Creating symbiotic bond

A customer loyalty card is a marketing weapon to encourage customers to buy or continue to buy certain products or services. The purpose of introducing customer loyalty cards is to influence a customer to make repeat purchases. But most importantly a retailer collects customer data when purchase is done through loyalty cards. It is a form of relational capital (intellectual property) which can be analysed using database management, data mining (data mining software is one of a number of analytical tools for analyzing data) or analytical CRM software. The analysis can be exploited to reveal consumer buying patterns or cross selling opportunities.

Reward for retailer

A customer loyalty card ameliorates customer relationship by providing special offers and schemes. Thereby, acquisition and retention of customers become easy for a business owner. Mr Subhrangshu Neogi, Head-Brand & Corporate Communication, Religare Enterprises Limited explains, “A customer loyalty card induces loyalty, repeat purchases, and essentially attempts to build a reason to come back and buy. In India currently, a loyalty card has almost become a hygiene factor across all formats of retail.”

Loyalty programmes have become a rage among retailers in the last few years. To name a few, Lifestyle has a programme called ‘The Inner Circle’, Pantaloons offers `Green Card’, Westside has ‘Club West’ and Shoppers Stop has ‘First Citizen’ card. And the results have been impressive, as Shoppers Stop claims that 65 per cent of their business is through loyalty customers. For Pantaloons, it is 55 per cent as per the statement from Mr Zahid Shaikh, Head - Marketing.

A customer loyalty card is instrumental in bringing some advantages. It works for:

• Repeat purchases: When an apparel brand announces special discounts on its products or services, customers using the brand’s loyalty cards are informed about the benefits of the scheme. This in turn maximises the chance of repeat purchases as a customer who gets special benefits will definitely choose to shop repeatedly with you.
• Customer Data: It enables a business owner to capture customer information and track purchase history. A retailer can design the marketing strategy keeping those data in his mind. This also helps him in differentiating his customers for these special offers.
• Cross selling opportunities: Customer loyalty cards guarantee cross selling opportunities for a retailer. When the business owner has every detail of his customer’s buying patterns, he can surely persuade him to buy something costlier.
• Enhance brand image: A customer loyalty card enhances brand image and also reinforces brand position. Loyalty cards in customers' wallets are a constant reminder of the brand.
• Enhances your corporate image and brand recall: These loyalty cards also work towards brand recall. Cardholders see your logo and brand every time they use their cards, and recall it more often.  
• Increase communication: Cardholders receive a monthly statement containing promotions, news, and information about the company's new products. This provides a direct communication channel between the company and its customers that would otherwise be too expensive to operate.
• Co-branding opportunities: A loyalty card also brings the opportunity of tying up with a suitable partner whose target customer is from the same social rung, for example, the First Citizen Citibank MasterCard, a co-branded card launched by Shoppers’ Stop in association with Citibank and MasterCard.

Customer’s benefits

Customer loyalty cards give discount or points to the card holders when they purchase using these cards. Apart from this, a customer gets quality products at a discounted rate. Loyalty card users enjoy discounted prices, special coupon offers, and rebates or "points" towards airline tickets. It makes them feel special and the customer bonds well with the brand. In addition, loyalty card programmes offer substantial benefits like when a customer gets information about the special offers or schemes which are running or going to be launched, shopping becomes more convenient for him/her. He can visit the shop in his /her suitable time and day. Also, he gets free home delivery of altered clothes, amongst other benefits.

Loyalty cards misuse

One should remember that using of loyalty cards is vulnerable to fraudulent practices and misuses. Only the implementation of a robust IT security system can protect the privacy and confidentiality of data concerning a customer. For instance, Unisys Chief Security Advisor, Mr Sunil Misra discussed a case in a technology newspaper ‘Information Week’ in May 2004, where a member of the senior IT staff at a large supermarket chain created a secret back door so that he could access and sell protected information. So an organisation without a robust IT security system will definitely be a serious concern to a customer.

However, there certainly are measures to prevent the misuse, as Mr Shankar Suryanarayan, Vice President, Marketing, Lifestyle International (P) Ltd opines, “Personalised membership cards are given out to consumers to restrict its usage to one person. Two to three check points are put in practice during swiping of card and redemption of points.” Mr Kay Ramesh, Director, A- ID System (I) Pvt Ltd explains, “Cards could be secured using various techniques. In case of plain plastic cards, customised holographic/ security images could prevent duplication. Usage of loyalty cards on Smartcards and RFID cards could well secure the cards as they could utilise the inherent secured transaction process available on Smartcards”.

Points calculation

The calculation of points for a customer loyalty card varies from company to company. Reliance Retail offers its customers "Reliance One" Membership & Loyalty program, designed to deliver customised benefits to frequent shoppers. Under this scheme, customers can earn Reliance One Points on all shopping in the store which can be redeemed after accumulation. Westside’s Club West is a tier 2 rewards scheme - Classic card and Gold membership. One can become a Classic card member either by shopping for Rs 2000 and more or by paying Rs150. In order to become a Gold card member, one needs to shop for Rs 5000. Between the two cards, the percentage of reward points differs. For every purchase of Rs 50, the Classic card member earns a point, while the Gold card member earns a point for every purchase of Rs 40. The more expensive ones are Pantaloons, since to become a Green Card level-one star, the minimum expenditure has to be Rs 8,000. Mr Zahid Sheikh, Head-Marketing, Pantaloon Retail informs, “Pantaloons’ Green Card does not give points. It offers discount on purchase based on the tier of the member.” Neogi says, “Loyalty points are essentially based on the amount and quantum of transactions/purchases.”

Investment required

Investment per membership card is Rs 40 for a simple card and for a high-end card, the cost goes up to Rs 80-100. The cost of the software is between Rs 2.5 lakh to 4 lakh according to Ramesh.