Effectiveness of Layalty Program in Readymade Garment Retailing

Effectiveness of Loyalty Program in Readymade Garment Retailing
2009
Presented by Ashish Kumar and Lal Chand Bhamare, PGPM, IIIrd Sem, IBMR-A’bad
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Certificate
This is to certify that Mr. Ashish Kumar (A-25) and Lal Chand Bhamare (A72), bon
a fide student of III-Sem PGPM bearing in INSTITUTE OF BUSINESS MANAGEMENT & RES
EARCH, Ahmedabad has carried out a project Report entitled a study on ―Effectivene
ss of Loyalty Program in Readymade Garment Retailing under my supervision & guida
nce. The project report prepared by him/her is original to the best of my knowle
dge.
Date: Place:
Signature R.K. Balayan (Dean & Director)
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Preface
The PGPM programme is well structured and integrated course of business studies.
The main objective of practical training at PGPM level is to develop skill in s
tudent by supplement to the theoretical study of business management in general.
Industrial training helps to gain real life knowledge about the industrial envi
ronment and business practices. The PGPM programme provides student with a funda
mental knowledge of business and organizational functions and activities, as wel
l as an exposure to strategic thinking of management.
In every professional course, training is an important factor. Professors give u
s theoretical knowledge of various subjects in the college but we are practicall
y exposed of such subjects when we get the training in the organization. It is o
nly the training through which I come to know that what an industry is and how i
t works. I can learn about various departmental operations being performed in th
e industry, which would, in return, help me in the future when I will enter the
practical field.
Training is an integral part of PGPM and each and every student has to undergo t
he training for 45 days in a company and then prepare a project report on the sa
me after the completion of training.
During this whole training I got a lot of experience and came to know about the
management practices in real that how it differs from those of theoretical knowl
edge and the practically in the real life.
In todays globalize world, where cut-throat competition is prevailing in the mar
ket, theoretical knowledge is not sufficient. Beside this one need to have pract
ical knowledge, which would help an individual in his/her carrier activities and
it is true that ―Experience is best teacher .
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Acknowledgement
With immense pleasure, I would like to present this project report for IBMRAhmed
abad. It has been an enriching experience for me to undergo my PGPM project, whi
ch would not have possible without the goodwill and support of the people around
. As a student of INSTITUTE OF BUSINESS MANAGEMENT & RESEARCH (IBMR), Ahmedabad,
I would like to express my sincere thanks too all those who helped me during my
practical project period. Words are insufficient to express my gratitude toward
R.K. Balayan (Dean & Director),IBMR-A’bad. I would like to give my heartily thank
s to prof. Kavita Sharma, IBMR-A’bad, who helped me at every step whenever needed.
. I am very thankful to the all retailers of A’bad, who helped me at every step wh
enever needed. Last but not least, I would like to record my deepest sense of gr
atitude to my friends for their support and constant encouragement. However, I a
ccept the sole responsibility for any possible error of omission and would be ex
tremely grateful to the readers of this project report if they bring such mistak
es to my notice.
Date: 10th Dec, 2009 Place: Ahmedabad
Ashish Kumar (9924354216) Lal Chand Bhamare (A-72) IBMR, Ahmedabad
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Contents
Sr. No. 1. 2. Contents Executive Summary Introduction: 1. Introduction to Indian
Readymade Garment Industry, 2. Retailers’ Profile, i. 3Cs Analysis of retailers,
ii. SWOT Analysis of retailers. 3. Introduction to Effectiveness of Loyalty Prog
ram in Readymade Garment Retailing, 3. Background of the Study, 1. Statement of
the Problem, 2. Objective of the Study, 3. Scope of the Study. 4. 5. Research Me
thodology, Literature Review (Effectiveness of Loyalty Program in Readymade Garm
ent Retailing) 1. Loyalty Program, 2. Customer Information is Key, 3. What Custo
mer Expects, 4. Types of Rewards, 5. Types of Loyalty Programs, 6. Retailer Bene
fits, 7. Importance of studying Effectiveness of Loyalty Program in Readymade Ga
rment Retailing, 8. Problem faced during field work. 7. 8. 9. 10. 11. 12. Data A
nalysis Limitations Findings Suggestions Conclusion and Future Outlook Bibliogra
phy Presented by Ashish Kumar and Lal Chand Bhamare, PGPM, IIIrd Sem, IBMR-A’bad
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Executive Summary:
Indian organized retail industry is poised for growth. Readymad Garment sector i
n particular has a great opportunity with alignment of Indian economy to globali
sed markets. With the widespread use of customer retention-Long term activities
which provide material inducements to consumers and trade it becomes imperative
for managers to understand such practices and understand challenges. This study
investigates Customer retention activities of five organized readymade garment r
etailers in Ahmedabad market and compares them on various dimensions. It present
s major findings and provides insights on consumer loyal buying behavior. Lifest
yle, for instance, has a loyalty programme called `The Inner Circle , while Pant
aloons offers a `Green Card Rewards programmes, Westside has `Club West to woo
the customers. Managerial challenges are posed in planning and implementing suc
h activities. The paper concludes with future bright outlook.
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Introduction to Indian Readymade Garment Industry: The Garment Industry of India
is an Rs one trillion industry. Almost 33 % of its knitwear production and abou
t 20% of its woven-garment production, both by volume, enters export markets. Ov
erall about 25 % of the volume of its garment production goes into export market
s, leaving 75 % for domestic consumption. The Industry covers over one lakh unit
s and employs about 6 million workers, both directly and indirectly in almost eq
ual proportion. The indirect portion helps to sustain the direct production sect
or in the shape of items associated with the garment industry production includi
ng sewing/embroidery thread, buttons, buckles, zippers, metal plates, cardboard
sheets, plastic butterflies and packaging material.
