Seminar on Contemporary Issues for Corporate Growth
A study on Customer Retention efforts by Shopping Malls in India
Submitted to: Prof. Neetu Ganapathy
Submitted By: Sumit K. Jangid ‐ 7113
SDM Institute for Management Development Mysore, Karnataka
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Executive Summary
Dissertation Title: A study on Customer retention efforts by Shopping Malls in India. Faculty Guide: Prof. Neetu Ganapathy Name of student: of student: Sumit K. Jangid
PGDM No: 7113
India is the most attractive retail industry in the world. Retail formats of organized retail industry are getting affected by this boom, favourably as well as unfavourably. Number of Shopping Malls in India is growing at electric rate and thus the challenge or opportunity of retaining of retaining the existing customers is also growing faster.
This study focuses on the need of customer retention efforts such as loyalty programs etc., which enables the Indian Shopping Malls to be competitive and better than others existing and upcoming Malls. The study of existing of existing loyalty programs and other customer retention efforts helps in understanding the current situation and strategies better. Their analysis provides a view of the relationship between the nature of the of the utility offered and the customer experience cycle by using Buyer Utility Map.
It was found that loyalty card programs have not worked as well as expected, but the most important benefit of having loyalty program is that retailers can quantify new
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Some of the of the major Recommendations are: o
Introduction of shopping of shopping mall loyalty card.
o
College Savings Scheme
o
Customized Loyalty Programs
Sumit K. Jangid
Date: 05/09/2008
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Acknowledgement
The satisfaction that accompanies the successful completion of any task would be incomplete, without the mention of the people who have made it possible with constant guidance and encouragement.
I take this opportunity to express my profound gratitude and deep regards to my Faculty Guide
Prof. Neetu Ganapathy for her exemplary guidance, valuable
feedback and constant encouragement throughout the duration of the project and preparation of this report. Her valuable suggestions were of immense help throughout my contemporary study.
My several well‐wishers helped me directly or indirectly; I virtually fall short of words of words to express my gratefulness to them.
Sumit K. Jangid
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Contents
Page No.
Executive Summary
i
Acknowledgement
iii
Table of Contents of Contents
iv
Ch. 1. Introduction
1
Ch. 2. Research Framework
6
Ch. 3. Literature Review
10
Ch. 4. Common features among Indian Shopping Malls
16
Ch. 5. Loyalty Programs by Indian Shopping Malls Critical factors for successful loyalty programs Loyalty program of Globus of Globus Mall Loyalty program of Forum of Forum Mall Loyalty program of Shoppers of Shoppers Stop
20 21 24 25 26
Ch. 6. Customer Retention efforts by Indian Shopping Malls Forum Mall Garuda Mall Gopalan Mall
29 32 34 35
Ch. 7. Analysis Success and failure factors for Shopping Malls Application of Buyer of Buyer Utility Map Analysis of Buyer of Buyer Utility Map
37 37 38 39
Ch. 8. Do loyalty programs really work well?
43
Ch. 9. Findings
46
Ch. 10. Conclusion
47
Ch. 11. Recommendations
48
Ch. 12. Further Research
52
Ch. 13. References
53
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1. Introduction
Recently, the press has been full of articles touting the growth of Shopping Malls in India, especially in big cities and metros. Projections from F & R research: Malls in India 2007, say that India will have more than 715 Malls, operating in the country by 2015 with the retail space of 350 million sq. ft. in comparison with 47.4 million sq. ft. in year 2007. Articles suggest that the retail industry will be beneficiated greatly by this new retail space available for retailing as it will ensure more visibility and interaction with consumers and hence may result in better turnovers and profits. More retail space is a necessity to handle and cater to new retail brands (global as well as national brands) that are coming into the market. This supports the idea that adequate retail space could be the missing link for prosperous retail industry. However, the actual examination of the influences and impacts of these new Shopping Malls opening at the arm distances has been less documented. What is the impact of these new Shopping Malls on brands’ strategies, customers’ power in the channel, customers’ buying patterns etc.?
Though, the vibrant retail boom is pushing up the number of Malls in the country but uncertainty remains about the success of these of these Malls. The major concern for Shopping Malls owners and its tenants is the low conversion rate. This has led to the closure of individual shops, at several Malls. Many tenants express grief about grief about the low percentage of conversions of conversions from those who walk through the portals of these of these Malls. Observers routinely find shopping‐
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that consumers are reverting to their traditional shopping‐destinations. Therefore, it becomes a marketing challenge to retain customers and encourage repeat purchase. It is a well known fact that repeat customers spend more than the average customers.
