effectiveness of layalty program in readymade garment retailing

Effectiveness of Loyalty Program in Readymade Garment Retailing

Presented by Ashish Kumar and Lal Chand Bhamare, PGPM, IIIrd Sem, IBMR-A’bad

2009

1



2009

2



2009

3

Certificate

This is to certify that Mr. Ashish Kumar (A-25) and Lal Chand Bhamare (A-

72), bona fide student of III-Sem PGPM bearing in INSTITUTE OF BUSINESS

MANAGEMENT & RESEARCH, Ahmedabad has carried out a project Report

entitled a study on ―Effectiveness of Loyalty Program in Readymade Garment

Retailing‖ under my supervision & guidance. The project report prepared by him/her

is original to the best of my knowledge.

Date: Signature

Place: R.K. Balayan

(Dean & Director)



2009

4

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

student by supplement to the theoretical study of business management in general.

Industrial training helps to gain real life knowledge about the industrial environment

and business practices. The PGPM programme provides student with a fundamental

knowledge of business and organizational functions and activities, as well as an

exposure to strategic thinking of management.

In every professional course, training is an important factor. Professors give us

theoretical knowledge of various subjects in the college but we are practically exposed

of such subjects when we get the training in the organization. It is only the training

through which I come to know that what an industry is and how it works. I can learn

about various departmental operations being performed in the 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

the training for 45 days in a company and then prepare a project report on the same

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 knowledge

and the practically in the real life.

In todays globalize world, where cut-throat competition is prevailing in the

market, theoretical knowledge is not sufficient. Beside this one need to have practical

knowledge, which would help an individual in his/her carrier activities and it is true

that ―Experience is best teacher‖.



2009

5

Acknowledgement

With immense pleasure, I would like to present this project report for IBMR-

Ahmedabad. It has been an enriching experience for me to undergo my PGPM project,

which 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 thanks 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

whenever needed.

Last but not least, I would like to record my deepest sense of gratitude to my

friends for their support and constant encouragement.

However, I accept the sole responsibility for any possible error of omission and

would be extremely grateful to the readers of this project report if they bring such

mistakes to my notice.

Date: 10th Dec, 2009 Ashish Kumar (9924354216)

Place: Ahmedabad Lal Chand Bhamare (A-72)

IBMR, Ahmedabad



2009

6

Contents

Sr. No. Contents PAGE

1. Executive Summary

2. 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 Program 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. Research Methodology,

5. Literature Review (Effectiveness of Loyalty Program in Readymade Garment

Retailing)

1. Loyalty Program,

2. Customer Information is Key,

3. What Customer Expects,

4. Types of Rewards,

5. Types of Loyalty Programs,

6. Retailer Benefits,

7. Importance of studying Effectiveness of Loyalty Program in

Readymade Garment Retailing,

8. Problem faced during field work.

7. Data Analysis

8. Limitations

9. Findings

10. Suggestions

11. Conclusion and Future Outlook

12. Bibliography



2009

7

Executive Summary:

Indian organized retail industry is poised for growth. Readymad Garment sector

in particular has a great opportunity with alignment of Indian economy to globalised

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

retailers in Ahmedabad market and compares them on various dimensions. It

presents major findings and provides insights on consumer loyal buying behavior.

Lifestyle, for instance, has a loyalty programme called `The Inner Circle', while

Pantaloons offers a `Green Card' Rewards programmes, Westside has `Club West' to

woo the customers. Managerial challenges are posed in planning and implementing

such activities. The paper concludes with future bright outlook.



2009

8

Introduction to Indian Readymade Garment Industry:

The Garment Industry of India is an Rs one trillion industry. Almost 33 % of its

knitwear production and about 20% of its woven-garment production, both by volume,

enters export markets. Overall about 25 % of the volume of its garment production

goes into export markets, leaving 75 % for domestic consumption. The Industry

covers over one lakh units and employs about 6 million workers, both directly and

indirectly in almost equal proportion. The indirect portion helps to sustain the direct

production sector in the shape of items associated with the garment industry

production including 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,

concentrating chiefly on exports. These are usually limited Companies while the rest

are proprietary or partnership Companies. Geographically, men's garments are largely

produced in western and southern India while production of ladies garments

predominates in North India. Eastern section of India specializes in children garments

where in fact, these took their birth.Fibre-wise, 80% of the production is of cotton

garments, 15% of synthetic/mixed garments and the rest of silk and wool garments.