Organized sector of the garment industry is roughly 20% of the total industry, c
oncentrating chiefly on exports. These are usually limited Companies while the r
est are proprietary or partnership Companies. Geographically, men s garments are
largely produced in western and southern India while production of ladies garme
nts predominates in North India. Eastern section of India specializes in childre
n garments where in fact, these took their birth.Fibre-wise, 80% of the producti
on is of cotton garments, 15% of synthetic/mixed garments and the rest of silk a
nd wool garments. The industry manufactures over a 100 different types of garmen
ts for men, women and children. These includes overcoats/raincoats, suits, ensem
bles, jackets, dresses, skirts, trousers, shirts, blouses, inner-garments, T-shi
rts, jerseys/pullovers, babies garments as well as accessories like shawls/scarv
es, handkerchiefs, gloves and parts of garments.Fabric constitutes 65 to 70% of
the cost of production with labour making up a further 15% and the rest go for o
verheads and manufacturer s profit. Retail trade in India is spread over departm
ent stores, hyper markets/discount stores and specialty stores. A number of shop
ping malls have sprung up all over the country, especially in the metros. Due to
this, land prices have spiraled. Attention now shifts to "B" class, "C" class c
ities and the rural area.
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Retailers Profile:
This study is based on five retailers in Readymade Garment Industry. They are as
below:
3 Cs Analyses:
Pantaloon Retail India Ltd Company:
Future Group, led by its founder and Group CEO, Mr. Kishore Biyani, is one of In
dia’s leading business houses with multiple businesses spanning across the consump
tion space. Pantaloon Retail is the flagship
enterprise of the Future Group. Pantaloon Retail (India) Limited has spread acro
ss various businesses and cities in India.
Pantaloon owns multiple retail formats and is able to cater to a large section o
f the society. The company has over 140 stores across 32 cities in India and 140
00 employees. The headquarters of the company are situated at Mumbai. The organi
zation made an incursion into the modern retail (fashion) in 1997. Big Bazaar, a
hypermarket chain, was introduced in the year 2001, with an Indian touch of con
venience and hygiene. Food Bazaar, food and grocery chain, and Central Mall loca
ted at various Metros are other important parts of the group.
Others include Collection (home improvement products), E-zone (consumer electron
ics), Depot (books, music, stationery and gifts), Blue Sky (fashion accessories)
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and Shoe Factory (footwear). The company has also launched a retailing venture k
nown as futurebazaar.com. The vision of Future group is to "Deliver Everything,
Everywhere, Every time to Every Indian Consumer in the most profitable manner."
National Retail Federation gave Pantaloon the International Retailer of the Yea
r Award.
Competitors: Westside, Globus, Lifestyle, V-Mart, etc. Consumers: According to m
y observation at Pantaloon store, Gulmohar mall, A’bad targets Upper middle and up
per class people.
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Westside Company:
Established in 1998 as part of the Tata Group, Trent Ltd. operates Westside, one
of India s largest and fastest growing chains of retail stores.
The Westside stores have numerous departments to meet the varied shopping needs
of customers. These include Menswear, Women’s wear, Kid’s wear, Footwear, Cosmetics,
Perfumes and Handbags, Household Accessories, lingerie, and Gifts. The company
has already established 36 Westside departmental stores (measuring 15,000 30,000
square feet each) in Ahmedabad, Bangalore, Chennai, Delhi, Gurgaon, Ghaziabad &
Noida (to be considered as 1 city), Hyderabad, Indore, Jaipur, Kolkata, Ludhian
a, Lucknow, Mumbai, Mysore, Nagpur, Pune, Rajkot, Surat, Vadodara and Jammu. The
company hopes to expand rapidly with similar format stores that offer a fine ba
lance between style and price retailing.
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Competitors: Pantaloon, Globus, Lifestyle, V-Mart, etc.
Consumers: Middle class, and upper middle class.
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Lifestyle International Pvt. Ltd. Company:
Lifestyle International (P) Ltd is part of the Landmark Group, a Dubai – based ret
ail chain. With over 30 years’ experience in retailing, the Group has become one o
f the foremost retailers in the Gulf. Positioned as a trendy, youthful and vibra
nt brand that offers customers a wide variety of merchandise at an exceptional v
alue for money, Lifestyle India began operations in 1999 with its first store in
Chennai. Currently there are 15 Lifestyle stores and 8 Home Centre stores acros
s Ahmedabad, Bangalore, Chennai, Hyderabad, Jaipur, Mumbai, Pune, New Delhi, Noi
da, and Gurgaon.
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Competitors: Westside, Globus, Pantaloon, V-Mart, etc.
Consumers: According to my observation at Lifestyle, Galops mall, A’bad, Upper mid
dle and upper class people are being targeted.
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V-Mart
In 2003, V Mart opened its first store at Law Garden, Ahmedabad and today boast
of its presence in almost all the major cities across India. With chain of 26 ou
tlets in 22 cities V Mart is having pan India presence, V Mart covers over 3,50,
000 sq.ft. of area and delights 60,000 satisfied shoppers each day.
V Mart is a multi-branded family store that works on the ―Value for money retail co
ncept thus providing the masses with the best quality at cheaper price. The vast
product range caters to every age and all the family needs with Apparels for me
n, women & kids, Food & Home products, Health & Wellness, Lifestyle Products, Fo
otwear and Travel Accessories for men, women and kids. The ―Sabse Sasta, Sabse Ach
cha Story. V Mart has positioned itself in the ―Value for Money category thus provid
ing customers with the most economic and best of quality products. The Sabse Sas
ta, Sabse Achcha theme says every thing about V Mart, the philosophy and the val
ues. One can find the best of products, quality, latest fashion and every thing
that keeps customers healthy and happy and of course the vast range to choose fr
om.
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The company hopes to expand rapidly with similar format stores that offer a fine
balance between style and price retailing. V Mart targets to expand into a 100
outlets by March 2010.
Competitors: Westside, Globus, Lifestyle, Pantaloon, etc.
Consumers: The vast product range caters to every age, lower middle and upper mi
ddle.
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Globus Stores Pvt. Limited
Company:
Launched in January 1998, Globus is a part of the Rajan Raheja group. The
company opened its first store in 1999 at Indore followed by the launch of its s
econd store in Chennai (T-Nagar). Soon to follow was another in Chennai located
in Adyar. The flagship store in Mumbai was opened on 1st November 2001 followed
by a swanky new outlet in New Delhi in South Extension Part-2. The sixth & seven
th stores are in Bangalore in Koramangala & Richmond Road
respectively. The Eighth store in Ghaziabad at Shipra Mall followed by the ninth
, tenth and eleventh in Kalaghoda, Mumbai, Thane and Ghaziabad, twelfth store at
Kanpur and thirteenth store in Ahmedabad & fourteenth store in Lucknow.As of Ma
y 2008, Globus has opened its 24th Store in Nagpur and the journey continues...
