unless he/she gets some ‘extra’ benefit for rebuying that product from the same place. This is mainly because, in Indian market, almost every retailer is trying to delight his customers. On the basis of these findings, it can be said that loyalty is not easy to build among Indian customers and that is the biggest challenge Shopping Malls are going to face

in the near future; especially in metros and big cities, where Shopping Malls are very close to each other.

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2. Research Framework

Methodology:

This study will examine the efforts made by Indian Shopping Malls to retain their customers with them and build loyalty among their existing customers. It utilizes the secondary and primary data for research. Secondary data involves the collection of data through past research studies, journals, magazines, books, leading databases, articles and internet, while primary data involves the observations of the customer retention efforts adopted by Shopping Malls in Bangalore. This study also highlights the common phenomenon of Shopping Malls across the country.

The study would focus on building customer loyalty using differentiation strategies. It uses a four stage research strategy, outlining a research design, then collecting secondary data, then collecting primary data, and finally analyzing the available data. Such studies are capable of capturing data to answer the ‘why’ and ‘how’ questions associated with the subject under research.

Nature:

Study’s objective is to achieve exploratory rather than explanatory results. Study is analytical in nature which gives a better understanding of the various loyalty programs and efforts adopted by Shopping Malls in India.

Hypothesis:

Research Hypothesis for the study is that Loyalty efforts and programs adopted by Shopping Malls are effective. Null Hypothesis of the study is they are not effective.

Limitations:

Common limitations of the study are unconscious influence while data collection and interpretation. The other limitation of the study is that only Shopping Malls in Bangalore have been studied thus, collected data cannot be generalized nation‐wide.

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Models and Theories:

The study will be taking inferences from the theory of Differential Congruence: Coskun Samli and Boston Consulting Group (BCG) matrix.

The study is using Buyer Utility Map for analyzing the efforts made by Indian Shopping Malls to retain and attract the customers.

Common Features among Indian Shopping Malls

• Shoppertainment:

People use to spend their whole day in a Mall these days. They do not go to a Shopping Mall only for shopping, but they go to have fun, to have some time for relaxation. Shopping Malls which caters to each and every segment of the market, where people can come and spend time with their families. These new developments have given birth to a new shopping culture – ‘Shoppertainment’. Now Shopping Malls are not only a retail format they have become a destination for people for meetings, get together, having fun etc. The fact that Malls should always keep in mind that they do not divert from their prime business of retailing though entertainment s coming into their business models.

• Show Business:

Multiplexes in Shopping Malls are not a strange thing as entertainment aspect related with shopping has already been mentioned earlier. In Mumbai, the four‐screen multiplex at Mumbai's Eternity Mall and Wonder Mall (also Cinemax) on Ghodbunder Road have become film hubs while, Nirmal Lifestyle also provides a six‐screen PVR, which can seat 1,850 people. Bangalore's Garuda Mall off MG Road can accommodate 1,300 people per show at its INOX theatre. Forum Mall's 11‐screen PVR multiplex, which prides itself as India's largest multiplex. The experience of watching movie on PVR Gold class screens is luxurious and outstanding, which ultimately creates excitement about PVR and positive feeling about Forum, the Mall as well. The trend of having at least one multiplex in Shopping Mall is continuously and rapidly growing.

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• Standardization:

Standardization is one of the common happenings seen among the Shopping Malls in the country. Almost all the Malls look like similar whether it is exteriors or interiors. They also present a uniform appearance to the customers; which do not helps in enhancing customer experience and upon that it dulls the customer’s desire to come again and again to the Shopping Mall. Most of the Malls are providing the same things for entertainment also. Like movie theatres, bowling alleys, arcade games, restaurants etc. No real differentiation could be seen among the Malls these days in India. We will find the architecture, lighting, and other sensory items which creates the shopping experience very much similar in a Delhi Mall and in a Bangalore Mall. Though the culture, buying patterns, customer segments are very different. ‘Localization’ of the Mall should be taken care of while developing a Shopping Mall.

• Missing Local Flavour:

As mentioned above the Localization of Malls is very much important to appeal the customers each and every time they decide to shop. The next most important thing in retailing after price is the experience, the interaction of customer with the store. And that experience cannot be build up until a Shopping Mall has taken care of the local preferences, tastes, local culture, and value systems. All the big Malls developers are going national from local. They all want uniformity in their Malls on argument that the differences in Malls will give the negative outlook of biasness towards a particular city or else. To some extent uniformity is needed but when it comes to emotional senses local catchment is the necessity for success. A Shopping Mall can have uniformity in terms of services, policies etc.

• Space Crunch:

Packed parking lots, busy food courts and restaurants, crowded anchor stores – this is the situation of most of the Shopping Malls in India. The average size of Shopping Malls in India is 2.5 lakh sq. ft., which is very less in compare to Malls of United States. Because of lack of adequate space, shoppers find themselves in a shop only and not in any Shopping Mall. The experience of Shopping Mall does not even come into the picture when the Mall is over‐crowded. American Shopping Malls have the luxury of space and thus able to attract customers better as they have wider variety of offerings like amusement attractions, aquariums, skating rinks, hotels, or community halls etc. You name it and that will be there in their Shopping Malls, but this is not the case with Indian Shopping Malls because they cannot scale themselves due to space constraints.