The industry manufactures over a 100 different types of garments for men, women and

children. These includes overcoats/raincoats, suits, ensembles, jackets, dresses, skirts,

trousers, shirts, blouses, inner-garments, T-shirts, jerseys/pullovers, babies garments

as well as accessories like shawls/scarves, 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 overheads and manufacturer's profit. Retail trade in

India is spread over department stores, hyper markets/discount stores and specialty

stores. A number of shopping 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 cities and the rural area.



2009

9

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

India’s leading business houses with multiple

businesses spanning across the consumption

space. Pantaloon Retail is the flagship

enterprise of the Future Group. Pantaloon Retail

(India) Limited has spread across various

businesses and cities in India.

Pantaloon owns multiple retail formats and is able to cater to a large section of

the society. The company has over 140 stores across 32 cities in India and 14000

employees. The headquarters of the company are situated at Mumbai. The

organization 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

convenience and hygiene. Food Bazaar, food and grocery chain, and Central Mall

located at various Metros are other important parts of the group.

Others include Collection (home improvement products), E-zone (consumer

electronics), Depot (books, music, stationery and gifts), Blue Sky (fashion accessories)



2009

10

and Shoe Factory (footwear). The company has also launched a retailing venture

known 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

Year' Award.

Competitors: Westside, Globus, Lifestyle, V-Mart, etc.

Consumers: According to my observation at Pantaloon store, Gulmohar mall, A’bad

targets Upper middle and upper class people.



2009

11

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,

Ludhiana, Lucknow, Mumbai, Mysore, Nagpur, Pune, Rajkot, Surat, Vadodara and

Jammu. The company hopes to expand rapidly with similar format stores that offer a

fine balance between style and price retailing.



2009

12

Competitors: Pantaloon, Globus, Lifestyle, V-Mart, etc.

Consumers: Middle class, and upper middle class.



2009

13

Lifestyle International Pvt. Ltd.

Company:

Lifestyle International (P) Ltd is part of the

Landmark Group, a Dubai – based retail chain.

With over 30 years’ experience in retailing, the

Group has become one of the foremost retailers

in the Gulf.

Positioned as a trendy, youthful and vibrant

brand that offers customers a wide variety of

merchandise at an exceptional value 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 across Ahmedabad, Banga-

lore, Chennai, Hyderabad, Jaipur, Mumbai, Pune, New Delhi, Noida, and Gurgaon.



2009

14

Competitors: Westside, Globus, Pantaloon,

V-Mart, etc.

Consumers: According to my observation

at Lifestyle, Galops mall, A’bad, Upper

middle and upper class people are being

targeted.



2009

15

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 outlets 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

concept 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 men,

women & kids, Food & Home products, Health & Wellness, Lifestyle Products,

Footwear and Travel Accessories for men, women and kids.

The ―Sabse Sasta, Sabse Achcha‖ Story.

V Mart has positioned itself in the ―Value for Money‖ category thus providing

customers with the most economic and best of quality products. The Sabse Sasta,

Sabse Achcha theme says every thing about V Mart, the philosophy and the values.

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 from.



2009

16

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

middle.



2009

17

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 second

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 & seventh 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 May 2008, Globus

has opened its 24th Store in Nagpur and the

journey continues...

Competitors: Westside, Pantaloon,

-Lifestyle, V-Mart, etc.

http://www.rraheja.com/home.htm



2009

18

Consumers: According to my observation at Globus store, Galops, mall, A’bad,

Lower and upper middle class people are being targeted.



2009

19

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 consumer 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

maintaining cordial relationship.

Human Capital – attracting the most talented pool from best business schools

across India.

Shopping Experience is customized according to store format. Like Big Bazaar

has a Indian bazaar like appeal whereas Central which is into lifestyle segment

gives altogether different experience.

Understanding of Fashion – After studying Indian Markets excessively and then

delivering the product. For example: certain colors have more influence in a

particular region, so merchandise would have more of those colors.

Unique Discounting/ Markdown - Special discounting during Independence and

Republic days which attracts more number of customers than any other stores.

Private label brands like John Miller, Bare, UMM etc considered as national

brand and performing well.

Trained customer relationship agents to guide customers.

Tie-ups with many national as well as international brands – like liliput,

Weakness:

Shrinkage rates are higher than industry norms.

Store renovations of older stores not done.

Low employee retention levels at shop floor level due to better pay package by

competitors.

