<FONT COLOR="#FF0033"><B>Guest Article: Justin Rabindra:</B></FONT> Is it really possible to build a relationship with retail customers?

Justin Rabindra

OgilvyOne Worldwide

Which Indian wouldn’t like to figure out what’s the next big thing – oh for another IT- like wave and a shot at making a million dollars! Some of us like to believe that retail might be it.

According to one estimate, there are 300 new malls, 1,500 supermarkets and 325 departmental stores being built in India’s cities. And according to a recent McKinsey article, retail sales in India’s consumer goods market are expected to grow to $400 billion by 2010, making it one of the world’s five biggest markets.

This will be fuelled by the entry of leading global retailers with the opening up of FDI in this sector. What does all this mean for the retail marketer?

India’s emerging middle class is driving this rapid growth and companies need to target this segment. Here are some tips from the experience of more mature Western markets to improve the chances of winning the retail game.

View the situation differently

The size of the Indian market has dulled marketers into thinking that there exists an almost endless supply of customers. There isn’t, and it is prudent to be prepared for when supply will exceed demand, as it must. It all comes down to how you manage your customer. Variously called relationship marketing, CRM, loyalty marketing and so on, it really is good old-fashioned customer management as practised by our kirana stores.

It all begins with the right vision

What helps is a vision that says that you care for the customer (and it has to be more than pure lip service, or the customer will see through you in a second). Yes, there is an emotional element to it, but it is something that the customer will sense and respond to immediately, as opposed to something along the lines of ‘I’ll give you good value for your money’.

In other words, there has to be a passion about the customer that begins with the top management, flows across the leadership and permeates down to everybody in the company.

This does not happen by accident. It takes some serious thinking about what business you are in. It’s a mistake to think that you are in the retail business; you’re really in the business of building customer loyalty. You hire the kind of people who like dealing with people. You train them in the business of caring for the customer. Then you share with them the vision you have for the company. And they reinforce the message in every encounter with the customer, across all touch points, every day.

When that happens, customer loyalty is a natural by-product.

Building customer loyalty

True loyalty is demonstrating to the customer that you care about her and, because you care, you will do things for her that will cause her to put her trust in you and in your brand. In this situation, when you say, ‘I have a deal for you’, she’ll sit up and listen to you.

The idea, therefore, is not to make a fast buck from the customer. The reason why many CRM projects get a bad name is because they’ve been sold on the hype that a points programme will make the customer loyal. The fact is that a points programme is just a sales promotion. In no way does it induce loyalty among customers. The programme then deteriorates into a marketing, sales and promotion tool. Customer management is about relationships and customers are quick to cold-shoulder you when they suddenly discover that it’s been about money all along.

Build on a foundation of customer understanding

Customer management is built on the foundation that customers want relationships. When you do stuff for the customer, is she left with the feeling, ‘Wow, I get the best discounts here, I like them’? Or does she think, ‘Wow, these guys understand me, I like them’?

The difference is subtle: In the first case, she’ll skip to any retailer who offers a better discount; in the latter, she’ll stay with you because she senses that you have taken the trouble to understand her and treat her like she is a unique customer. In the first case, you would send out the standard ‘Dear Customer’ mailer to all your customers; in the latter, you’ll take the trouble to determine the different segments of customers that constitute your database, check on their specific needs, communicate with them ‘differentially’, and address them by their first name.

Capture detailed customer data

Customer data needs to capture not just demographic and lifestyle information (including total amount spent on food items in stores and response to promotions and other programmes), but also specifics about the customers’ interest in, and use of, a diverse range of other product related services.

Invest in professional data analysis

Employ the services of a professional external vendor to analyse your customer data and layer it with research. Given the thousands of combinations of products and services purchased, only a professional analyst can mine and interpret the results of any analysis. This is time and money well spent because it will tell you quite sharply what segments exist, what offers would work best, who to aim them at and which medium to communicate through.

Divide and rule

The idea is to delve into the data to look for ‘stories’ that it tells you about groups of customers. You are certain to find statistics like 5 per cent of your customers are giving you 40 per cent of your profits. Or that when men buy a pair of trousers (a planned purchase), they also pick up a woman’s perfume for twice the price (an impulse purchase). Only data mining will throw up gems like these. Imagine the impact of your communications when it is based on information so powerful.

Which groups of people are buying which set of products and when? Map purchase information with family data and predict which promotions they are most likely to respond favourably to, which combination of products loyal customers are already buying and, therefore, what you should offer them to retain their loyalty.

Communicate relevantly

Be prepared to create several dozen versions of the mailer according to the segments and product offer combinations that emerge. Research shows that the response to relevantly designed offers and communications far outweigh the additional cost incurred in customisation.

However, it pays to test your offers on a small sample (or on a few stores), gauge the response and fine-tune the offer if necessary, before rolling out to the universe.

Measure progress

Your customer is buying from other retailers besides you. You’ll know you’re doing it right when she starts spending more of her monthly shopping money on you (in other words, you are getting a greater share of her wallet). Or if she’s visiting you more often than she did when the relationship began (in other words, she is demonstrating greater loyalty).

One retailer that learnt quickly to recognise the value of retaining and growing customers is Tesco, the leading UK based supermarket chain. After years of experimenting, refining and customising its customer management programme, today, it has a customer base of over 10 million regular customers and it generates over £100 million through this programme.

(Justin Rabindra is regional knowledge manager, Asia Pacific, O&M, and training head, OgilvyOne Worldwide. You can write to him at justin.rabindra@ogilvy.com)

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