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• Retail Estate:

Almost every Mall owner group is originally a real estate group which has diversified themselves into retail real estate after seeing this vibrant growth in Indian organized retail market. K RAHEJA CORP. is one of the leaders in Real Estate Development, having diverse interests in Retailing & Hospitality businesses. Today, they are the proud owners of Inorbit Malls, HyperCITY, Shoppers’ Stop and Crossword shops. They are the pioneers in organized retail by taking a first giant step to successfully establish "Shopper's Stop".

The Prestige Group is one of South India’s most successful developers of real estate. It is the owner of Forum Malls in India. The group is about to expand its presence in Mall business by opening up Malls in major South Indian cities like Hyderabad, Cochin etc. These are only some of the real estate groups becoming Mall owners. We must understand that operating and developing Malls need certain kind of expertise and real estate owners alone cannot tackle this situation, they need people who are experts in ‘Mall management’. Because of the lack of expertise in Mall management, most of the Mall developers offer the same kind of Malls which have spaces for shopping, food and films, but as the number of Malls will increase people will look for Malls location and what new it’s offering that will become a major factor in raising or lowering its asset value.

After observing the common phenomenon among the Indian Shopping Malls, it can be said that now after a long period of time after introduction, big cities’ Malls need some differentiation in their offerings, services etc. to re‐generate the level of excitement among people, which could be one of the prime motives for the customers to stay with a particular Shopping Mall.

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Loyalty Programs by Indian Shopping Malls

Other than these customer experience focused facilities, Shopping Malls are not doing much to retain the customers or to build loyalty among customers. Mainly, because most of the Mall owners are in the business of real estate so they consider these Malls in very constricted sense. Like constructing a Mall, getting fixed rentals from the retail stores and be happy with the rentals retail stores are paying for the retail space provided by them. They do not focus on marketing strategies for these Shopping Malls like other developed countries. Now, we will analyze the loyalty program of some big department stores that are pretty much similar to a Shopping Mall like Shoppers Stop, Globus Mall and some Shopping Malls.

Loyalty Program Overview

Almost 80 percent of shoppers in the Europe now belong to at least one loyalty program and the trend is fast catching up in India but how well do they really work? They are not working the way they were expected to. The matter has to probe into and analyzed as how advances in customer data collection are helping some companies to revise their Loyalty business strategies in different ways. There are frequent shopping programs, frequent flyer programs, frequent Mall cards and frequent petrol programs. There are points at the pump schemes, Service tax holidays and, some of them even donate to charities like CRY for people who use their Credit card reward points.

There are plastic cards, smart cards, thermal cards, magnetic strips Co‐branded Credit Cards. Within the next couple of years players like Airtel, Reliance, are working on using 802.11 to Flash your mobile phone at a reader as you whiz through checkout, and you'll get a couple of rupees knocked off your bill. Call it the loyalty craze. Credit Card companies are offering programs by tying up with various Shopping establishments to offer discounts and lure the customers towards using their shops and Credit Cards. While loyalty cards, Shopping Festivals and prizes have always been, first and foremost, a cheap way for businesses large and sMall to start tracking their customers shopping habits, more customers than ever now consider themselves entitled to special treatment.

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Critical factors for successful loyalty programs

• Specific Objectives:

A successful loyalty program is based on specific measurable targets and objectives. It enables the retailer to design appropriate loyalty strategies and target relevant consumer segments. The progress can be monitored against the goals and targets after the launch of the program and strategic changes can be made accordingly.

Proper prior Research:

Gaining the most accurate information about customer behaviours, motivation and expectations is crucial to the success of a loyalty program. The research needs to be well balanced and must contain data from various perspectives like demographic profile and socio‐economic status of customers, purchase patterns, behavioural drivers, reward expectations, special interests and lifestyle factors.

Innovative and Creative:

Innovation and creativity are among the key factors that define a successful customer loyalty program, particularly in the retail sector. The primary objective of the retailer is to keep the high‐potential customer from being loyal by offering a loyalty program that is unique and exciting.

Emotional Touch:

Emotional connect is the most critical factor, which can decide the fate of a loyalty program. The basic and the prime objective of a customer loyalty program is to make the customer feel privileged and valued. The best programs constantly work on building a long term relationship with the customer through various initiatives like customized loyalty cards, newsletters that not only help the firm and the customer stay in touch but also create a sense of belonging; a card or a gift on birthdays and special occasions and organizing members‐only events. Member‐only events like giving special privilege to loyalty card members on seasonal sale etc.

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Software:

As with any strategic involvement, the operational aspects are as crucial to the effectiveness of a loyalty program as the concept and plans. Loyalty software that combine multiple functions like data tracking and storage, automated transactions, updating membership details, points and chum etc. can ensure that the loyalty initiative is well co‐coordinated, efficient and hassle‐free.

Organizational Commitment:

Customer loyalty programs need complete support and commitment from the top management in order to be successful. Nothing could be more disastrous than a disgruntled employee weakly or unenthusiastically administering a loyalty program.

