Customer Participation in Retail Loyalty Programs: A Study Across Leading Organized Retailers in India

Customer Participation in Retail Loyalty Programs:

A Study Across Leading Organized Retailers in India

Dr. M Rahman Asst. Professor,

Apeejay Institute of Technology-School of Management, Gr Noida (India) m_rahmaan@rediffmail.com

Abstract: In the present business scenario, most of the organized retailers have implemented loyalty programs as a key CRM program. There are a large number of customers enrolled in the loyalty programs across industries throughout the world. However, the sad picture is that members’ engagement with the programs was found to be very low as majority of the memberships were found to be inactive. Since previous literatures have highlighted the importance of customer participation in loyalty program on store loyalty, retailing organizations must be aware of the customer participation in their loyalty programs. Hence, the key objective of this research was to analyse the customer participation in the loyalty programs of leading organized retailers in India. The research was conducted in Delhi/NCR and the primary data was collected from 372 customers, who were members of retail loyalty program for at least a year. The leading retailers considered were – Pantaloons, Shoppers Stop, Westside, , Globus, Lifestyle, Ritu Wear's Biglife, Big Bazaar, Max Fashion and Reliance Trends. Based on the results, Pantaloons was ranked the topmost retailer in terms of customer participation in its loyalty program. It was also found that customer participation in loyalty program significantly varied with the retailers.

Key Words: Customer participation, Retailers, loyalty program.

1. INTRODUCTION

The dynamic retail business environment has always forced the marketing managers of physical store-based retailers to explore innovative marketing strategies or programs to retain their customers for long time and defection to their offline competitors. In the present business scenario, most of the organized retailers with large customer base have implemented loyalty programs or frequent shopping programs as a key CRM program. These programs not only build a customer database by identifying customers with every transactions but also encourage repeat purchase behavior and store loyalty [1]. Members of these programs are offered a range of rewards on the basis of customer value to the firm.

identifies the card holder as a member in a loyalty program [2]. It allows consumers to receive free rewards when they make repeated purchases with a firm [3].

Many studies have found these programs to have positive effect on consumer purchase and enhance loyalty[3][4][5]. A study by Rahman & Singh focused on Gen Y members and found that store loyalty of a member increases with his loyalty program membership duration [6]. However, some studies also found that loyalty program may not influence customer loyalty [7][8].

Most of the organised Indian retailers like Pantaloons, Shoppers stop, Big Bazaar, Van Heusen, Ritu Wear’s Biglife etc. have launched their loyalty programs for identifying and rewarding their loyal customers through a combination of financial/economic and non- financial/non-economic benefits. The financial benefits offered by these retailers are in the form of points, discounts, exclusive and/or Sales promotion for members only. The non-financial benefits offered are in the form of exclusive billing counters, personalized greetings/offers on special days like birthday, anniversary etc., Previews of new arrivals, store updates etc[9[8][10].

There are a large number of customers enrolled in the loyalty programs across industries. As per Colloquy report 2011, the number of loyalty program memberships in the U.S. was over 2 billion and in Canada there were 120.7 million members. In terms of memberships, Retail business controls a huge 40% of total memberships [11]. The number of members jumped to 3.3 billion in U.S. in 2014 with an American on an average holding 29 program cards. However, the sad picture is that members’ engagement with the programs was found to be very low as majority of the memberships (approx 60%) were found to be inactive. On average, an American was found to belong to 29 loyalty programs but had any sort of participation in only 12 programs as per 2015 Colloquy Loyalty Census [12].

review of literatures found a lack of studies on the customer participation in these dimensions. Hence this paper attempted to understand customer participation in loyalty programs of leading Indian organized retailers.

2. LITERATURE REVIEW

A loyalty program is defined as a structured marketing effort with an aim to reward its members and encourage loyal behavior - the behavior which is beneficial to the firm. Members of these programs get a loyalty card that identifies the card holder as a member in a loyalty program [2]. These loyalty programs allow consumers to accumulate rewards when they make repeated purchases with a firm [3]. Multiple studies have been conducted in the past to understand the various aspects of loyalty program and its positive effects on customer behaviour [3] [4] [5]. However, there were few studies found on customer participation in loyalty programs

Customer participation is defined as ‘the degree of consumer’s effort and involvement, both mental and physical that relate to the production and delivery of a service’[13]. Other expert defines customer participation as the types and level of behavior in which buyers actually engage in connection with the define and delivery they seek. Participation factors include tangibility, empathy, attendance at meetings, and meaningful interaction. For many services, the customer is required to participate to an extent in order for the service to occur and be consumed [14].

