In a chat with Priyanka Dasgupta, Caroline Papadatos, Senior Vice-President with LoyaltyOne International, argues that loyalty programmes entail much more than merely offering points – they are very potent devices to identify and understand your customers and their buying habits.
How do you think FDI will change the retail landscape of India?
In an amusing sort of way, the kiranas have retained a solid advantage over modern retailers. They know their customers by name and have a relationship with them. They also offer monthly credit and just-in-time service. Many times, they know more about the products than the customer and things are delivered right at their doorsteps. The biggest challenge for retailers in India as they modernise will be how to maintain an intimate relationship with thousands of customers, and that’s where I think loyalty has a role to play.
How do you think loyalty programmes can help retailers in India?
The retailer can thus have differentiated experiences for different customer profiles. He can actually organise his store accordingly, based on what he knows about his customers. In India, people think of loyalty as offering their customers a bunch of points that will make them happy. But loyalty is much deeper than that. It’s a strategy for knowing your customers. A loyalty card is just the first step in identifying them and then learning more about them. You can see every transaction they do, and when you have that, you can do many things like rewarding customers differently.
The second thing is recognition. If somebody is your best customer, the worst thing you can do to him is to fail to recognise him when he comes to your store. It is absolutely necessary for a competitive retailer to know his best customers.
Also important is creating communication that is relevant to the customers. If a retailer knows what his customers buy, he can send tailor-made messages to them. In India, retailers are still relying on very basic information like anniversaries and birthdays, but in the new world of retailing, you need to know 20–30 things about a customer, otherwise it won’t be possible to have an effective relationship with him.
All these things require only one thing – data – and retailers need to invest heavily in collecting it. Loyalty programmes are a very good way to do that. Today, these programmes are seen by the Indian retailers as an extension of their brand. They want to put a great logo on the loyalty card but they are not really thinking about it in terms of a great retail asset. Once they start collecting and using the data of customers, they will become truly competitive. In fact, there are six stages of loyalty programmes and I can safely say that Indian retailers have managed to cross only the first three – there are three more to go.
In Europe and North America, the average food-and-grocery retailer would have 50 or 60 analysts at a time analysing customer data. That information helps them decide which products to buy and where to put them on the shelves, who to target, and the pricing strategy. In other words, retailing in the West is a highly analytical exercise.
I think Indian retailers are yet to have access to that kind of information. They are currently much more focussed on brand marketing than analysing data. In India, brand marketing is stronger whereas in the matured markets, customer marketing is stronger.
The average Indian consumer has more than three loyalty cards and he accumulates small number of points on each card, which do not give him any substantial reward. We already know that if there are not enough rewards on a loyalty card, the customers don’t shop that frequently. Also, the big difference between a normal loyalty card and a coalition programme is that all the discretionary and non-discretionary spends of a customer will be reflected on one common platform, and help him in accumulating more points.