The issue of competitive rentals has already come up as there are Malls in very close proximity to each other in big cities. Success and failure statistics of the of the Malls in India during the past few years indicate that not all the Malls are successful. According to industry experts, only 10‐12 percent of operational Malls in India have been successful. These are numbers available with various retail and real estate analysts. Shopping Malls in tier II cities are still far from the kind of competition of competition that Shopping Malls of big of big cities like Mumbai, NCR or Bangalore are experiencing. This state of competition of competition helps customers as they have more options to shop, but for Shopping Malls to make people come to their Mall for shopping is becoming difficult. The solution could be by differentiating your Shopping Mall from other Malls. But the big question is, how?
Retaining existing customers is always the desirable situation for any business. In the situation of tuff competition, these are the only asset of the business who helps dearly by remaining with you and working as promoters through word of mouth. of mouth.
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in the near future; especially in metros and big cities, where Shopping Malls are very close to each other.
Significance of the of the study India is the most attractive retail industry in the world now; it tells the fact that the growing number of Shopping Malls in India is not going to stop or slow down in near future. The most ‘benefited’ cities from this rapid growth will be the big cities of the country like Mumbai, New Delhi and Bangalore etc. As more Shopping Malls are opening up more difficult it would be for Shopping Malls to retain customers with them. Sensing this issue some Shopping Mall developers have started spending marketing efforts for gaining customer loyalty for their Shopping Malls. The need for the hour is to attract the footfalls, convert them into customers and try to retain them as long as you can.
Today the greatest growth for customer relationship programs is in retail and Shopping Malls in particular, but effectiveness of these loyalty programs is also a major concern for multi‐branded Shopping Malls.
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Shopping Mall in Brief: Shopping Mall is the new and modern version of traditional marketplace. A Shopping Mall or shopping center is a building or set of buildings of buildings that contain a variety of retail of retail units, with interconnecting walkways enabling visitors to easily walk from unit to unit or store to store.
People often use the word ‘Mall’ for big stores like Shoppers stop, Westside or Pyramid, unknowingly. Actually, they are not Shopping Malls, but another format of organized retail called ‘Departmental Store’. Forum of Bangalore, Inorbit of Mumbai or Metro Walk Mall of New Delhi are some examples of retail of retail formats which actually comes under the category of Shopping Malls. India is having 179 operational Malls which are providing a retail space of 47.4 million square feet. The number of Shopping Malls is estimated to rise by 335% by 2010 to 600 Shopping Malls.
Customer Loyalty in Brief: Customer loyalty refers to the feelings or attitudes that incline a customer either to return to a company, shop or outlet to purchase there again, or else to re‐purchase a particular product, service or brand. A problem is often raised that some proportion of customers of customers will
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there only for shopping. The basic reason for caring about customer satisfaction is that it leads to loyalty and customer retention.
It is possible for customers to be satisfied from the Shopping Mall environment, services etc., but not repurchase due to, among other things, poor product supply, variety seeking or multiple sourcing and large promotional deals. This is the same happening with the Shopping Malls of big cities, customers come and do not find anything excited apart from great retail stores. It turns them off about that Shopping Mall. These issues will be dealt in detail at the later part of this of this report.
Similarly, customers may be unsatisfied but continue to purchase, for example, when dealing with a monopoly as in the case of Shopping of Shopping Malls of tier of tier II cities.
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2. Research Framework
Methodology: This study will examine the efforts made by Indian Shopping Malls to retain their customers with them and build loyalty among their existing customers. It utilizes the secondary and primary data for research. Secondary data involves the collection of data through past research studies, journals, magazines, books, leading databases, articles and internet, while primary data involves the observations of the customer retention efforts adopted by Shopping Malls in Bangalore. This study also highlights the common phenomenon of Shopping Malls across the country.
The study would focus on building customer loyalty using differentiation strategies. It uses a four stage research strategy, outlining a research design, then collecting secondary data, then collecting primary data, and finally analyzing the available data. Such studies are capable of capturing data to answer the ‘why’ and ‘how’ questions associated with the subject under research.