Customer participation is considered to be vital in services for good quality and a satisfactory outcome. Previous literature found a positive association of increased customer participation with service quality and customer satisfaction [15]. The services marketing experts like Zeithaml suggested that with a high involvement and qualified input, the customers can improve the outcome of both parties [16].The effectiveness of relationship marketing efforts in services selling is to a large extent dependent on customers ’ commitment to increase the depth and breadth of their relationship with the organisation. It was found that customer participation had a significant and positive influence on customer loyalty in financial services [17].

activity/participation within a 12-month period [11]. It was found that the characteristics and benefits offered by a program influenced the customer participation in the loyalty program significantly [18]. A study was conducted to find out the level of customer participation in loyalty programs of organised retailers and the impact of customer participation in loyalty programs on store loyalty. The results showed that there was a significant impact of customer participation in loyalty programs on store loyalty. However, the level of customer participation was not found to be encouraging as a majority of the respondents didn't always participate in various activities under the loyalty programs [19].

The review of existing literatures showed that customer participation is quite important for the success of a program or a business firm. But there was lack of studies on understanding the customer participation in loyalty programs of organized retailers in India.

3. RESEARCH METHODOLOGY

On the basis of review of literature, the following objectives have been set for this study:

1.

To rank the organized retailers in terms of customer participation in their loyalty programs.

2.

To analyze customer participation in loyalty programs of the leading organized retailers.

The study is descriptive in nature as it highlights the levels of customer participation in retail loyalty programs. The data has been collected with the help of a structured questionnaire developed after thorough literature review. There were five items in the 1 to 5 Likert-type scale (‘1’ forNeverand ‘5’ for

Always) to measure customer participation in retail loyalty programs. The items were ‘provide personal information whenever required’, ‘carry loyalty card to present during billing’, ‘Actively redeem/strive to redeem reward points’, ‘Avail loyalty program benefits’ and ‘read messages/information sent by the store’. Cronbach’s Alpha test was done to check reliability of the scale developed in this study.

Statistical analysis of the data was done with the help of SPSS 20 version software. For descriptive analysis, Mean and SD was used. For testing hypotheses developed in the study, One-way ANOVA statistical tool was used. Post-hoc analysis was done with Tukey HSD.

Hypothesis of the study

The retailers strive to differentiate their loyalty programs from their competitors to gain competitive advantage. Each retail lp has its unique characteristics and reward-mix offered to its members. There are non-hierarchical as well as hierarchical lp with different membership levels and different reward-mix [9]. It was found that the characteristics and benefits offered by a program influenced the customer participation in the loyalty program significantly [19].

Based on the review of literatures, a null and related alternative hypothesis of this study has been developed as mentioned below:

Null hypothesis

H0: There is a significant difference in customer participation in loyalty program based on a customer’s association with a retailer.

Alternative hypothesis

H1: There is a significant difference in customer participation in loyalty program based on a customer’s association with a retailer.

4. DATA ANALYSIS

4.1 Reliability Analysis

Cronbach’s Alpha test was done to check reliability of the scale to measure customer participation in loyalty programs in this study. All the 5 components of customer participation was considered for the test and the value of ‘Cronbach alpha’ was found to be 0.755. This alpha value indicates strong reliability of the internal consistency of the questionnaire [20].

4.2 Ranking of Retailers in terms of Customer Participation in their Loyalty Programs

Table 1

Descriptive Statistics (Customer Participation mean scores of different stores)

N Mean Std. Deviation

Shoppers Stop _{61 3.68 0.71}

Pantaloons _{88 3.72 0.76}

Globus 52 3.23 0.87

Lifestyle _{46 3.35 0.70}

Westside 40 3.47 0.96

FBB 34 2.81 0.90

Ritu Wear’s Big life _{15 2.76 0.77}

Max 20 3.37 0.71

Reliance Trends _{16 2.98 0.85}

(Mean = 3.35, SD = 0.70), Globus (Mean = 3.23, SD = 0.87), Reliance Trends (Mean = 2.98, SD = 0.85), Fashion Big Bazaar or FBB (Mean = 2.81, SD = 0.90) and lastly Ritu Wear’s Biglife (Mean = 2.76, SD = 0.77). Hence, the ranking of retailers in terms of customer participation in their loyalty programs is shown in table 1.2.

Table2

Ranking of retailers in terms of Customer Participation in their loyalty programs

Rank Mean

Pantaloons _{1 3.72}

Shoppers Stop

2 3.68

Westside

3 3.47

Max _{4 3.37}

Lifestyle _{5 3.35}

Globus _{6 3.23}

Reliance Trends _{7 2.98}

FBB _{8 2.81}

R itu Wear's Big life _{9 2.76}

and low partcipation in Globus, Lifestyle, Westside and Max Fashion loyalty programs. And, the customer participations in Fashion Big Bazaar, Ritu Wear's Biglife and Reliance Trends loyalty programs are very low. Hence, all retailers have to work hard to improve/strengthen their customers' participation in their programs by redesigning the loyalty program to make it more attractive, beneficial to their customers.