Continuous Communication:

A loyalty program is not a one‐time event. The best programs maintain an active relationship with the customer by informing them of new developments, offers etc. and seeking their feedback. One must understand and remember that loyalty programs can be designed in quick time but the effectiveness with which they are implemented is of utmost importance. It takes many long years for an organization to really identify the right kind of customers to whom it should target its loyalty programs. The truly successful loyalty programs are not just short term measures to expand the customer base. By aligning with the organization's strategy, mission and vision, they contribute significantly to long term profitability, growth and competitiveness.

Customer Loyalty Program of GLOBUS Mall "PRIVILEGE CLUB‐

The customer reward program followed at Globus is called the 'Globus Privilege Club'. This is the first of its kind program in India where the members are rewarded immediately for their purchase at any of the stores.

Two types of membership cards:

• Privilege Card

• Gold Card

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Privilege Card:

When a customer purchases merchandise worth Rs.2000 or more, then he becomes eligible to become a privilege card holder. These purchases can be spreads across the first three months of the first purchase at Globus.

Privilege card benefits:

• Members get invites to events specially organized for them.

• Members can enjoy the exclusive new product privileges. They get the opportunity to purchase the new products before the launch.

• Special hours are reserved for the members during festive season and other occasions giving them the freedom to shop at their leisure.

• The members can also avail the benefits of the special tie ups that Globus has with the national and multinational brands and other leading outlets.

Gold Card:

When a customer shops for Rs.15000 or more in a single year, then he becomes eligible to be a gold card holder.

Gold Card Benefits:

• Members can enjoy the benefits of reserved car parking at the outlets.

• In case of any alterations in the garments, it will be home delivered free of cost to the members.

• The Gold card members can utilize the benefits of the special counter, opened exclusively for them.

• The members can also enjoy exclusive previews of the seasonal collection.

• The members can also enjoy the benefits of free travel packages.

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Customer Loyalty Program of Forum Mall

This is the first step taken by any Shopping Mall in India to come up with some loyalty program. Though, it is not a customer loyalty program from Forum Mall officially. But Forum and ICICI Bank have launched a co‐branded credit card called the 'ICICI Bank Forum' credit card. The strategic tie‐up of ICICI Bank and Forum Mall will help the bank provide a privileged status to its customers for every purchase they make at the Forum Mall.

Benefits:

• The credit card gives a host of benefits to the customers, which includes reward points and special discounts in addition to the existing features of the ICICI Bank credit card.

• The ICICI Bank Forum credit card is a Visa credit card and it allows the credit card holder to earn 8 reward points for every 200 rupees spent at the Forum Mall in Bangalore.

• A welcome voucher of Rs. 250, redeemable at Forum Mall in Bangalore awaits every ICICI Bank Forum credit card holder.

This credit card also gives the cardholder privilege parking and privileged ticketing at PVR cinemas.

Customer loyalty program of Shoppers Stop

Though, Shoppers Stop does not come under the category of a Shopping Mall still we are considering its loyalty efforts for the good of the study. The reason for consideration is the largest department store in the country and they proclaim their stores as Shopping Malls. The customer loyalty program followed at Shopper's Stop is called the 'First Citizen'.

Types of First Citizen Cards:

• Classic Moments

• Silver Edge

• Golden Glow

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Reward Points:

A Classic Moment member gets 1 point for every Rs.100 spent at Shopper's Stop. A Silver Edge member earns 1 point for every Rs.50 spent at Shopper's Stop. A Golden Glow member earns 1 point for every Rs.34 spent at Shopper's Stop. Additional reward points for spending on private labels. A Silver Edge member earns 1% extra point and a Golden Glow member earns 2% extra Reward points for purchasing in‐house labels like STOP, Kashish, and Life.

Associate cards:

A Classic Moments member can apply for one associate card by paying Rs.100.A Silver edge member can apply for two associate cards by paying Rs.I00. A Golden Glow member can apply for three associate cards, two Complimentary, one paid.

Other benefits:

• Free car parking facilities including valet parking made available at all outlets of Shopper's Stop, for the members.

• Members are sent regular updates on all mega events at Shopper's Stop.

• Exclusive cash counters are provided for the members inside the store.

• Special in‐store and out‐store offers are made available exclusively for the members.

• The members are given exclusive preview of the merchandise during the sale period.

• Free home delivery of alterations, reserved parking facilities, additional 5% discount (during sale) for the Golden Glow members.

Enrolment:

A customer needs to fill up the application form and pay Rs.150 to become a member of the First citizen program. The customer earns 100 bonus points and also receives a Classic Moments permanent card along with a benefit guide.

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Up gradation:

A Classic Moments member has to complete a shopping of Rs. l0, 000 within the validity period of two years to upgrade to Silver Edge. A Silver Edge member has to complete a shopping of Rs. 4O, OOO during the two year validity period to become a Golden Glow member.

Renewal:

• A Classic Moments membership card cannot be renewed.

• A Silver Edge member has to maintain a shopping of Rs. l0, 000 during the Validity period for his card to get renewed.

• A Golden Glow member has to maintain a shopping of Rs. 4O, OOO during the validity period for the renewal of his card.

Redemption:

Points can be redeemed by the member by presenting the card and receiving the reward point certificate. This certificate can be used with in 6 months from the date of issue.