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Hypothesis: Research Hypothesis for the study is that Loyalty efforts and programs adopted by Shopping Malls are effective. Null Hypothesis of the of the study is they are not effective.
Limitations: Common limitations of the study are unconscious influence while data collection and interpretation. The other limitation of the study is that only Shopping Malls in Bangalore have been studied thus, collected data cannot be generalized nation‐wide.
Models and Theories: The study will be taking inferences from the theory of Differential of Differential Congruence: Coskun Samli
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utility proposition from existing products. A customer’s experience can usually be broken down into a cycle of six of six distinct stages, from purchase to disposal in the case of product. of product.
Utility Levers
The Six Stages of the of the Buyer Experience Cycle
Purchase
Customer Productivity
Simplicity
Convenience
Risk Reduction
Fun & Image
Environmental Friendliness
Delivery
Use
Supplements
Maintenance
Disposal
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In the buyer utility map for a Shopping Mall, the buyer experience cycle would be different from the buyer experience cycle for a product.
Utility Levers
The Four Stages of the of the Buyer Experience Cycle (for Shopping (for Shopping Malls)
Interaction
Customer Productivity
Simplicity
Convenience
Risk Reduction
Fun & Image
Environmental
Services
Purchase
Add‐ons
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3. Literature Review
•
Dr. Trivedi Shekhar (2008) “Zooming in on malls”, Retail Biz, May 2008.
Standardization of malls of malls is one of the of the common phenomenons among malls developers. The look and feel of all of all malls in general is same and somewhat presents a uniform appearance to the customers. Standardization has its own benefits but uniformity may tend to dull customer’s desire. Developers have not thought greatly about the local catchment profile.
Shopping Malls have given birth to a new shopping culture ‐ ‘Shoppertainment’. Nowadays, contrary to the real shopping take place, people are opting shopping more for their entertainment purpose.
Author talks about black spots of malls. He says malls attract different level of footfalls and attention from shoppers within its various parts. For example, ground floor attracts more
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Standardization. National retailers have to take care about making the brand relevant to the local consumer in the catchment area of the of the stores.
•
Gopal, Prashant (2007) “Malls betting on entertainment to draw in shoppers”, New Delhi
( http://www.livemint.com/2007/05/14003113/Malls http://www.livemint.com/2007/05/14003113/Malls‐betting‐on‐entertainment.html )
When people go for shopping, they, especially youth spend their entire day at the mall. They want entertainment also for spending an entire day there at the mall. Strong entertainment needs to be in a mall to encourage loyalty to the mall. Increase in footfalls is not only important but to convert those footfalls into consumption is the key to success.
Need of the of the hour is to create a mall, where people can spend time with their family.
Most of the malls are providing the same things for entertainment. Like movie theatres,
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finding difficult to understand the psyche of the local Indian customers, their tastes or preferences etc. Localization with Globalization is necessary for malls.
Situation of lack of professional suppliers in India is also testing the supply‐chain of these organized retail stores as the availability of stock is one of the major factors for building loyalty for a particular store.
Recognisability, legitimacy, consistency, proximity, value are the essential characteristics of a brand. Retail branding creates a brand preference, which goes beyond the product or service in itself. Mall developers need to create distinctive brand identities for their specific
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•
King, Sharon R. (2008) “Shoppers get awards; Malls get loyalty”, The New York Times, Thursday, September 4, 2008.
( http://query.nytimes.com/gst/fullpage.html?res=9902E4DF103CF930A15751C1A96E958260 http://query.nytimes.com/gst/fullpage.html?res=9902E4DF103CF930A15751C1A96E958260 )
Malls are giving rewards for shopping. Rewards range from prepaid calling cards, magazine subscriptions, credit cards to vacation trip etc. creating relationship with customers is the key to success in today’s competitive world.
Redeemable points offered by malls through various loyalty cards do not spur sales for the mall from those customers/card holders. But, these efforts help in keeping them coming back to the mall, add some more points and get better reward for some special occasions;
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incorporate large entertainment area, with enough spaces for parking and excellent infrastructural benefits that shall be passed on to the retailer. The target audience for the Gen X Malls is the tourist/out of town visitor and the person from the city looking for entertainment options.
•
Rigby, K. Darrell and Vishwanath, Vijay, “Localization: The Revolution in Consumer Markets”, Harvard Business Review .