4.3 Hypothesis Testing

H0: There is a significant difference in customer participation in loyalty program based on a customer’s association with a retailer.

H1: There is a significant difference in customer participation in loyalty program based on a customer’s association with a retailer.

Table 3

ANOVA for hypothesis H1

Customer participation in LP

Sum of Squares Df SquareMean F Sig.

Between Groups _{36.049 8 4.506 7.040 .000}

Within Groups 232.351 363 .640

Total _{268.400 371}

The result of hypothesis testing done with the help of One-way ANOVA (as shown in the ANOVA table no. 2) confirms the rejection of null hypothesis H0 and acceptance of the alternative hypothesis H1 as the p value is 0.000, which is less than the level of significance of 0.05 considered in this study. Hence, there was a significant difference in customer participation in loyalty program based on a customer’s association with a retailer.

4.3.1 Multiple Comparisons of SS and Pantaloons stores with other retailers Table 4

Multiple Comparisons of SS and Pantaloons stores with other retailers

Tukey HSD

(I) Store (J) Store

Mean Differenc

e (I-J) ErrorStd. Sig.

95% Confidence Interval Lower

Bound BoundUpper

Ss Pantaloons

-0.04277 0.13329 1.000 -0.4587 0.3732

globus _{0.44079 0.15101 0.088 -0.0304 0.912}

lifestyle _{0.32324 0.15623 0.496 -0.1643 0.8108} westside _{0.21041 0.16277 0.933 -0.2975 0.7184}

fbb _.86365* _{0.17123 0.000 0.3293 1.398}

big life _.91541* _{0.23058 0.003 0.1959 1.635}

max _{0.30541 0.20615 0.864 -0.3379 0.9487}

rel trend _{0.70041 0.22472 0.051 -0.0009 1.4017}

pantaloons ss _{0.04277 0.13329 1.000 -0.3732 0.4587}

globus _.48357* _{0.13994 0.018 0.0469 0.9203}

lifestyle _{0.36601 0.14556 0.228 -0.0882 0.8203} westside _{0.25318 0.15256 0.771 -0.2229 0.7293}

fbb _.90642* _{0.16155 0.000 0.4023 1.4106}

big life

.95818* _{0.22349 0.001 0.2608 1.6556}

max _{0.34818 0.19819 0.711 -0.2703 0.9666}

rel trend _.74318* _{0.21744 0.020 0.0646 1.4217}

*. The mean difference is significant at the 0.05 level.

As sown in table no.3, customer participation in loyalty program of both Shoppers Stop and Pantaloons store was found to be significantly higher than that of two stores FBB and Ritu Wear's Biglife stores. In addition to this, the participation in loyalty program of Pantaloons store was significantly higher than that of Globus, and Reliance Trends stores. It might have come because the loyalty programs of these stores offer a range of monetary as well as non-monetary rewards/benefits to their customers.

4.3.2 Multiple Comparisons of Globus, Lifestyle and Westdide with other retailers

Table 5

Multiple Comparisons of Globus, Lifestyle and Westdide with other retailers

Tukey HSD

(I) Store (J) Store

Mean Differenc

e (I-J) ErrorStd. Sig.

95% Confidence Interval Lower

Bound BoundUpper

Globus ss _{-0.44079 0.15101 0.088 -0.912 0.0304}

pantaloons

-.48357* _{0.13994 0.018 -0.9203 -0.0469}

lifestyle _{-0.11756 0.16194 0.998 -0.6229 0.3878} Westside _{-0.23038 0.16826 0.909 -0.7555 0.2947}

fbb _{0.42285 0.17645 0.289 -0.1278 0.9735}

big life

0.47462 0.23448 0.528 -0.2571 1.2063

max _{-0.13538 0.21051 0.999 -0.7923 0.5215}

rel trend _{0.25962 0.22872 0.969 -0.4541 0.9734}

Lifestyle ss _{-0.32324 0.15623 0.496 -0.8108 0.1643}

pantaloons

-0.36601 0.14556 0.228 -0.8203 0.0882

globus _{0.11756 0.16194 0.998 -0.3878 0.6229}

Westside _{-0.11283 0.17297 0.999 -0.6526 0.4269}

fbb _{0.54041 0.18094 0.073 -0.0242 1.1051}

big life _{0.59217 0.23788 0.241 -0.1502 1.3345}

max _{-0.01783 0.21429 1.000 -0.6865 0.6509}

rel trend _{0.37717 0.23221 0.791 -0.3475 1.1018}

Westside ss _{-0.21041 0.16277 0.933 -0.7184 0.2975}

pantaloons _{-0.25318 0.15256 0.771 -0.7293 0.2229}

globus _{0.23038 0.16826 0.909 -0.2947 0.7555}

Lifestyle

0.11283 0.17297 0.999 -0.4269 0.6526

Fbb _.65324* _{0.18662 0.015 0.0709 1.2356}

big life _{0.705 0.24223 0.090 -0.0509 1.4609}

Max _{0.095 0.2191 1.000 -0.5887 0.7787}

rel trend _{0.49 0.23666 0.495 -0.2485 1.2285}

*. The mean difference is significant at the 0.05 level.