Competitors: Westside, Pantaloon, -Lifestyle, V-Mart, etc.
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Consumers: According to my observation at Globus store, Galops, mall, A’bad, Lower
and upper middle class people are being targeted.
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SWOT Analysis
Pantaloon Retail India Ltd Strength: Pantaloon Retail was the first retail chain
with pan India presence. Maximum number of formats to cover most of the consume
r classes. Strong supply chain mechanism. Higher bargaining power due to maximum
number of stores, higher customer footfalls and covering most types of formats.
Green Card loyalty program which ensures loyalty of customers and helps in main
taining cordial relationship. Human Capital – attracting the most talented pool fr
om best business schools across India. Shopping Experience is customized accordi
ng to store format. Like Big Bazaar has a Indian bazaar like appeal whereas Cent
ral which is into lifestyle segment gives altogether different experience. Under
standing of Fashion – After studying Indian Markets excessively and then deliverin
g the product. For example: certain colors have more influence in a particular r
egion, so merchandise would have more of those colors. Unique Discounting/ Markd
own - Special discounting during Independence and Republic days which attracts m
ore number of customers than any other stores. Private label brands like John Mi
ller, Bare, UMM etc considered as national brand and performing well. Trained cu
stomer relationship agents to guide customers. Tie-ups with many national as wel
l as international brands – like liliput, Weakness: Shrinkage rates are higher tha
n industry norms. Store renovations of older stores not done. Low employee reten
tion levels at shop floor level due to better pay package by competitors. Floor
level Customer Relations Executives not having proper product, store etc knowled
ge due to lack of proper training. Loyalty program of competitors is more effect
ive due to better scheme and merchandise. Merchandise and product focus not cons
istent and clear.
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Opportunities: Geographical Expansion: Untapped market in terms of tier II and t
ier III cities. Untapped segments such as ethnic wear, Organic cotton wear etc.
Luxury segment with brands like Gucci, Tommy, Armani etc. Stand alone stores of
other brands like Bare, UMM etc. Getting license agreement of smaller regional b
rands. More effective online shopping for garments. Custom Tailoring business un
tapped. Suiting brand from Future group can be feasible.
Threats: Economic slowdown and scanty rainfall which has major impact on Indian
Economy. Consumer spending on non-essential fashion items, garments etc have bee
n reduced significantly. Competitive rivalry in the industry like Big Bazaar is
facing competition from Fashion Yatra (Trent Ltd), HyperCity (Shoppers Stop), Ma
x ( Landmark group), Megamart (Arvind). Pantaloon & Central is facing competitio
n from Westside (Trent), Shoppers Stop, Relaiance Trends, Lifestyle, Globus etc.
Foreign players like Carrefour, Tesco, Walmart lined for their Indian operation
s. Increasing cost of raw material, power and transportation. Delay in store del
ivery – due to increased price and economic slowdown, the infrastructure sector in
India is affected and hence the construction of new malls have been halted or s
lowed down.
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Westside Strength:
It is growing at the faster pace Has good brand name of TATA’s. It has many outlet
s all over India. It has a good customer base. Apparels are cheaper by 5 to 10%
while the price difference on the other products varies between 5 to 20%. Attrac
tive promotional schemes and heavy discounts Quality and branded stuff only The
Westside has been positioned to the customer as a place where the customer can s
hop for each & everything for which he goes to a market except groceries. Locati
onal advantage- All Westside stores are located in prime locations of the city l
ike Shivajinagar, Camp etc.
Weakness:
Westside has not yet trapped the whole market- rural market is still Untapped. N
ot much product range for middle class people Facing problems due to political e
nvironment-Subsidy from octroi, different Taxes like land tax and water tax • Need
help in taking over properties and real estate • Need some concessions from labor
laws Lack of differentiation among the malls that are coming. Poor inventory tu
rns and stock availability No involvement in food retailing business.
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Opportunities:
Huge untapped market Rising disposable income- Increase in number of people in e
arner category, Women earning Urbanization-Changing consumer habits and lifestyl
es as the disposable Income is increasing per family.
Threats: Competition from organized retail players which are in market and emerg
ing like Reliance, Shopper’s stop, Wal-Mart –Bharti etc. Competition from local reta
ilers.
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Lifestyle International Pvt. Ltd.
Strength:
Increasing demand (Rising living standard of people). Flexibility of product mix
(they can add different category of apparels to their product mix). Well manage
ment. Good Quality of product. Availability of wide range of Varieties. Availabi
lity of Large space. Trained employee. Well structure.
Weakness:
Few stores are available across the india Not affordable price to common people
No music system Less advertising
Opportunity:
Opportunity to capture increasing population. Well opportunity for developing bu
siness.
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Increasing productivity Scope of strategic alliance/ Merge.
Threats:
Cut throat competition Entry of local brand with good quality.
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Globus Stores Pvt. Limited Strength:
Increasing demand (Rising living standard of people). Flexibility of product mix
(they can add different category of apparels to their product mix ) Attracting
people through Well music system. Good Quality Trained employee
Weakness:
Fewer Varieties. Selling only apparels. Limited space. Not economical.
Threats:
Increasing global competition Upcoming local competitors with good quality of pr
oduct.
Opportunity:
Domestic market too presents immense opportunities with spending on the rise and
organize retail sector. Opportunity to capture international market.
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Introduction to the topic:
Loyalty programs are structured marketing efforts that reward, and therefore enc
ourage, loyal buying behavior — behavior which is potentially of benefit to the fi
rm.[1]
In marketing generally and in retailing more specifically, a loyalty card, rewar
ds card, points card, advantage card, or club card is a plastic or paper card, v
isually similar to a credit card or debit card, that identifies the card holder
as a member in a loyalty program. Loyalty cards are a system of the loyalty busi
ness model. In the United Kingdom it is typically called a loyalty card, in Cana
da a rewards card or a points card, and in the United States either a discount c
ard, a club card or a rewards card.