( http://www.hbsp.harvard.edu/hbsp/hbr/articles/article.jsp?articleID=R0604E&ml_action=get http://www.hbsp.harvard.edu/hbsp/hbr/articles/article.jsp?articleID=R0604E&ml_action=get ‐ article&print=true )
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of a of a survey that retail designing is the need for today’s retail market. Retail design does not include only interiors but other factors also like determining consumers’ attraction etc.
•
Jain, Pradeep, (2008) “Must for Malls: USP”, Retailer , July edition.
Writer is the MD of Parsvanath Developers Ltd. He talks about the anchor stores that they are the champion for any Shopping Mall to attract ‘serious’ customers again and again. Speciality Mall format is still not considered here but it can give a different position from other Shopping Malls and able to attract genuine customers. Customers want perfect shopping experience and even a minute imperfection can divert them to another substitute
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4. Common Features among Indian Shopping Malls
•
“Shoppertainment”:
People use to spend their whole day in a Mall these days. They do not go to a Shopping Mall only for shopping, but they go to have fun, to have some time for relaxation. Shopping Malls which caters to each and every segment of the market, where people can come and spend time with their families. These new developments have given birth to a new shopping culture – ‘Shoppertainment’. Now Shopping Malls are not only a retail format they have become a destination for people for meetings, get together, having fun etc. The fact that
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•
Standardization:
Standardization is one of the common happenings seen among the Shopping Malls in the country. Almost all the Malls look like similar whether it is exteriors or interiors. They also present a uniform appearance to the customers; which do not helps in enhancing customer experience and upon that it dulls the customer’s desire to come again and again to the
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but it cannot have uniformity on size, colour, interiors, exteriors, tenant mix, and promotional events etc. throughout the country like India (diversified cultures) (diversified cultures)..
•
Space Crunch:
Packed parking lots, busy food courts and restaurants, crowded anchor stores – this is the
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Forum Malls in India. The group is about to expand its presence in Mall business by opening up Malls in major South Indian cities like Hyderabad, Cochin etc. These are only some of the of the real estate groups becoming Mall owners. We must understand that operating and developing Malls need certain kind of expertise and real estate owners alone cannot tackle this situation, they need people who are experts in ‘Mall management’. Because of the of the lack
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5. Loyalty Programs by Indian Shopping Malls
Other than these customer experience focused facilities, Shopping Malls are not doing much to retain the customers or to build loyalty among customers. Mainly, because most of the
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reader as you whiz through checkout, and you'll get a couple of rupees of rupees knocked off your off your bill. Call it the loyalty craze. Credit Card companies are offering programs by tying up with various Shopping establishments to offer discounts and lure the customers towards using their shops and Credit Cards. While loyalty cards, Shopping Festivals and prizes have always been, first and foremost, a cheap way for businesses large and sMall to start tracking their
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Customer Loyalty Program of GLOBUS of GLOBUS Mall "PRIVILEGE CLUB"
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o
State wise distribution of Shopping of Shopping Malls (Graph):
No. of m a lls lls in sta sta te s
60
55 50
50 s l l a M f o . o N
40
30
30
20 19
20
13 15 14 13 11
9
8
8
10
6
4
2
2
2
1
1
1
1
0
a h t r r s a a r h M a
. B . W
. P . a t r A a j G u
n d . l a r h a n U P a a r h a t s K e a k h n d i g a j a r h a R a t a t C U
K & J
a G o
Sta te s
o
Distribution of Shopping of Shopping Malls in big cities:
City Mumbai New Delhi* Kolkata Chennai Bangalore
No. of Malls 32 30 21 11 14
*(except Gurgaon, *(except Gurgaon, Noida, and Faridabad)
14
Bangalore
s e i t i C o r t e M
11
Chennai
21
Kolkata
30
New Delhi* Delhi*
32
Mumbai 0
5
10
15
20
No. of Malls
25
30
35
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o
Observational Form (checklists) to collect primary data:
Category o
Parking Facility
o
Public Transport
o
Security Check
o
Customer help desks
o
Interiors & Exteriors
o
Retail Outlet Mix
o
Customer Profile
o
Seating Arrangement
o
Sign Boards
o
Eateries & Food Court
o
Rest Rooms
o
Loyalty Cards
o
Product Displays
o
Art Shops
o
Multiplexes
o
Music Shows, Competitions etc.
o
o
Others
Remarks