Floor level Customer Relations Executives not having proper product, store etc

knowledge due to lack of proper training.

Loyalty program of competitors is more effective due to better scheme and

merchandise.

Merchandise and product focus not consistent and clear.



2009

20

Opportunities:

Geographical Expansion:

Untapped market in terms of tier II

and tier 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 brands.

More effective online shopping for

garments.

Custom Tailoring business

untapped.

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 been reduced significantly.

Competitive rivalry in the industry like Big Bazaar is facing competition from

Fashion Yatra (Trent Ltd), HyperCity (Shoppers Stop), Max ( Landmark group),

Megamart (Arvind). Pantaloon & Central is facing competition from Westside

(Trent), Shoppers Stop, Relaiance Trends, Lifestyle, Globus etc.

Foreign players like Carrefour, Tesco, Walmart lined for their Indian operations.

Increasing cost of raw material, power and transportation.

Delay in store delivery – 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 slowed down.



2009

21

Westside

Strength:

It is growing at the faster pace

Has good brand name of TATA’s.

It has many outlets 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%.

Attractive 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 shop for each & everything for which he goes to a market

except groceries.

Locational advantage- All Westside stores are located in prime locations of

the city like Shivajinagar, Camp etc.

Weakness:

Westside has not yet trapped the whole market- rural market is still

Untapped. Not much product range for middle class people

Facing problems due to political environment-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 turns and stock availability

No involvement in food retailing business.



2009

22

Opportunities:

Huge untapped market

Rising disposable income- Increase in number of people in earner category,

Women earning

Urbanization-Changing consumer habits and lifestyles as the disposable

Income is increasing per family.

Threats:

Competition from organized retail players which are in market and

emerging like Reliance, Shopper’s stop, Wal-Mart –Bharti etc.

Competition from local retailers.



2009

23

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 management.

Good Quality of product.

Availability of wide range of

Varieties.

Availability 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 business.



2009

24

Increasing productivity

Scope of strategic alliance/ Merge.

Threats:

Cut throat competition

Entry of local brand with good quality.



2009

25

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 product.

Opportunity:

Domestic market too presents immense opportunities with spending on the rise

and organize retail sector.

Opportunity to capture international market.



2009

26

Introduction to the topic:

Loyalty programs are structured marketing efforts that reward, and therefore

encourage, loyal buying behavior — behavior which is potentially of benefit to the

firm.[1]

In marketing generally and in retailing more specifically, a loyalty card, rewards

card, points card, advantage card, or club card is a plastic or paper card, visually

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 business model. In the

United Kingdom it is typically called a loyalty card, in Canada a rewards card or a

points card, and in the United States either a discount card, a club card or a rewards

card.

A readymade garment retail establishment or a retail group may issue a loyalty

card to a consumer who can then use it as a form of identification when dealing with

that retailer. By presenting the card, the purchaser is typically entitled to 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 implementing 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, such as

name and address. Application forms usually entail agreements by the store

concerning customer privacy, typically non-disclosure (by the store) of non-aggregate

data about customers. The store — one might expect — uses aggregate data internally

(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 beer, or whether she is

a vegetarian.

Where a customer has provided sufficient identifying information, the loyalty

card may also be used to access such information to expedite verification during

receipt of cheques or dispensing of medical prescription preparations, or for other

membership privileges (e.g., access to a club lounge in airports, using a frequent

flyer card).

http://en.wikipedia.org/wiki/Loyalty_program#cite_note-0

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

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

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

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

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

http://en.wikipedia.org/wiki/Two-part_tariff

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

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

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

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



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

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

http://en.wikipedia.org/wiki/Frequent-flyer_program





2009

27

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 satisfied 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 an emotional bind with the brand not

just a rational preference. The result is highly customer loyalty. Hence an attempt is

made to create loyal customer by Readymade Garment Retailers. Readymade Garment

Retailers carry out some activities know 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

Retailer. 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 activities. This

customer loyalty decides the fate of the product and organization. There is various

factors influence to the customer loyalty. These factors are,

Post purchase behavior, Reputation, Product availability, Branding, and

convenient etc.



2009

28

Research Methodology

The study of Effectiveness of Loyalty Program in Readymade Garment

Retailing is mainly concerned with Loyalty of consumer towards Readymade

Garment Retailing. In the study, we used survey method to collect various data

regarding effectiveness of loyalty program which is a primary source of data and we

also used secondary data method to prepare this project report. Hence various data

and methodology is considered in finding out effectiveness of loyalty program. The

main data sources are:

Primary Data:

The primary data refers to original information gathered for a specific 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 basis of survey method with the help of

questionnaires, and interviews, personal observation, 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:



2009

29

It refers to the individuals who are to be surveyed in the study and it is the

customer 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 study 100 people

were surveyed and responses drawn.