A readymade garment retail establishment or a retail group may issue a loyalty c
ard to a consumer who can then use it as a form of identification when dealing w
ith that retailer. By presenting the card, the purchaser is typically entitled t
o either a discount on the current purchase, or an allotment of points that can
be used for future purchases. Hence, the card is the visible means of implementi
ng a type of what economists call a two-part tariff.
The card issuer requests or requires customers seeking the issuance of a loyalty
card to provide a usually minimal amount of identifying or demographic data, su
ch as name and address. Application forms usually entail agreements by the store
concerning customer privacy, typically non-disclosure (by the store) of non-agg
regate data about customers. The store — one might expect — uses aggregate data inte
rnally (and sometimes externally) as part of its marketing research. These cards
can be used to determine, for example, a given customer s favorite brand of bee
r, or whether she is a vegetarian.
Where a customer has provided sufficient identifying information, the loyalty ca
rd may also be used to access such information to expedite verification during r
eceipt of cheques or dispensing of medical prescription preparations, or for oth
er membership privileges (e.g., access to a club lounge in airports, using a fre
quent flyer card).
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Background of the Study
A Statement of the problem: Many Readymade Garment Retailers are aiming for high
satisfaction and delightness of the customers because customers who are just sa
tisfied still it find it easy to switch when better offer comes along. Those who
are highly satisfied are much less ready to switch. High satisfaction creates a
n emotional bind with the brand not just a rational preference. The result is hi
ghly customer loyalty. Hence an attempt is made to create loyal customer by Read
ymade Garment Retailers. Readymade Garment Retailers carry out some activities k
now as loyalty program in order to create existing customer as loyal customer as
well as create new loyal customers. Now the problem is whether loyalty program
is effective to the retailer as well as customers or not.
Objectives This project is based on consumer loyalty towards Readymade Garment R
etailer. Hence, Objectives of study are: 1.) From the consumer’s perspective, are
rewards attainable? 2.) From the consumer’s perspective, are rewards relevant? 3.)
From the firm’s perspective, is the LP design aligned with the desired goal(s)? 4
.) To full fill the partial requirement of PGPM degree.
Scope of study: Customer Loyalty is an important element in the marketing activi
ties. This customer loyalty decides the fate of the product and organization. Th
ere is various factors influence to the customer loyalty. These factors are, Pos
t purchase behavior, Reputation, Product availability, Branding, and convenient
etc.
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Research Methodology
The study of Effectiveness of Loyalty Program in Readymade Garment Retailing is
mainly concerned with Loyalty of consumer towards Readymade Garment Retailing. I
n the study, we used survey method to collect various data regarding effectivene
ss of loyalty program which is a primary source of data and we also used seconda
ry data method to prepare this project report. Hence various data and methodolog
y is considered in finding out effectiveness of loyalty program. The main data s
ources are:
Primary Data: The primary data refers to original information gathered for a spe
cific purpose and provides up to date, accurate and relevant information and it
is gathered in an investigation according to the needs of the problem.
Tools Used To Collect The Primary Data: The primary data is collected on the bas
is of survey method with the help of questionnaires, and interviews, personal ob
servation, direct consultation with consumers and dealers. Both open and closed
end questions are used in the questionnaire.
Methods: The survey method is used to collect the primary data with the help of
questionnaire based on explorative and conclusive research.
Sampling Unit:
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It refers to the individuals who are to be surveyed in the study and it is the c
ustomer who is consuming or using or who has bought AMUL milk and milk products
are surveyed.
Sample Size: It refers to the number of people surveyed for this topic, in the s
tudy 100 people were surveyed and responses drawn.
Secondary Data: The secondary data can be defined as data collected by son\me on
e else for purposes other than solving problem being investigation and previousl
y meant for another purpose. A secondary data is collected from the books, perio
dical journals, magazines, papers, company records, internet and other publicati
on.
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Literature Review:
Loyalty Programs: Building Customer Loyalty to Build Profits “Loyalty is one of th
e great engines of business success” Frederick F. Reicheld, author of The Loyalty
Effect Today’s successful Readymade Garment Retailers recognize the importance of
customer retention in their efforts to grow operational profits. To achieve this
, more and more retailers are implementing loyalty programs as a competitive mar
keting strategy to build long-term relationships with customers, allocate market
ing Rupees based on the customer’s value and derive as much as revenue as possible
from them over a lifetime.
Of course, loyalty is more than a business strategy. It is an ongoing, two-way r
elationship based on respect, trust and commitment – a relationship in which the c
ustomer feels all-important. A successful loyalty program builds and nurtures su
ch a relationship by accomplishing two critical tasks. The first is to gather in
formation that will help retailers understand their customers’ tastes, needs and e
xpectations. The second is to offer recognition and rewards (loyalty card, rewar
ds card, points card, advantage card, or club card) that are relevant to their c
ustomers as a reward for their loyalty – and as a trade for the personal and trans
actional data that starts the loyalty cycle and keeps it going. By tracking memb
ers’ transactions, companies can identify the various segments of their customer b
ase to create strategies that keep their customers coming back for more.
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Customer Information is Key: Effective loyalty programs generate incremental spe
nding – more rupee spent, more frequently, from customers whose needs and expectat
ions are understood and met. With 80% of retailers’ business being generated from
as little as 20% of their customers, identifying and understanding their needs a
nd expectations of this 20% is crucial. By gathering customer information, retai
ler can make intelligent marketing decisions that will keep their best and most
profitable customers more loyal. They can also leverage this thinking to increas
e sales the under-performing segments of their customer base.
The most valuable loyalty programs to retailers are those which utilize advanced
technology to collect data at the point of sale, track valuable information abo
ut customer purchase behavior, and provide access to rich database reports and a
nalysis that can be used to increase the effectiveness of retailers’ marketing cam
paigns.