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Customer Retention Efforts By Indian Shopping Malls

Not every Indian Shopping Malls offer loyalty programs to its existing customers to build up loyalty or to retain them with the business, but they are trying to retain the customers by focusing on excitement feature, customer experience characteristic. Here, we try and list down some of the common efforts adopted by Shopping Mall owners to attract potential customers and retain them. Later in the report we will discuss the loyalty card programs used by some of the Indian Shopping Malls.

Music Shows/Competitions:

The most common strategy adopted by Shopping Malls worldwide to attract people continuously is to organize some events like musical shows, dance or singing competitions, games etc. especially for youth. Most of these events started on the festival occasions, but today almost every day with collaboration with some corporate entity Shopping Malls arrange these shows to retain the charm of excitement among its customers.

Art Shops:

Shopping Malls have art shops like Portrait making, Pottery painting, creating cartoons, casting gold and silver impressions, getting a glamorous photo shot, handicrafts’ shops etc. These small shops occupy the vacant space available in the Shopping Mall like places near escalators, one side of the walkways, and open area in Mall etc. Generally, they are not allotted the actual store space available in the Shopping Malls as these are very small money invested shops. But the growing trend has enabled enough attraction into companies like Colour factory, First Impressions, Make my Toon, Star Shots etc. for this sector. The target customers for these shops are upper middle income group, elite class customers and youth. These stores keep attracting people because first, they are not highly expensive and second, they offer personalized services which give the feel of luxury at very acceptable price.

Product Displays:

Display of products like cars, antique objects etc. in the Shopping Malls attracts the people into the Shopping Mall. Forum Mall, Bangalore is adopting this product display strategy effectively to bring footfalls in the Mall. Gopalan Mall, Bangalore has allotted the front space to a motorcycle company to display its products. This strategy is basically to pull people into the Shopping Malls from outside.

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Iconic or Concept Tenants:

Kind of retail stores also play an important part in attracting potential customers. For example famous or big brands attract people. Also some very different or unique shops like Scary House in Garuda Mall also able to pull customers, especially youngsters into Shopping Malls and those stores. Apple and Bose store thrills and invite people into Forum Mall, Bangalore.

Sign Boards:

In the earliest Malls of the country, we would not find any sign boards or convenience assistance to guide us, but now they are an integral part of any shopping center as they help customers and provide them extra convenience to make their experience better with the Shopping Mall. Some time these small things matter a lot, mostly to women and elder people who do not want to roam in search of the retail stores. These sign boards give them the extra help.

Baby care corners:

As the number of working ladies is increasing in India and in cities particularly, a new concept of Baby care corners has come up in Shopping Malls and big department stores. Shopping Malls have a corner, where mothers of new born, who need any assistance they will get it from the personnel or if they want to do shopping they can leave their babies in that baby care with baby sitters and do their shopping without worrying about their children. This concept actually targets new mothers and by giving them the feeling of care, Malls are trying to make them loyal.

Seating Facility:

As most of the Malls are targeting to youth, they are forgetting about aged people or new mothers, who cannot roam in a Mall without taking rest like youngsters. They need some time for relaxing themselves to again start their shopping. Some Shopping Malls have started thinking and improving on this aspect like Garuda Mall, it has chairs near lifts so that people do not need to stand while waiting for lift. This shows the concern for customer convenience and customer experience. But still this issue has not taken into consideration seriously, by majority of Shopping Mall developers.

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Personal Attention:

In Malls like Globus which is more of like department store, a lot of personal attention is given to the customers. The salespeople help the shoppers with the shopping cart. Once the dress is finalized they send it to the billing counter. This reduces the weight of carrying the shopping bag with you. But in Shopping Malls this service could be very tricky to provide.

To substantiate the data collected by secondary resources, primary data of 3 Shopping Malls in Bangalore has been collected. Data collection is done by observational method.

Forum Mall:

• Popular Shopping Mall in Bangalore, located on Hosur Road in the Koramangala suburb.

• Winner of the Best Mall Award at Real Estate Excellence Awards 2007 held at Le Meridien, New Delhi, on 27th May, 2007

• Forum has the only Apple store in South Asia. If you want to get a Mac or an Apple product, you will get it only here.

It also has a Bose and Swarovski store.

• The Mall does the product displays to attract people. Mostly the products displayed are of big, famous companies like Audi, Volkswagen in cars etc.

• Interiors of the Mall are good and in fact better than other two Shopping Malls observed in the survey.

• As mentioned earlier Mall has a good amount of luxury or iconic brand stores which tempts people to come again and again.

• It has baby care corners near rest rooms, which highlights the concern on customer convenience.

• To assist customers in searching the desired destination or retail store, Directory boards are put up on the walls at convenience places. These directory boards give information about every retail store on that floor, escalators, lifts etc. through graphical representation.

• Mall has sketch‐picture making shop at the entrance of the Mall.

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• Parking facility is good as there are ramps at different levels. It is an amazing idea for providing extra comfort to customers. If a customer wants to go to

4th level of the Mall, he does not have to park his vehicle at the basement

parking area and go through the lift or escalator to 4th level of the Shopping Mall. Now, he can directly park his vehicle to the adjoining level for parking to the desired level of the Mall.