Secondary Data:

The secondary data can be defined as data collected by son\me one else for

purposes other than solving problem being investigation and previously meant for

another purpose. A secondary data is collected from the books, periodical journals,

magazines, papers, company records, internet and other publication.



2009

30

Literature Review:

Loyalty Programs:

Building Customer Loyalty to Build Profits

“Loyalty is one of the 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 marketing

strategy to build long-term relationships with customers, allocate marketing 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

relationship based on respect, trust and commitment – a relationship in which the

customer feels all-important. A successful loyalty program builds and nurtures such a

relationship by accomplishing two critical tasks. The first is to gather information that

will help retailers understand their customers’ tastes, needs and expectations. The

second is to offer recognition and rewards (loyalty card, rewards card, points card,

advantage card, or club card) that are relevant to their customers as a reward for

their loyalty – and as a trade for the personal and transactional data that starts the

loyalty cycle and keeps it going. By tracking members’ transactions, companies can

identify the various segments of their customer base to create strategies that keep their

customers coming back for more.



2009

31

Customer Information is Key:

Effective loyalty programs generate incremental spending – more rupee spent,

more frequently, from customers whose needs and expectations are understood and

met. With 80% of retailers’ business being generated from as little as 20% of their

customers, identifying and understanding their needs and expectations of this 20% is

crucial. By gathering customer information, retailer can make intelligent marketing

decisions that will keep their best and most profitable customers more loyal. They can

also leverage this thinking to increase 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 about

customer purchase behavior, and provide access to rich database reports and analysis

that can be used to increase the effectiveness of retailers’ marketing campaigns.

What Customers Expect:

Today’s consumers are more savvy and sophisticated than ever. They expect

loyalty programs to offer:

Easy participation

Instant rewards

Flexible rewards

Fast accumulation of rewards

Rewards claimed at any participating

establishment

Special offers

Instant win opportunities



2009

32

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

benefits and soft benefits. Hard benefits appeal to the rational component of customer

loyalty with "tangible‖ rewards such as free travel. Hard benefits compel customers to

immediately take advantage of an extraordinary opportunity that may not last long.

Conversely, soft benefits appeal to the emotional component of customer loyalty and

are slower to reward. Discounts are considered soft benefits, as they require the

member to spend in order to receive and do not differentiate retailers from the

competition. Focusing the member's attention on price and not on the issue of a

compelling reward, soft benefits are equally important to Retailers’ most valuable

customers, whose loyalty demands legitimate evidence of their special status. Special

status means special treatment, special deals, special access and special events -

whatever it takes to reinforce the sense of importance of a retailer’s top-tier, high-

value customers. Defining soft benefits sets apart your relationship with your best

customers, offering experiences unique to your product or service and unavailable to

non-members.

Types of Loyalty Programs:



2009

33

Mid-market retailers or groups of retailers owned by a parent company will

benefit from using a program that will enable them to increase their customer

transactions and retention through membership card, points programs, electronic

couponing, 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 programs 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 Calendar’s in the restaurant industry. In a

closed-loop program, points are exchanged exclusively within participating outlets,

greatly reducing the cost base of issued and outstanding points.

Closed-loop programs require a private-label or in-house co-branded credit card to

enable transactions.

Using ―Private Label‖ cards, national, regional and small to mid size retailers can

operate their own ―closed loop‖ loyalty programs. Generally, cardholders are instantly

enrolled at the participating retailers’ POS and in all cases a co-branded or generic

private label card is issued to the party enrolling.

o How “Closed-Loop”, Private Label Programs Work:

―Private Label‖ programs are executed through the following steps:

1) Customer presents 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 certified terminal or electronic cash register

system, the payment processing and customer transaction data are captured at the

loyalty program’s host.



2009

34

3) The Retailer’s financial institution handled credit/debit authorization as normal.

There is no effect to the Retailer’s existing banking or processing relationship.

4) The Loyalty Host recognizes loyalty transaction through encoded information and

processes it accordingly. The customer has the option to redeem earned rewards 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 maintains the program’s Data Warehouse and can produce specialized

database marketing reports for the Retailer based on their requirements.