What Customers Expect: Today’s consumers are more savvy and sophisticated than eve
r. They expect loyalty programs to offer: Easy participation Instant rewards Fle
xible rewards Fast accumulation of rewards Rewards claimed at any participating
establishment Special offers Instant win opportunities
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Membership Cards Greetings on special occasion Gifts Coupons/Vouchers
Types of Rewards:
Hard benefits and Soft Benefits
Loyalty program rewards can be classified into two main categories: hard benefit
s and soft benefits. Hard benefits appeal to the rational component of customer
loyalty with "tangible rewards such as free travel. Hard benefits compel customer
s to immediately take advantage of an extraordinary opportunity that may not las
t long. Conversely, soft benefits appeal to the emotional component of customer
loyalty and are slower to reward. Discounts are considered soft benefits, as the
y require the member to spend in order to receive and do not differentiate retai
lers from the competition. Focusing the member s attention on price and not on t
he issue of a compelling reward, soft benefits are equally important to Retailer
s’ most valuable customers, whose loyalty demands legitimate evidence of their spe
cial status. Special status means special treatment, special deals, special acce
ss and special events whatever it takes to reinforce the sense of importance of
a retailer’s top-tier, highvalue customers. Defining soft benefits sets apart your
relationship with your best customers, offering experiences unique to your prod
uct or service and unavailable to non-members.
Types of Loyalty Programs:
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Mid-market retailers or groups of retailers owned by a parent company will benef
it from using a program that will enable them to increase their customer transac
tions and retention through membership card, points programs, electronic couponi
ng, instant messaging and special offers, while the customer is present in their
location – in real time, at the point of sale. There are several types of program
s to choose from. “Closed-Loop” Programs: A ―closed-loop loyalty program involves only
one company or chain of locations within a particular industry, such as Marie Ca
lendar’s in the restaurant industry. In a closed-loop program, points are exchange
d exclusively within participating outlets, greatly reducing the cost base of is
sued and outstanding points. Closed-loop programs require a private-label or in-
house co-branded credit card to enable transactions. Using ―Private Label cards, na
tional, regional and small to mid size retailers can operate their own ―closed loo
p loyalty programs. Generally, cardholders are instantly enrolled at the particip
ating retailers’ POS and in all cases a co-branded or generic private label card i
s issued to the party enrolling. o How “Closed-Loop”, Private Label Programs Work: ―Pr
ivate Label programs are executed through the following steps: 1) Customer presen
ts his or her designated (specific bank or affinity) credit card or ―Private Label
Loyalty Card at a participating Retailer 2) When the card is swiped through a ce
rtified terminal or electronic cash register system, the payment processing and
customer transaction data are captured at the loyalty program’s host.
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3) The Retailer’s financial institution handled credit/debit authorization as norm
al. There is no effect to the Retailer’s existing banking or processing relationsh
ip. 4) The Loyalty Host recognizes loyalty transaction through encoded informati
on and processes it accordingly. The customer has the option to redeem earned re
wards at the point of sale or continue accumulating. The receipt generated from
the Program Terminal provides the customer with a mini-statement each time they
use their card. 5) The transaction details are collected, tracked and stored at
the Loyalty Host’s Data Warehouse, maintained by Global Loyalty. 6) Loyalty Host m
aintains the program’s Data Warehouse and can produce specialized database marketi
ng reports for the Retailer based on their requirements. 7) Retailers can dissem
inate precise information and implement innovative new marketing programs or jud
ge the effectiveness of existing ones. Specific customer behavioral data opens t
he door to establish new markets while maintaining the needs of current ones. 8)
At the point of sale, a Retailer can then inform his customers of new promotion
s, special privileges, events and increased rewards. A Retailer can also tailor
a specific message (up to 160 characters) live, on-demand (host change required,
done within 24 hrs), on all customer receipts.
Open/ Cross-Sell Programs: An ―open or cross-sell loyalty program involves multiple
types of companies and industries. Participating Retailers are typically nation
al or regional chains (category killers) that do not compete for each other’s cust
omers, but share similar demographic and psychographic profiles.
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An open program consists of a group of participating Retailers that allow custom
ers – cardholders –to earn and redeem points at each participating Retailer within t
he group. For example, if Marie Calendar’s were to become part of an open program
with The Gap, a customer could use their Marie Calendar loyalty points at the Ga
p, and vice versa.
Using advanced systems developed by top-tier loyalty program specialists, chain
Retailers using their existing terminal or POS system can operate multiple cross
-sell programs between departments and in parallel with other non-competitive ch
ains. In an open or cross-sell program, revenues are generated from membership p
oints (optional) and transaction fees and through system access fees and program
set-up fees if applicable.
Real-Time Points Programs
Real-time points programs are a powerful tool for Retailers to reward loyal cust
omers for making purchases. Points are accumulated as a percentage of the Rupee
amount spend and a reward for frequenting your location. Points can be adjusted
to align with Retailers’ seasonal business cycles (double points, bonus points, et
c.).
All points are accrued and or redeemed at the POS in real-time. Points in effect
instantly become an electronic currency that can be redeemed at all Retailers P
articipating in the coalition program. This means Retailers can avoid the hassle
of producing expensive month-end statements for customers, and customers experi
ence the excitement for instant gratification each time they use their card.
35
2009
Real-time points programs offer POS instant statements that include customers’ cur
rent point total, accrued balance, life time points and up to 360 characters of
instant custom messaging or the printing of an electronic coupon.
Retailer Benefits: Regardless of what type is chosen, an effective electronic lo
yalty program offers Retailers: Automated marketing through the elimination of c
oupons rolls of till tape, manual intervention or back-end processing required.
Ability to target selected customers rather than employing blanket-marketing str
ategies. Ability to reward customers at point-of-sale rather than at another tim
e, avoiding fulfillment costs. Ability to cost effectively run incentive program
s for small transactions and modifies programs regularly. Prevention of fraud an
d over-claiming Rewards tailored to various customer groups (ex., a restaurant’s b
est customers can be automatically identified and given a better or increased re
ward over an infrequent guest) Compatibility with any and all payment methods Ab
ility to operate multiple programs can simultaneously Multiple programs for each
transaction Cross sell opportunities and incentives Ability to change parameter
s based on business cycles Detailed reports of transactions – purchases and redemp
tion Re-loadable electronic gift cards and coupons
36
2009
Importance of studying Effectiveness of Loyalty Program in Readymade Garment Ret
ailing: Take notice of the word "choose." Customers are not entitled to stick to
just one brand for the rest of their purchasing lives. If they feel that the br
and is no longer delivering well, then they can go to another brand. Therefore t
he former brand lost a loyal customer.