• Forum Mall sells Gift vouchers – Forum Gift Voucher. It gives offerings like fashion, accessories, gifts, movies and food. The Forum Gift Vouchers are available in the denominations of:

o Rs. 1000.00

o Rs. 500.00

Rs. 250.00

These can be purchased at the help desks against cash or credit cards and for the bulk orders against cheques which will be delivered to your address. It gives an opportunity for the corporate houses to use these vouchers for incentive programs and order these Gift vouchers for their employees.

Garuda Mall:

• The Mall is located on Magrath Road, Bangalore.

• It houses the brands like Mango, Guess, Marks & Spencer, Shoppers Stop, Westside, Planet Sport, Adidas, Reebok, Fabindia, Swarovski and Titan.

• At the entrance level of the Mall, msn was conducting a competition among the people there. It was the center of attraction, as the crowd was all over the place to watch the event.

• The Mall has some unique brand stores like scary house which no other Malls in Bangalore have. It gives an additional advantage to Garuda.

• Mall developers have taken care of sign boards to help customers to roam around easily. Sign boards give information about the floor only not about the whole Shopping Mall.

• Seating arrangement was not proper. The Mall has seating facility only near lifts.

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• A section of a floor is dedicated to entertainment. It was having a healthy number of people.

The Mall offers shoppers a wide range of cuisines at the food court with over 20 food counters along with Sikandar and Kobe sizzlers.

• There are dining options in five exclusive restaurants serving Oriental, Continental, Mediterranean and Frontier cuisines.

• Mall has its own parking which is categorized into visitor parking, corporate parking and tenant parking.

• Garuda also sells gift vouchers ‐ Garuda Mall GIFT VOUCHER. These Gift Vouchers in the Mall are available in two types:

o Diamond Gift Voucher Rs. 1000.00

o Gold Gift Voucher Rs. 500.00

Gopalan Mall:

• It is located on the prime location at Mysore Road, Bangalore. But, still it has not been able to pull the customers after its introduction period, consistently.

• A motorcycle was on display after the entrance.

• Tenant‐mix was not very attractive and contemporary. Retail stores were mostly of slow moving brands.

• No entertainment section was in the Mall.

• Food court as usual had a decent crowd.

• Roaming around the Mall is not very convenient. To find the escalators or stairs, thanks to the lack of sign‐boards and personnel’s assistance

The customers are mostly the aged customers not the youth. Thus, the seating facility is very important. Mall has the seating facility, but the chairs were not installed in the sufficient number as well as at appropriate places.

• Parking facility was good in the Mall.

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Efforts Forum Mall Garuda Mall Gopalan Mall

Music Shows, Competitions Yes Yes No

Art Shops Yes Yes Yes

Product Display Yes No Yes

Iconic/Concept Tenants Yes Yes No

Sign Boards Yes Yes No

Baby Care Corners Yes No No

Seating facility Fair Good Poor

Personal Attention No No No

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Analysis

Success and failure factors for Shopping Malls:

Following factors have been identified as most crucial for the success or failure of any Shopping Mall:

Tenant mix‐ The term tenant mix refers to a combination of factors, including the proportion of space or number of units occupied by different retail/service types, as well as the relative placement of tenants in the centre.

Anchor tenants in the malls‐ An anchor store implies a store that is a large entity in terms of size or a square footage. It caters to the need of the people across all ages, it usually has a large variety of sellable items ranging from cloths to household items from different brands. Like Westside in a Shopping Mall.

Interiors and Design of the malls ‐ The interiors and design of the mall have to address two kinds of customers i.e. tenant and the end consumer. For the tenants factors like floor, build‐up area, energy efficiency, security movements of goods, effective and timely garbage removal system and safety should be taken care of. Whereas, for the end consumers factors like safety, easy customer circulation, wide passageways to shop around with trolleys, ample parking space, easy access from shopping areas with trolleys to the vehicle parking area, adequate rest rooms, place for the tired to sit and relax and phone facilities should be provided. Customer’s loyalty comes from the overall excitement that the shopping experience offers.

Other factors‐ Ample parking space, location of the malls, and serious footfalls etc. We can now monitor the real objectives of these strategies and tactics adopted by Indian Shopping Malls. Where they are targeting on customer benefits? And on Which stage of buying experience cycle they are targeting?

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Interaction Stage:

At the first stage of buyer experience cycle – Interaction. Personal assistance provided by the Shopping Malls personnel in a Shopping Mall directly hits to create convenience for customers with the additional benefit of simplifying the process of customer interaction with the Shopping Mall. Interiors and Exteriors are the most important aspect of any Shopping Mall for the very first impression in customers’ minds with the spaciousness of the Mall. They create an image in the mind of the customers about the Shopping Mall. Services:

Services like Multi‐level parking, Valet parking, Sign Boards, Escalators, Lifts, and Seating facility etc. also focus on making the customers’ experience with the Shopping Mall convenient. This experience stage of services is the support stage for the rest of the stages as these services helps at every stage of buyer experience. Multi‐level parking simplifies the process of complete shopping experience as now customers can park their vehicle to the level which they intended to shop or visit. Growing security concern among customers can be a major factor in success. Absence of which may result in customer un‐favourability. Proper security check reduces the risk among the customers and makes the experience fear free. We can now monitor the real objectives of these strategies and tactics adopted by Indian Shopping Malls. Where they are targeting on customer benefits? And on Which stage of buying experience cycle they are targeting?

