ISMS MBA CASE STUDY PAPERS – Why has it become necessary to develop cordial relations with customers How can this help in enhancing customer satisfaction
ISMS MBA CASE STUDY PAPERS – Why has it become necessary to develop cordial relations with customers How can this help in enhancing customer satisfaction
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Sales and Distribution Management
Case 3 :- First Citizen Club
When customers in an outlet of Shoppers’ Stop pick up a pair of Florsheim shoes, they leave behind a distinct trail. The purchases made up a First Citizen Club (FFC) member are under the store’s microscope. Shoppers’s Stop wants to know what brand of shoes you like to wear. This process aims at building bridges to both its customers and suppliers, or perhaps even other manufacturers.
Shoppers’ Stop uses customer preferences to gather valuable market reach data. Ajay Kelkar, senior manager marketing services says, “We are looking at the various ways in which we can work with our brands and customers.”
In India, Shoppers’ Stop is one of the first major chains that is working on ways to manage its customer related information to gain competitive advantage. Arvind Singhal, managing director of retail consultant KSA Technopak says, “Customer information capture, and an intelligent and rigorous warehousing and mining of transaction behavior, is increasingly becoming one of the major success factors for successful retailers.” Singhal cites the example of Wal-Mart, whose success has hinged on the way in which it uses its famously advanced customer shopping information.
Shoppers’ Stop opened its first store in Mumbai in 1991. It launched its First Citizen Club Programme only in April 1994, drawing from the base of people that had been encouraged to drop their visiting cards in the previous years.
Any customer can become a FCC member by either paying an enrollment fee of Rs. 150 or making purchases worth Rs. 2,500 in a single day. The benefits to customers include reward points and updates on store events and merchandising, and information on the latest fashion trends through a monthly newsletter named First Update.
In the first year of this programme, the store enrolled some 4,000 FCC members. By 2000, FCC had 100,000 members and created members categories who could have a gold, silver, and a classic card. These cards bear different eligibility levels for different categories.
Pradeep Katya, senior manager, direct marketing say, “Beginners used to be targeted in a different manner, while high-frequency FCC member were already familiar with the experience. So the objective there is to grow in share of wallet.”
About 2 per cent of the FCC members are gold cardholders, 25 per cent silver, and the rest have basic card. Around 15 per cent of the walk-ins on any day in any store are FCC members, and they account for nearly 40 per cent of the store’s sales. According to Katyal, globally, large retailers sell as much as 60 per cent of their products in each category to loyalty customers. In India, the retail market is still fragmented, but Katyal expects the global trend will soon reach here as large and organized retailing grows in the country. Shoppers’ Stop is clearly recognising that its FCC members area a precious database. For the chain is sitting on a cache of data on consumer buying habits. In fact, the quality of database isn’t really derived from the information customers give upfront at the time of enrollment. That just covers the usual details like name, address, date of birth, spouse’s name and date of birth, and their marriage anniversary. Katyal says, “Few people give out family details. But as long as we can communicate with them, it is sufficient. “The real business starts when the FCC member starts making purchases.
Since the FCC programme is integrated in Shoppers’ Shop enterprise resource package, every customer transaction at any checkout counter gets recorded. Over a period of time, then, the chain could ascertain whether a customer prefers Louis Philippe, Allen Solly, or whether he goes in for that Calvin Klein, or Armani after-shave.
“We can track consumers’ psychographics by seeing when they buy and what kind of products or brands they buy. Now we are talking to other companies about this and they see value in it,“ says Kelkar. Singhal believes the store can, with a very significant investment in technology and management, use the loyalty programme-based transaction data to offer a more focused product mix in its stores, customise brand and product choices from one location to another, and delete slow-moving SKUs and substitute them with fast moving ones.
Singhal says, “It can also use this information to generate a more direct Customer Relationship Management (CRM) effort, and give loyal shoppers enhanced service, and tangible and non-tangible benefits so as to generate higher sales per customer.” The store is certainly open to the possibilities. Kelkar says that if they can understand their customers’ psychographics and demographics, they can target products exclusively to them or even do limited launches for them, something they are currently discussing.
Some of the direct marketing thrust will be through the other link that the store has with its FFC base – the newsletter. Katyal claims that experience has shown the best advertisers in First Update tend to grab the best market share in that category.
So, now the chain is using the medium to promote its in-store label Shop, which accounts for 20 per cent of sales currently, but which Katyal and Kelkar would like to take to 50 per cent.
Consider the promo that Shoppers’ Stop did for Espirit watches last year. FCC members were informed through a mailer that they could get a free Espirit watch if they bought goods worth rupees 15,000 within three months. Katyal says that against an estimated 1,500 watches, the store ended up giving 3,700 watches.
While each watch was worth Rs. 2,700, the promo brought in sales in excess of Rs. 5 crores for Shoppers’ Stop. Katyal adds, “Generally, direct marketing has a 1-2 per cent success rate. We consider anything less than 12 per cent as a failure.
The store is also looking at going beyond such efforts. They back and front office teams are currently working on identifying the top-selling SKUs in every category. Shoppers’ Stop will then use its database to profile buyers of that SKU, not on age or address, but by seeing what other products they are buying, and then targeting other buyers who have similar buying habits.
For example, in a simplistic scenario, if a large number of customers who buy Florsheim shoes also tend to buy Arrow shirts, the store could target other buyers of Arrow shirts and do a promo for Florsheim shoes with them.
The store has recently done market research. In another case, channels like Hallmark and National Geographic are considering using the store’s database for promotions. When Lakme sponsored a beauty week at the store earlier this year, it could interact with customers and gauge their responses to its products. Once the data warehousing tools are in place, Katyal and Kelkar plan to analyse the FFC data to give feedback to brands that are already selling at Shoppers’ Stop. This could be done at a category level or with a specific brand.
Brand could even use the information to clear inventory. For instance, if a producer has stagnant stocks of, say, 42-size shirts, the firm could use the database to target only those customers who wear that size.
On the other hand, the store could come up with a base of, say, bargain hunters and target events for them. Besides, if the suppliers have such information, they could quicken their response time for developing new products apart from improving their production planning for a more efficient replenishment cycle.
The store’s customer base is essentially within the socio-economic classes A and B, and aged between 25 – 45 years. There’s also the fact that the audience may be limited to a certain geographical area within the city – after all, Shoppers’s Stop expansions are based on this catchment area premise. But Katyal says, “Most brands at the end of the day are targeting people who are in this age group and within a good disposable income.
Today, it is a buyer’s market and marketers have to continuously add value for customers and convert first-time buyers into second-and-third timers.
Questions
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How is Shoppers’ Stop benefiting from FCC programme? Do you think the store is practicing CRM? Explain.
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Why has it become necessary to develop cordial relations with customers? How can this help in enhancing customer satisfaction
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