With the use of survey, these retailers are updated on how well they are deliver
ing their products. Customers can express whether they are satisfied or not. How
ever, these retailers must know that the results from a survey do not necessaril
y mean that the satisfied customers are loyal, as mentioned in the previous para
graph.
If these retailers manage to retain the customer loyalty programs, then they dem
onstrate high possibilities of customer loyalty to their business. By encouragin
g them to remain active in purchasing the services they provide and the products
they offer, the company is doing well when it comes to customer loyalty.
The models and date that are reflecting on the surveys conducted on how customer
s respond can also predict on how long they will be loyal to your these retailer
s. If they show good results, then that means your front-end marketing program i
s running well and you do not have to wrap it up. It also means that you are mee
ting the customer s expectations. The data that you see right in front of you al
lows you to promote it even further, therefore saving rupee, because you don t h
ave to come up with a new approach. Problem faced during field work: Linguistic
Problem: Even though I have well convincing power, I faced a lot of linguistic p
roblem due to the unawareness of the Gujarati language.
37
2009
Data Analysis and Interpretation
In this study, Five Readymade garment retailers in organized sector were selecte
d for studying effectiveness of loyalty program in readymade garment retailing.
As the purpose of the study was exploration, sample of five was deemed fit as th
ey would represent the population of organized apparel retail outlets in Ahmedab
ad market- a mini metro in western part of India. We surveyed 100 Readymade Garm
ent Customers. The collected data were not easily understandable, so I analyzed
the collected data in a systematic manner and interpreted with simple method.
The analysis and interpretation of the data involves the analyzing of the collec
ted data and interpretation it with pictorial representation such as bar charts,
and pie charts.
Below is the questionnaire which was used to collect data from customers:
Q.1) Gender:
Male (70%) Female (30%)
38
2009
Interpretation: According to this survey, it is clear that male is keener to pre
fer these retailers than woman.
Q.2) Age:
15-25 (60%) 26-35 (24%) 36-45 (16%) 46 Above
Interpretation: Above data shows that young generation is keener to prefer this
branded readymade garment retailer than adults.
Q.3) Occupation:
Business Man (60%) 26-35 (24%) 36-45 (16%) 46 Above
39
2009
Q.4) Yearly Income:
< 1 Lac (24%) 1 lac-2.5 lac (46%) 2.5 lac-5.5 lac (20%) > 5.5 lac (10%)
Interpretation: Survey shows that 24% customers, whose earning are less than 1la
c per year (student who are Dependent on parents), 46% customers, whose earning
are between 1-2.5 lac, 20% customers, whose earning are between 2.5-5.5 lac, and
10% customers, whose earning are more than 5.5 lac prefer these retailers. It s
hows that young generation and middle class as well as upper class are very keen
to prefer these retailers.
Q.5) How frequently do you shop from Branded readymade garment retailers?
5-7 times a month (10%) 3-5 times a month (16%) 1-3 times a month (74%) Other (0
)
40
5-7 times a month 3-5 times a month 1-3 times a month Other 10 16 74 0
2009
HYPOTHESIS TESTING: Step1: State Hypothesis: Ho: Customers use to shop for 1-3 t
imes a month from branded readymade garment retailer. Ha: Customers use to shop
for more than 1-3 times a month from branded readymade garment retailer.
Step 2: Set the Rejection criteria: DF = 4-1 = 3 At alpha .05 and 3 degrees of f
reedom, the critical value from the chi square distribution table is 7.84. Step
3: Compute X2 Chi-Square.
(O-E)2 4 16 χ2 =(O-E)2/E 2.67
Preferen e 5-7 times a month 3-5 times a month 1-3 times a month Other
Observed 10
Expe ted 6
O-E
16
20
-4
16
0.80
74
65
9
81
1.24
0
0
0
0 χ2=4.71
0
Interpretation: As the Chi-square test statisti s value 4.71 is less than the r
iti al value or
tabulated value of 7.84, hen e null hypothesis is a epted and it an be on lud
ed that Customers use to shop for 1-3 times a month from branded readymade garme
nt retailer. Presented by Ashish Kumar and Lal Chand Bhamare, PGPM, IIIrd Sem, I
BMR-A’bad
41
Effe tiveness of Loyalty Program in Readymade Garment Retailing
2009
Q.6) Whi h retailer do you visit for pur hasing garments?
Pantaloon (48%) Westside (24%) Lifestyle (14%) V-Mart (8%) Globus (6%)
Pantaloon Westside Lifestyle V-Mart Globus
48 24 14 8 6
HYPOTHESIS TESTING: Step1: State Hypothesis: Ho: Customers are very keen to pref
er Pantaloon and Lifestyle. Ha: Customer are very keen to prefer Westside, V-Mar
t, and Globus.
Step 2: Set the Reje tion riteria: DF = 5-1 = 4 At alpha .05 and 4 degrees of f
reedom, the riti al value from the hi square distribution table is 9.49. Step
(O-E)2 χ2 =(O-E)2/E
Preferen e
Observed
Expe ted
O-E
42
Pantaloon Westside Lifestyle V-Mart Globus 48 24 14 8 6 55 10 23 8 4 -7 -4 -9 0
2 49 16 81 0 4 0.89 1.60 3.52 0 1 χ2=7.01
2009
iti al value or
ed that Customers are very keen to prefer Pantaloon and Lifestyle.
Q.7) Why do you prefer this garment retailer? (Give Rank)
Good Quality of produ ts (70%) 1st Dis ount S hemes (14%) 2nd Variety of produ t
s (10%) 3th Well Behaved Staff (6%) 4th Ambien e (0%) 5th 0 10 20 30 40 50 60 70
Good Quality Dis ount s hemes Variety of produ ts Well behaved staff Ambien e
70 14 10 6 0
43
2009
HYPOTHESIS TESTING: Step1: State Hypothesis: Ho: Customers prefer these branded
readymade garment be ause of quality and loyalty program a tivities like dis oun
t s hemes. Ha: Customers prefer these readymade garment retailers be ause of var
iety of produ ts and well behaved staff.