Interaction Stage:

At the first stage of buyer experience cycle – Interaction. Personal assistance provided by the Shopping Malls personnel in a Shopping Mall directly hits to create convenience for customers with the additional benefit of simplifying the process of customer interaction with the Shopping Mall. Interiors and Exteriors are the most important aspect of any Shopping Mall for the very first impression in customers’ minds with the spaciousness of the Mall. They create an image in the mind of the customers about the Shopping Mall.

Services:

Services like Multi‐level parking, Valet parking, Sign Boards, Escalators, Lifts, and Seating facility etc. also focus on making the customers’ experience with the Shopping Mall convenient. This experience stage of services is the support stage for the rest of the stages as these services helps at every stage of buyer experience. Multi‐level parking simplifies the process of complete shopping experience as now customers can park their vehicle to the level which they intended

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to shop or visit. Growing security concern among customers can be a major factor in success. Absence of which may result in customer un‐favourability. Proper security check reduces the risk among the customers and makes the experience fear free.

Purchase:

Though, Shopping Malls cannot do much during purchasing stage of the customer experience cycle except selecting an appropriate tenant‐mix as retail outlets generally face the purchasing stage of the cycle. But by selecting a good and contemporary tenant‐mix, Shopping Malls ensure that the Shopping Mall remains up to date and attract customers. By introducing the creative concept of shops like portrait making, pottery painting, and photo shot etc. Mall developers try to enhance the productivity of customers as now they can shop for much more modern and fresh fashion in the market. As discussed earlier, many of the Malls have introduced Gift Vouchers for its customers. The benefit to the customers is that now they do not have to worry about the likes‐dislikes of another person. They can but these vouchers and gift it to the person they want to gift. That person can come with that gift voucher and shop according to his/her likes and dislikes. This reduces the risk for the customers and simplifies the purchasing process. Multiplexes, Entertainment section (Arcade Games), and concept or unique shops helps in creating an image of a Shopping Mall among the customers. As these all are the part of the retail business of the Shopping Mall, they come under purchase stage of experience cycle. An example of this came across to me when I was collecting the primary data for Forum Mall in Bangalore. Often, People use the name of PVR to resemble the Forum Mall because of the publicity of PVR cinemas in Forum Mall.

Add ons: ‐

Shopping Malls provide add‐ons, which are not asked by the customers but to enhance the customer experience and build loyalty among existing customers, Shopping Malls offer loyalty cards for existing customers. This is a common practice among the Shopping Malls abroad. In India, it is not a common practice by Mall developers, but Forum Mall has started a loyalty cum credit card with association with ICICI Bank. This card gives benefits to its customers in terms of privileged parking, privileged ticketing at PVR cinemas, special discounts at participating stores and gift vouchers etc. after collecting certain reward points. Baby care corners concept tries to target the mothers of new born and focus on giving convenience while shopping in the Mall. Though India’s Shopping Malls are not quite big, but still people sometimes need help for these kind of customers ‘customer help desks’ at the ground floor of the Malls are placed. It focuses on convenience utility of buyers. Various competitions and music shows try to create the excitement, the fun atmosphere in a Shopping Mall as well as in customer

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shopping experience, which relaxes customers and give them some time free from the worries of the world they carry with them. Some Shopping Malls in Mumbai have organized some public awareness programmes on Pollution, Diseases like Polio, AIDS etc. These programmes come under corporate social responsibility (CSR). Although this is not the only reason for which Shopping Malls do these programmes, they also try to project themselves as a part of the society and want to get noticed among the masses. No Shopping Mall has yet focused on the aspect of Environmental Friendliness of their operations, activities etc. This aspect could provide a massive competitive edge to Shopping Mall over others as people are becoming more and more environment conscious, better knowledgeable about problems caused by wastages etc. Thus, a Shopping Mall can project itself as an Environmental Friendly operated Shopping Mall like its environment friendly wastage treatment procedure, plants trees on achieving certain amount of sales or footfalls etc.

Do Loyalty Card Programs really work well?

The straight answer would be ‐ not as well as they might have been. The success of these loyalty programs lies in the execution of these programs. Majority of the retailers are still struggling to get it right. The most important question need to be addressed from the view of a retailer is whether they really drive loyalty or not. The fact argued by loyalty program experts like Jim Barnes is that loyalty programs have little or no effect on genuine customer loyalty. A very large percentage of senior executives feel that they are developing relationships with their customers through these loyalty card programs, and add‐on services etc. but most of the customers do not think the same way. Why the senior management level executives are so out of touch with their customers when it comes to emotional connections? Results of the various surveys performed by retail organizations show that consumers perceive a ton of value in loyalty programs and use them often to earn rewards. But, they have precious little to do with loyalty. According to Jim Barnes loyalty Programs expert, one must not confuse loyalty programs with loyalty. At the end of the day, these programs drive short‐term behaviour, not loyalty. Most customers are in it for the points and the rewards that come with them, not because they hold the company in especially high regard. Do loyalty programs influence customer behaviour? Of course they do. But, if we are looking to build long‐term customer loyalty, the kind of loyalty that is grounded in an emotional connection, retailers should not go running off to start a loyalty program. The most negative part of these loyalty programs is that they lose focus on the most important aspect to identify the loyal and the non loyal customers and develop a unique relationship among them.