7) Retailers can disseminate precise information and implement innovative new

marketing programs or judge the effectiveness of existing ones. Specific customer

behavioral data opens the 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 promotions,

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 national or regional chains (category

killers) that do not compete for each other’s customers, but share similar demographic

and psychographic profiles.



2009

35

An open program consists of a group of participating Retailers that allow

customers – cardholders –to earn and redeem points at each participating Retailer

within the 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

Gap, 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 chains. In

an open or cross-sell program, revenues are generated from membership points

(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

customers 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, etc.).

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

Participating in the coalition program. This means Retailers can avoid the hassle of

producing expensive month-end statements for customers, and customers experience

the excitement for instant gratification each time they use their card.



2009

36

Real-time points programs offer POS instant statements that include customers’

current 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 loyalty program offers

Retailers:

Automated marketing through the elimination of coupons rolls of till tape,

manual intervention or back-end processing required.

Ability to target selected customers rather than employing blanket-marketing

strategies.

Ability to reward customers at point-of-sale rather than at another time,

avoiding fulfillment costs.

Ability to cost effectively run incentive programs for small transactions and

modifies programs regularly.

Prevention of fraud and over-claiming

Rewards tailored to various customer groups (ex., a restaurant’s best customers

can be automatically identified and given a better or increased reward over an

infrequent guest)

Compatibility with any and all payment methods

Ability to operate multiple programs can simultaneously

Multiple programs for each transaction

Cross sell opportunities and incentives

Ability to change parameters based on business cycles

Detailed reports of transactions – purchases and redemption

Re-loadable electronic gift cards and coupons



2009

37

Importance of studying Effectiveness of Loyalty Program in Readymade

Garment Retailing:

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 brand is no longer

delivering well, then they can go to another brand. Therefore the former brand lost a

loyal customer.

With the use of survey, these retailers are updated on how well they are

delivering their products. Customers can express whether they are satisfied or not.

However, these retailers must know that the results from a survey do not necessarily

mean that the satisfied customers are loyal, as mentioned in the previous paragraph.

If these retailers manage to retain the customer loyalty programs, then they

demonstrate high possibilities of customer loyalty to their business. By encouraging

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

customers respond can also predict on how long they will be loyal to your these

retailers. If they show good results, then that means your front-end marketing program

is running well and you do not have to wrap it up. It also means that you are meeting

the customer's expectations. The data that you see right in front of you allows you to

promote it even further, therefore saving rupee, because you don't have 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 problem due to the unawareness of the Gujarati language.



2009

38

Data Analysis and Interpretation

In this study, Five Readymade garment retailers in organized sector were

selected 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 they

would represent the population of organized apparel retail outlets in Ahmedabad

market- a mini metro in western part of India. We surveyed 100 Readymade Garment

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

collected 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%)



2009

39

Interpretation: According to this survey, it is clear that male is keener to prefer

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



2009

40

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

1lac 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 shows

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%)



Other (0)



2009

41

5-7 times a month 10



Other 0

HYPOTHESIS TESTING:

Step1: State Hypothesis:

Ho: Customers use to shop for 1-3 times 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 freedom, the critical value from the chi square distribution

table is 7.84.

Step 3: Compute X2

Chi-Square.

Preference Observed Expected O-E (O-E)2 χ2

=(O-E)2/E

5-7 times a

month

10 6 4 16 2.67

3-5 times a

month

16 20 -4 16 0.80

1-3 times a

month

74 65 9 81 1.24

Other 0 0 0 0 0

χ2=4.71

Interpretation: As the Chi-square test statistics value 4.71 is less than the critical value or

tabulated value of 7.84, hence null hypothesis is accepted and it can be concluded that Customers use

to shop for 1-3 times a month from branded readymade garment retailer.



2009

42

Q.6) Which retailer do you visit for purchasing garments?

Pantaloon (48%)

Westside (24%)

Lifestyle (14%)

V-Mart (8%)

Globus (6%)

Pantaloon 48

Westside 24

Lifestyle 14

V-Mart 8

Globus 6

HYPOTHESIS TESTING:


Ho: Customers are very keen to prefer Pantaloon and Lifestyle.

Ha: Customer are very keen to prefer Westside, V-Mart, and Globus.


DF = 5-1 = 4


table is 9.49.

Step 3: Compute X2

Chi-Square.