(O-E)2 10 -6 0 0 -4 100 36 0 0 16 χ2 =(O-E)2/E 1.67 1.80 0 0 4 χ2=7.47
Preferen e Good Quality Dis ount s hemes Variety of produ ts Well behaved staff
Ambien e
Observed 70 14 10 6 0
Expe ted 60 20 10 6 4
O-E
iti al value or
ed that Customers prefer these branded readymade garment be ause of quality and
loyalty program a tivities like dis ount s hemes.
Q.8) What are they doing to retain ustomers?
44
2009
Membership Card (44%) Greetings on spe ial o asion (34%) Coupons/Vou hers (16%)
Gifts (6%)
Membership ard Greeting on spe ial o asion Coupons/ vou hers Gifts
44 34
16 6
HYPOTHESIS TESTING: Step1: State Hypothesis: Ho: Membership ard and greeting on
spe ial o asion are most preferred. Ha: Coupons and gifts are most preferred.
(O-E)2 -10 100 χ2 =(O-E)2/E 1.81
Preferen e Membership ard Greeting on spe ial
Observed 44
Expe ted 55
O-E
34
30
4
16
0.54
45
o asion Coupons/ vou hers gifts 6 5 1 1 χ2=3.35 0.20 16 20 -4 16 0.80
2009
iti al value or
ed that Membership ard and greeting on spe ial o asion are most preferred.
Q.9) Do you prefer this retailer be ause of the above mentioned loyalty programs
?
Yes (73%) No (27%)
Yes No
73 27
HYPOTHESIS TESTING: Step1: State Hypothesis: Ho: Customer prefers this retailer
be ause of above mentioned loyalty program. Ha: Customer prefers this retailer n
ot be ause of above mentioned loyalty program. Presented by Ashish Kumar and Lal
Chand Bhamare, PGPM, IIIrd Sem, IBMR-A’bad
46
2009
(O-E)2 -7 7 49 49 χ2 =(O-E)2/E 0.61 2.45 χ2=3.06
Preferen e Yes No
Observed 73 27
Expe ted 80 20
O-E
iti al value or
ed that Customer prefers this retailer be ause of above mentioned loyalty progra
m.
Q.10) Have you ever been issued any loyalty ard (Membership ard) or lub ard
on bulk pur hasing from these retailers?
Yes (48%) No (52%)
47
2009
Interpretation: It shows that 48% ustomers have been issued membership ard but
rest ould be issued dis ount s hemes.
Q.11) If yes, Is loyalty program really helpful for you?
Yes (58%) No (42%)
Yes No
58 42
HYPOTHESIS TESTING: Step1: State Hypothesis: Ho: Yes. Ha: No.
(O-E)2 χ2 =(O-E)2/E
Preferen e
Observed
Expe ted
O-E
48
Yes No 58 42 65 35 -7 7 47 47 0.72 1.34 χ2=2.06
2009
iti al value or
ed that Loyalty program is really helpful to ustomer.
Q.12) Would you like to shift from any readymade garment retailer who doesn’t prov
ide loyalty ard to another readymade garment retailer who provides loyalty ard
fa ility?
Yes (36%) No (64%)
Yes No
36 64
HYPOTHESIS TESTING: Step1: State Hypothesis: Ho: Yes. Ha: No.
Step 2: Set the Reje tion riteria: Presented by Ashish Kumar and Lal Chand Bham
are, PGPM, IIIrd Sem, IBMR-A’bad
49
2009
DF = 2-1 = 1 At alpha .05 and 1 degrees of freedom, the riti al value from the
hi square distribution table is 3.84. Step 3: Compute X2 Chi-Square.
(O-E)2 -19 19 361 361 χ2 =(O-E)2/E 6.56 8.02 χ2=14.58
Preferen e Yes No
Observed 36 64
Expe ted 55 45
O-E
Interpretation: As the Chi-square test statisti s value 14.58 is more than the
riti al value
or tabulated value of 3.84, hen e null hypothesis is reje ted and it an be on
luded that ustomer would not like to shift from readymade garment retailer who
doesn’t provide loyalty program be ause here quality of produ t does matter.
Q.13) Retailer with high quality produ ts but not running loyalty program and ot
her retailer with low quality produ ts than first one but running loyalty progra
m then whi h one would be preferred by you?
Retailer with high quality produ ts (84%) Retailer with low quality produ ts (16
%)
50
2009
Interpretation: It again shows that quality of the produ t is major ingredient.
Though ustomer is provided loyalty ard but if produ t is not qualitative than
it is nothing for ustomer.
Q.14) Is there any use of loyalty ard a part from getting dis ount on pur hasin
g and points that are used for future pur hase?
Yes ( 38%) No (62%)
Interpretation: A ording to data, It is found that retailer needs to make usto
mer aware of additional use of this loyalty ard.
Q.15) Would you re ommend these retailers to your friends/relatives?
Yes ( 76%) No (24%)
51
2009
Interpretation: 76% ustomers are ready to re ommend these retailer to their fri
ends/ relatives be ause they are satisfied with their quality of the produ ts an
d loyalty program.
52
2009
Limitation:
1. Readymade Garment Retailers omplain that these loyalty program dis ount good
s to people that are buying their goods anyway, and that the expense of doing th
ese programs rarely pays. 2. The lower pri es and rewards as bribes to manipulat
e ustomer loyalty and pur hasing de isions, or in the ase of infrequent-spende
rs, a means of subsidizing frequent-spenders. 3. Commer ial use of the personal
data olle ted as part of the programs has the potential for abuse. 4. It is hig
hly likely that onsumer pur hases are tra ked and analyzed towards more effi ie
nt marketing and advertising (in fa t, this an be one of the purposes of the lo
yalty ard.) To some, parti ipating in a loyalty program (even with a fake or an
onymous ard) funds a tivities that violate priva y.
53
2009
Findings:
The table below gives Comparative Readymade garment retailers Profile and inform
ation about Loyalty Programs a tivities.
Store name Format Type
Pantaloon
Multibrand/ Departmental store
Lifestyle
Westside
Ex lusive Tata Multibrand/ Departmental store
Globus
V-Mart
Multi-brand/ Hypermarket
Positioning Floor Size Lo ation
Family store
Style & affordability
Enjoying the hange 15,00030,000sq.ft
Family shopping NA
Family Store.