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A study by Mc Kinsey states that loyalty programs fail to increase customer loyalty that they are expected to. From the perspective of a retailer a loyalty program has to generate brand loyalty to the retailer. The top four reasons for retailers’ dissatisfaction with loyalty programs were:

1. Customization: Loyalty programs have not been designed with respect to the consumer segments.

2. Costs: Administration costs are too high for implementing these loyalty retail programs.

3. Revenues: These retail loyalty programs have not lead to expected increase in revenues of these retail stores for whom these programs were developed.

4. Customer knowledge: Retailers have not used and collected appropriate details about customer's data and knowledge to design these loyalty programs.

Most loyalty programs are not designed with very fine data mining, to distinguish between customers who would recommend a particular business to friends and those who would not. Knowing this could mean millions of additional revenue for companies. The tendency of loyal customers to bring in new customers at no charge to the company is particularly beneficial. Many companies also tend not to do enough with their loyalty program data to make the customer feel special. One of the big benefits of a successful loyalty card program is that retailers can quantify new customer losses and introduce programs designed to retain or encourage the most profitable customers. "Without a loyalty card, one has no clue about the size of the inflow and outflow of new customers,” Learning to play the loyalty card game better can help companies reap big cash rewards. Profits rise as a customer's relationship with a company lengthens. There is therefore a need to take the lead in loyalty programs because it's just about the only department that can coordinate between business processes, external data‐analytics, vendors and the executives who can translate output into action. In retail today, every customer has a different need and every customer belongs to a different social class and hence forth the motivation and satisfaction levels are also different, it is not sufficient that customers are treated alike.

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Findings

o India is facing a vibrant growth in the number of Shopping Malls and this growth will remain at least for next some years.

o Uniformity in Interiors, Exteriors, and Offers etc. of Shopping Malls is preventing to create a strong differentiator on these parameters.

o Entertainment has almost become a necessity for any Shopping Mall to have in order to attract footfalls on regular basis.

o Avg. Indian Shopping Mall size is very less compare to Shopping Malls abroad like in U.S.

o Tenants always play the most vital role for the success or failure of any Shopping Mall.

o Environmental friendliness utility among the buyer utilities is yet not focused by Indian Shopping Malls for differentiation.

o Loyalty Programs adopted by Indian Shopping Malls have not been successful as expected. Retailers are also dissatisfied because of the high costs related with these programs and lesser than expected revenue growth, with the difficulty in customization of these loyalty card programs.

o One of the benefits of loyalty card programs is that retailers can quantify new customer losses and introduce programs designed to retain or encourage the most profitable customers.

o Shopping Malls are focusing more on how to create a better customer experience, but are not focusing greatly on how they could improve the efficiency or add convenience into the consumption chain of the customers. (Reference: Discovering New Points of Differentiation by McMillan and McGrath, HBR 1997)

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Recommendations

1. Not Just another Card:

In India, the market has been full of loyalty cards and customers also expect loyalty cards and their tangible benefits. The call of the hour for Shopping Malls is not to develop yet another me‐too card, but some different offerings or totally different concept of loyalty card. Differentiation is the only key available with the Shopping Malls to build customer loyalty. One concept could be an introduction of Shopping Mall loyalty card with the coalition of tenants like Adidas, Sony etc. and service provider like Visa, MasterCard. The concept would work like this: Customers will get the bills separately from each retail stores as usual. They will earn some points based on their shopping in that particular mall in total, but the customer has to redeem certain % of earned points on the store where he had shopped and rest of the points he can redeem on other stores of the Shopping Malls. The system will tell the information about the point’s status for each customer as well as particular stores.

o For example: I shop from an Adidas store in Garuda Mall for 1000 Rs. and I earned let’s say 200 points. Now as per the loyalty program rules, I can spend 120 points in that Adidas store only and rest 80 points in other shops of that Mall.

2. Shopping Malls can also look at a “College Savings Scheme” exclusively wherein a certain % of sales is ploughed back and held in a fund to aid college expenses of the customer or his nominee at a future date. This scheme will target to those shoppers whose children are in schools and will be joining college in near future. This scheme can have associates from family, friends also who can also help by giving their shopping points to the same customer. It will also attract current college students for short term savings. This scheme will work as CSR effort by the Shopping Mall but the catch will be by getting socially good image, emotional connect with shoppers, concern about their future needs, by allowing associates (which may mean more customers, new customers) the Shopping Mall actually adopting a sales promotion strategy. This model is doing fantastically well in United States. India has a greater probability because of more emotional customers, more family oriented culture.