=(O-E)2/E



2009

43

Pantaloon 48 55 -7 49 0.89

Westside 24 10 -4 16 1.60

Lifestyle 14 23 -9 81 3.52

V-Mart 8 8 0 0 0

Globus 6 4 2 4 1

χ2=7.01


tabulated value of 9.49, hence null hypothesis is accepted and it can be concluded that Customers are

very keen to prefer Pantaloon and Lifestyle.

Q.7) Why do you prefer this garment retailer? (Give Rank)

0 10 20 30 40 50 60 70

Ambience (0%) 5th

Well Behaved Staff (6%) 4th

Variety of products (10%) 3th

Discount Schemes (14%) 2nd

Good Quality of products (70%) 1st

Good Quality 70

Discount schemes 14

Variety of products 10

Well behaved staff 6

Ambience 0



2009

44

HYPOTHESIS TESTING:


Ho: Customers prefer these branded readymade garment because of quality and loyalty

program activities like discount schemes.

Ha: Customers prefer these readymade garment retailers because of variety of products and

well behaved staff.


DF = 5-1 = 4


table is 9.49.

Step 3: Compute X2

Chi-Square.


=(O-E)2/E

Good Quality 70 60 10 100 1.67

Discount schemes 14 20 -6 36 1.80

Variety of products 10 10 0 0 0

Well behaved staff 6 6 0 0 0

Ambience 0 4 -4 16 4

χ2=7.47


tabulated value of 9.49, hence null hypothesis is accepted and it can be concluded that Customers

prefer these branded readymade garment because of quality and loyalty program activities like

discount schemes.

Q.8) What are they doing to retain customers?



2009

45

Membership Card (44%)

Greetings on specialoccasion (34%)

Coupons/Vouchers (16%)

Gifts (6%)

Membership card 44

Greeting on special

occasion

34

Coupons/ vouchers 16

Gifts 6

HYPOTHESIS TESTING:


Ho: Membership card and greeting on special occasion are most preferred.

Ha: Coupons and gifts are most preferred.


DF = 4-1 = 3


table is 7.84.

Step 3: Compute X2

Chi-Square.


=(O-E)2/E

Membership

card

44 55 -10 100 1.81

Greeting on

special

34 30 4 16 0.54



2009

46

occasion

Coupons/

vouchers

16 20 -4 16 0.80

gifts 6 5 1 1 0.20

χ2=3.35


tabulated value of 7.84, hence null hypothesis is accepted and it can be concluded that Membership

card and greeting on special occasion are most preferred.

Q.9) Do you prefer this retailer because of the above mentioned loyalty

programs?

Yes (73%)

No (27%)

Yes 73

No 27

HYPOTHESIS TESTING:


Ho: Customer prefers this retailer because of above mentioned loyalty program.

Ha: Customer prefers this retailer not because of above mentioned loyalty program.



2009

47


DF = 2-1 = 1


table is 3.84.

Step 3: Compute X2

Chi-Square.


=(O-E)2/E

Yes 73 80 -7 49 0.61

No 27 20 7 49 2.45

χ2=3.06


tabulated value of 3.84, hence null hypothesis is accepted and it can be concluded that Customer

prefers this retailer because of above mentioned loyalty program.

Q.10) Have you ever been issued any loyalty card (Membership card) or club

card on bulk purchasing from these retailers?

Yes (48%)

No (52%)



2009

48

Interpretation: It shows that 48% customers have been issued membership

card but rest could be issued discount schemes.

Q.11) If yes, Is loyalty program really helpful for you?

Yes (58%)

No (42%)

Yes 58

No 42

HYPOTHESIS TESTING:


Ho: Yes.

Ha: No.


DF = 2-1 = 1


table is 3.84.

Step 3: Compute X2

Chi-Square.

Preference Observed Expected O-E (O-E)2 χ

2 =(O-E)

2/E



2009

49

Yes 58 65 -7 47 0.72

No 42 35 7 47 1.34

χ2=2.06


tabulated value of 3.84, hence null hypothesis is accepted and it can be concluded that Loyalty

program is really helpful to customer.

Q.12) Would you like to shift from any readymade garment retailer who doesn’t

provide loyalty card to another readymade garment retailer who provides loyalty

card facility?

Yes (36%)

No (64%)

Yes 36

No 64

HYPOTHESIS TESTING:


Ho: Yes.

Ha: No.




2009

50

DF = 2-1 = 1


table is 3.84.

Step 3: Compute X2

Chi-Square.