Westide store was found to be significantly higher than that of FBB store. Interestingly, customer participation in loyalty program of Lifestyle was not statistically different from that of any other stores.

4.3.3 Multiple Comparisons of Reliance Trends and RW Biglife stores with other retailers

Table 6

Multiple Comparisons of Reliance Trends and RW Biglife stores with other retailers

Tukey HSD

(I) Store (J) Store

Mean Difference

(I-J) Std. Error Sig.

95% Confidence Interval Lower

Bound BoundUpper

Rel trends ss _{-0.70041 0.22472 0.051 -1.4017 0.0009}

pantaloons

-.74318* _{0.21744 0.020 -1.4217 -0.0646}

globus _{-0.25962 0.22872 0.969 -0.9734 0.4541}

lifestyle _{-0.37717 0.23221 0.791 -1.1018 0.3475}

westside _{-0.49 0.23666 0.495 -1.2285 0.2485}

fbb _{0.16324 0.24255 0.999 -0.5937 0.9201}

big life _{0.215 0.28754 0.998 -0.6823 1.1123}

max _{-0.395 0.26835 0.868 -1.2324 0.4424}

RW Big life ss _-.91541* _{0.23058 0.003 -1.635 -0.1959}

pantaloons _-.95818* _{0.22349 0.001 -1.6556 -0.2608}

globus _{-0.47462 0.23448 0.528 -1.2063 0.2571}

lifestyle _{-0.59217 0.23788 0.241 -1.3345 0.1502}

westside _{-0.705 0.24223 0.090 -1.4609 0.0509}

fbb _{-0.05176 0.24799 1.000 -0.8256 0.7221}

max _{-0.61 0.27327 0.387 -1.4628 0.2428}

rel trend _{-0.215 0.28754 0.998 -1.1123 0.6823}

*. The mean difference is significant at the 0.05 level.

4.3.4 Multiple Comparisons of Fashion Big Bazaar and Max Fashion with other retailers Table 7

Multiple Comparisons of FBB and Max Fashion stores with other retailers

Tukey HSD

(I) Store (J) Store

Mean Differenc

e (I-J) ErrorStd. Sig.

95% Confidence Interval Lower

Bound BoundUpper

Fbb ss _{-.86365* 0.17123 0.000 -1.398 -0.3293}

pantaloons _-.90642* _{0.16155 0.000 -1.4106 -0.4023}

Globus _{-0.42285 0.17645 0.289 -0.9735 0.1278}

lifestyle _{-0.54041 0.18094 0.073 -1.1051 0.0242} westside _-.65324* _{0.18662 0.015 -1.2356 -0.0709}

big life _{0.05176 0.24799 1.000 -0.7221 0.8256}

Max _{-0.55824 0.22546 0.247 -1.2618 0.1453}

rel trend _{-0.16324 0.24255 0.999 -0.9201 0.5937}

Max Ss _{-0.30541 0.20615 0.864 -0.9487 0.3379}

pantaloons _{-0.34818 0.19819 0.711 -0.9666 0.2703}

Globus _{0.13538 0.21051 0.999 -0.5215 0.7923}

lifestyle _{0.01783 0.21429 1.000 -0.6509 0.6865}

westside _{-0.095 0.2191 1.000 -0.7787 0.5887}

Fbb _{0.55824 0.22546 0.247 -0.1453 1.2618}

big life _{0.61 0.27327 0.387 -0.2428 1.4628}

rel trend _{0.395 0.26835 0.868 -0.4424 1.2324}

*. The mean difference is significant at the 0.05 level.

5. CONCLUSION

The success of any marketing program largely depends on the customer partcipation to the program. The organized retailers have launched loyalty programs with an aim of understanding and rewarding their customers, who register as members with these programs. The loyalty programs of different retailers are different in terms of different characteristics and reward-mix so as to influence the shopping behaviour of the customers. However, the customer particpation in loyalty programs of all retailers in the study has been not been found to be high. Hence, the organised retailers have to work hard to improve their customers' participation in their programs by redesigning the loyalty program to make it more attractive, beneficial to their customers. The three retailers - Fashion Big Bazaar, Ritu Wear's Biglife and Reliance Trends -' are especially suggested to make sincere efforts in making their loyalty program attractive, if they wish to attract their customers to partcipate and remain competitive in the retail market.

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