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3. Another concept can be developing a "Mileage Program (MP)" based on purchase in the Shopping Mall, the usual more you purchase the more you earn mile/points. This will be of 2 types. One MP is outlet/category specific (McDonalds/fast food restaurants, Nike/Sportswear outlets) and the other MP is entire mall based. Any consumer purchasing worth XXXX amount in any category store of your mall will be in the MP1 and also in MP2 list. Based on certain slabs of points the consumers will get various prizes for MP1 or MP2 or both. For MP1, the ideal prizes will be discounts/coupons etc. as that is instant and attracts consumers. But for MP2 the prizes can be status symbol things, i.e. Membership of exclusive Country Club, Return tickets for 2 to any holiday resort, Membership of any airlines Privilege Class, Tickets for Top end Fashion Shows (Versace, CK, etc)/concerts/Opera Shows etc.

This card is basically to cater both kinds of customers together; customers who seek tangible benefits like discounts etc. as well as to customers for whom status is also important.

4. Differentiation: As discussed earlier in the report Standardization in Interiors and Exteriors is one of the common phenomenons in Indian Shopping Malls. Shopping Mall can take a step forward to differentiate itself from others on these aspects. Example could be like Theme of Shopping Mall (on seasonal basis). Current Shopping Malls are not spending much effort on Environmental Friendliness; a Shopping Mall can differentiate itself by implementing and communicating the environmental friendly operations like Eco Trash Removal System etc.

5. Customized Loyalty Programs: Today, every customer has a different need and every customer belongs to a different social class and hence forth the motivation and satisfaction levels are also different, it is not sufficient that customers are treated alike. Customized Loyalty program can overcome this issue and will be able to build strong belongingness among the customers.

6. Enhancing the customer experience: Conducting focus groups will ensure that the customers will come up with their requirements which can be included while designing the loyalty programs or strategies.

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Further Research

Beyond this study, the emerging challenge and opportunity of customer retention creates vast research opportunities. The applicability of the Buyer Utility Map to Shopping Malls and generalization of some loyalty programs call for further validation. Further researches may analyze the potential and complications related with the recommendations suggested in the study.

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Conclusion

The study gives an insight about the opportunity as well as the challenge of building customer loyalty for Shopping Malls in India as more and more Shopping Malls are opening up in the country especially in big cities and metros. To conclude, the increase in Shopping Mall retail space provide sufficient space for new brands but it also results in more options to the customers, which results in low customer loyalty towards a specific Shopping Mall. To retain customers, Shopping Malls are undertaking several strategies and tactics like extra services, better facilities etc. As the customer loyalty is becoming more crucial, differentiation in terms of consumption chain or the customer experience can help in building the desired loyal customer base to fight against the nearby Shopping Mall

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References

Articles and Research studies Referred:

Anand, Kumar (2008) “Indian retail sector fails consumer friendly test”, The Economic‐ Times, 9th August, Page 5.

Chakraborty, Somasroy, (2007) “Only 10 12% of malls in India successful”, ‐ Business Line, Saturday, June 23, 2007.

Dhanabhakyam, M. and Shanti, A., “Indian Retail Industry – Its growth, Challenges and Opportunities”.

Dr. Trivedi Shekhar (2008) “Zooming in on malls”, Retail Biz, May 2008.

Everitt, Lisa (2008) “How to build a Shopping Mall brand”, 29th April 2008 (http://industry.bnet.com/retail/100044/how to build a shopping mall brand/) ‐ ‐ ‐ ‐ ‐ ‐

FICCI and Ernst and Young Report, 2007 “India to have 600 Shopping Malls by 2010”.

F & R research, “Malls in India”, 2007 edition maps Shopping Centre Developments across India.

Gentleman, Amelia, “India's malls pull in people who aren't buying”, International Herald Tribune, May 11, 2005.

Gopal, Prashant (2007) “Malls betting on entertainment to draw in shoppers”, New Delhi.

(http://www.livemint.com/2007/05/14003113/Malls betting on entertainment.html) ‐ ‐ ‐

Gotsis, Tracey “Involve teens in marketing efforts to create brand loyalty” (http://www.icsc.org/srch/education/newsletter/involveteens.pdf)

Jain, Pradeep, (2008) “Must for Malls: USP”, Retailer, July, 2008.

King, Sharon R. (2008) “Shoppers get awards; Malls get loyalty”, The New York Times, Thursday, September 4, 2008.

(http://query.nytimes.com/gst/fullpage.html?res=9902E4DF103CF930A15751C1A96E958260)

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Pradhan, Swapna, “Shopping Malls in India – Implications for the future”, Retail Biz, June, 2008.

Prof. Sundar, “Building successful Indian retail brands” (http://www.bim.edu/pdf/Larticle/Building_Successful_Indian_Retail_Brands.pdf)

Rigby, K. Darrell and Vishwanath, Vijay, “Localization: The Revolution in Consumer Markets”, Harvard Business Review.

(http://www.hbsp.harvard.edu/hbsp/hbr/articles/article.jsp?articleID=R0604E&ml_action=get article&print=true) ‐

Shinde, Devendra (2008) “Care for your Brand, the way you care for your skin”, Retail Biz, March 2008.

World’s biggest Mall planned in Gurgaon, The times of India, 22 June 2005, (http://timesofindia.indiatimes.com/articleshow/1149016.cms)

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Websites Referred:

http://en.wikipedia.org/wiki/Shopping_mall

http://www.garudamall.net

http://www.globus.in

http://www.krahejacorp.com/retailing.html

http://www.shoppersstop.com

http://www.theforumexperience.com

http://www.upromise.com