=(O-E)2/E

Yes 36 55 -19 361 6.56

No 64 45 19 361 8.02

χ2=14.58

Interpretation: As the Chi-square test statistics value 14.58 is more than the critical value

or tabulated value of 3.84, hence null hypothesis is rejected and it can be concluded that customer

would not like to shift from readymade garment retailer who doesn’t provide loyalty program

because here quality of product does matter.

Q.13) Retailer with high quality products but not running loyalty program and

other retailer with low quality products than first one but running loyalty

program then which one would be preferred by you?

Retailer with high qualityproducts (84%)

Retailer with low qualityproducts (16%)



2009

51

Interpretation: It again shows that quality of the product is major ingredient.

Though customer is provided loyalty card but if product is not qualitative than it is

nothing for customer.

Q.14) Is there any use of loyalty card a part from getting discount on purchasing

and points that are used for future purchase?

Yes ( 38%)

No (62%)

Interpretation: According to data, It is found that retailer needs to make

customer aware of additional use of this loyalty card.

Q.15) Would you recommend these retailers to your friends/relatives?

Yes ( 76%)

No (24%)



2009

52

Interpretation: 76% customers are ready to recommend these retailer to their

friends/ relatives because they are satisfied with their quality of the products and

loyalty program.



2009

53

Limitation:

1. Readymade Garment Retailers complain that these loyalty program discount

goods to people that are buying their goods anyway, and that the expense of

doing these programs rarely pays.

2. The lower prices and rewards as bribes to manipulate customer loyalty and

purchasing decisions, or in the case of infrequent-spenders, a means

of subsidizing frequent-spenders.

3. Commercial use of the personal data collected as part of the programs has the

potential for abuse.

4. It is highly likely that consumer purchases are tracked and analyzed towards

more efficient marketing and advertising (in fact, this can be one of the

purposes of the loyalty card.) To some, participating in a loyalty program (even

with a fake or anonymous card) funds activities that violate privacy.

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

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

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

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



2009

54

Findings:

The table below gives Comparative Readymade garment retailers Profile and

information about Loyalty Programs activities.

Store name Pantaloon Lifestyle Westside Globus V-Mart

Format

Type

Multibrand/

Departmental

store

Multibrand/

Departmental

store

Exclusive Tata

Multibrand/

Departmental

store

Multibrand/

Departmental

store

Multi-brand/

Hypermarket

Positioning Family store Style &

affordability

Enjoying the

change

Family

shopping

Family Store.

Floor Size 28000 sq. ft 50,000 sq. ft 15,000-

30,000sq.ft

NA 3,50,000 sq.ft

Location Goolmohar

mall, Setellite,

Ahmedabad

(posh locality)

Gelops mall,

S.G. Highway,

Ahmedabad

Iscon mall,

S. G.

Highway,

Ahmedabad

Gelops mall,

S.G.

Highway,

Ahmedabad

Law Garden,

Ahmedabad

categories Apparel &

accessories

for men,

women &

children

Apparel &

accessories for

men,

women,

Footwear.

Stylized

clothes,

footwear &

accessories

Apparel for

man an

Woman.

Apparels for

men, women

& kids, Food

& Home

Products,

Health &

Wellness,

Lifestyle

Products,

Footwear and

Travel

Accessories

for men,

women and



2009

55

Kids.

Targeted

Customer

Upper middle

and

Upper class

Lower middle

and

Upper middle.

Lower middle

and

Upper middle

class.

Lower Middle

and

Upper middle.

For ever age,

everybody as

it is

Hypermarket

#of SKUs 45000 34 categories NA NA NA

#of suppliers 20-25 94 NA NA NA

Average

billing per

customer

Rs.1800 Rs 800 Rs199-1999 NA NA

Average

footfalls

1000 on

weekday &

1500 to

2000 on

Weekends,

holidays.

1200 in

week days &

6000 during

week end.

25-45 per

hour

NA 60,000 each

day.

Loyalty

Program

offered

Green Card,

ICICI bank

central credit

card,

gift voucher,

shopping

festival, PRIL

special offer.

The Inner

Circle

Club West Privilege

Card, Gold

Card, Silver

Card, Globus

Gift Vouchers

Gift Voucher

Both mulitbrand and exclusive use loyalty cards to reward loyal users and

encourage them to visit the store often and buy more by offering wide range for

men, women and children. Some store also offer home furnishings, accessories

and footwear, thereby providing convenience for one stop shopping. Examining

the various terms and conditions of loyalty programme revealed that some

rewards were quite complex and confusing. e.g. lifestyle’s card- Inner circle.