28000 sq. ft
50,000 sq. ft
3,50,000 sq.ft
Goolmohar
Gelops mall,
Is on mall, S. G. Highway, Ahmedabad
Gelops mall, S.G. Highway, Ahmedabad
Law Garden, Ahmedabad
mall, Setellite, S.G. Highway, Ahmedabad (posh lo ality) Ahmedabad
ategories
Apparel & a essories for men, women & hildren

Apparel & a essories for men, women, Footwear.
Stylized lothes, footwear & a essories
Apparel for man an Woman.
Apparels for men, women & kids, Food & Home Produ ts, Health & Wellness, Lifesty
le Produ ts, Footwear and Travel A essories for men, women and
54
2009
Kids.
Targeted Customer
Upper middle and Upper lass
Lower middle and Upper middle.
Lower middle and Upper middle lass.
Lower Middle and
For ever age, everybody as
Upper middle. it is Hypermarket NA NA NA NA NA NA
#of SKUs
45000
34 ategories 94 Rs 800
NA NA Rs199-1999
#of suppliers 20-25 Average billing ustomer Average footfalls
1000 on weekday & 1500 to 2000 on Weekends, holidays. Rs.1800
per
1200 in week days & 6000 during week end.
25-45 per hour
NA
60,000 ea h day.
Loyalty Program offered
Green Card, ICICI bank entral redit ard, gift vou her, shopping festival, PRI
L spe ial offer.
The Inner Cir le
Club West
Privilege Card, Gold Card, Silver Card, Globus Gift Vou hers
Gift Vou her
Both mulitbrand and ex lusive use loyalty ards to reward loyal users and en our
age them to visit the store often and buy more by offering wide range for men, w
omen and hildren. Some store also offer home furnishings, a essories and footw
ear, thereby providing onvenien e for one stop shopping. Examining the various
terms and onditions of loyalty programme revealed that some rewards were quite
omplex and onfusing. e.g. lifestyle’s ard- Inner ir le.
55
2009
The onditions to be fulfilled are not very lear to a ard member. For example,
if any other promotions are prevalent then pur hase made during those promotion
s would entitle for the ard reward points or not was not very lear.
From the above table whi h gives omparative pi ture of various readymade garmen
t retailing and manner of announ ement, evaluation et ., it is lear that these
retailers engage in end of season sale. This reinfor es the fa t that seasonalit
y affe ts apparel se tor and hen e it be omes riti al for a retailer to lear o
ff the sto ks at the end of season otherwise he may have to in ur substantial in
ventory arrying osts, allo ate s ar e shelf spa e and out of fashion apparels
maybe worthless- may remain unsold forever! Thus sto k learan e seems to be ver
y important obje tive for apparel retailer in using end of season sale twi e in
a year wherein dis ount given is up to 50% of the MRP(Maximum retail pri e).
All the stores used in store media to announ e promotions. However use of mass m
edia and ele troni media varied a ross the sample under study. Use of only inst
ore media would restri t the announ ement to those who walk into the store. It
an be assumed that only loyal/ frequent visitor would know about the offers. Whe
reas variety of media used would enhan e footfalls to the store and trigger word
of mouth.
In terms of type of onsumer sales promotions, almost everyone used dis ount, o
upon programmes and few used lu ky draws, ontests, gift, buy one get one free t
ype of promotions. Only Pantaloon had a unique s heme of an ex hange offer whi h
is normally prevalent in durable goods industry. Relating it to a ause donatin
g old pairs olle ted in ex hange s heme to harity would enhan e the brand valu
e among the onsumers.
56
2009
Suggestions:
Loyalty ard programmes require good administrative support and good database re
ords and data mining abilities to exploit to the fullest.
Too frequent use of rewarding may evoke indifferent attitude among onsumers or
shape deal to deal buying. A manager needs to be aware of these problems and hav
e to plan strategies to over ome them. Mangers also need to plan su h a tivities
whi h will synergise ompany’s positioning and advertising ampaign efforts rathe
r than erode brand image or equity.
Exe ution of these a tivities also require proper oordination of selling effort
, availability of promoted mer handise and managing produ t line pri ing.
57
2009
Con lusion:
From the findings it is apparent that use of loyalty program is quite widespread
and variety of a tivities are used to address variety of obje tives; lear off
old sto k, load the onsumer, en ourage brand swit hing, to reward the loyal use
r, to reate ex itement at point of pur hase et . The manager in harge of appar
el retail operations need to understand impa t of various types of ustomer need
. Finally it is lear that loyalty program is really effe tive and is one of the
best drivers for the retailer. It enable retailer to se ure their pla e in su h
a lutter and ompetitive market as so many foreign as well as lo al players ar
e plunging into industry. Loyalty ard programmes require good administrative su
pport and good database re ords and data mining abilities to exploit to the full
est.
Future outlook: Apparel se tor is likely to grow with growing Indian e onomy. Ma
ny multinational players either have already plunged into Indian market or plan
to do so in apparel se tor. They will bring many promotional pra ti es and loyal
ty a tivities whi h they have been following in developed markets whi h will in
rease the use of sales promotion a tivities even further. Indian brands will hav
e to withstand turbulent onditions and learn to survive. If the role of su h a
tivities is understood well it may help any player a long way to survive and gro
w.
58
2009
Bibliography:
1. Marketing Management By Philip Kotler, 2. The Prin iples Of Marketing Managem
ent By Philip Kotler And Koshy, 3. Resear h Methodology By Pearson Publi ation,
4. Http://Apparel.Indiamart.Com/Lib/Textile/Textile07301998.Html 5. Global Loyal
ty X-Change Published In Transa tion Trends Magazine 2003 6. Www.Pra ti ale omme
r e.Com 7. Http://Www.Resear handmarkets.Com/Reports/651166/ 8. Www.Indianretail
s.Com 9. Http://Www.Lifestylestores.Com/Pages/Apparel.Htm 10. Http://En.Wikipedi
a.Org/Wiki/Loyalty_Program 11. Www.Mywestside.Com/Pressreleases.Aspx 12. Www.Glo
bus.In/ 13. Www.Vmart.Co.In/ 14. Www.Pantaloon.Com/Fashion-Pantaloon.Asp
59

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