2009

56

The conditions to be fulfilled are not very clear to a card member. For example,

if any other promotions are prevalent then purchase made during those

promotions would entitle for the card reward points or not was not very clear.

From the above table which gives comparative picture of various readymade

garment retailing and manner of announcement, evaluation etc., it is clear that

these retailers engage in end of season sale. This reinforces the fact that

seasonality affects apparel sector and hence it becomes critical for a retailer to

clear off the stocks at the end of season otherwise he may have to incur

substantial inventory carrying costs, allocate scarce shelf space and out of

fashion apparels maybe worthless- may remain unsold forever! Thus stock

clearance seems to be very important objective for apparel retailer in using end

of season sale twice in a year wherein discount given is up to 50% of the

MRP(Maximum retail price).

All the stores used in store media to announce promotions. However use of

mass media and electronic media varied across the sample under study. Use of

only instore media would restrict the announcement to those who walk into the

store. It can be assumed that only loyal/ frequent visitor would know about the

offers. Whereas variety of media used would enhance footfalls to the store and

trigger word of mouth.

In terms of type of consumer sales promotions, almost everyone used discount,

coupon programmes and few used lucky draws, contests, gift, buy one get one

free type of promotions. Only Pantaloon had a unique scheme of an exchange

offer which is normally prevalent in durable goods industry. Relating it to a

cause donating old pairs collected in exchange scheme to charity would enhance

the brand value among the consumers.



2009

57

Suggestions:

Loyalty card programmes require good administrative support and good

database records and data mining abilities to exploit to the fullest.

Too frequent use of rewarding may evoke indifferent attitude among

consumers or shape deal to deal buying. A manager needs to be aware of

these problems and have to plan strategies to overcome them.

Mangers also need to plan such activities which will synergise company’s

positioning and advertising campaign efforts rather than erode brand image

or equity.

Execution of these activities also require proper coordination of selling

effort, availability of promoted merchandise and managing product line

pricing.



2009

58

Conclusion:

From the findings it is apparent that use of loyalty program is quite widespread

and variety of activities are used to address variety of objectives; clear off old

stock, load the consumer, encourage brand switching, to reward the loyal user, to

create excitement at point of purchase etc. The manager in charge of apparel retail

operations need to understand impact of various types of customer need. Finally it

is clear that loyalty program is really effective and is one of the best drivers for the

retailer. It enable retailer to secure their place in such a clutter and competitive

market as so many foreign as well as local players are plunging into industry.

Loyalty card programmes require good administrative support and good database

records and data mining abilities to exploit to the fullest.

Future outlook:

Apparel sector is likely to grow with growing Indian economy. Many

multinational players either have already plunged into Indian market or plan to do

so in apparel sector. They will bring many promotional practices and loyalty

activities which they have been following in developed markets which will increase

the use of sales promotion activities even further. Indian brands will have to

withstand turbulent conditions and learn to survive. If the role of such activities is

understood well it may help any player a long way to survive and grow.



2009

59

Bibliography:

1. Marketing Management By Philip Kotler,

2. The Principles Of Marketing Management By Philip Kotler And Koshy,

3. Research Methodology By Pearson Publication,

4. Http://Apparel.Indiamart.Com/Lib/Textile/Textile07301998.Html

5. Global Loyalty X-Change Published In Transaction Trends Magazine 2003

6. Www.Practicalecommerce.Com

7. Http://Www.Researchandmarkets.Com/Reports/651166/

8. Www.Indianretails.Com

9. Http://Www.Lifestylestores.Com/Pages/Apparel.Htm

10. Http://En.Wikipedia.Org/Wiki/Loyalty_Program

11. Www.Mywestside.Com/Pressreleases.Aspx

12. Www.Globus.In/

13. Www.Vmart.Co.In/

14. Www.Pantaloon.Com/Fashion-Pantaloon.Asp

http://www.practicalecommerce.com/

http://www.researchandmarkets.com/reports/651166/

http://www.indianretails.com/

http://www.lifestylestores.com/pages/apparel.htm

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

http://www.mywestside.com/pressreleases.aspx

http://www.globus.in/

http://www.vmart.co.in/

http://www.pantaloon.com/fashion-pantaloon.asp

effectiveness of layalty program in readymade garment retailing

Documents