SELL MORE AND SELL TO MORE
LOYALTY AND FASHION RETAILING
What’s your favorite brand? This is a question many of us have been asked multiple times in the past. Whether we are talking about the clothing store we shop frequently from, or the car we own or the one we would like to upgrade to, or the mobile phone that you feel is just right for you, we all have some brands we love more than others. Love for brands could manifest as aspiration or ownership. Luxury brands, for instance, are desired by many and owned by only a few. The prime intention of brand building initiatives from businesses would involve driving awareness, or changing perceptions, or increase usage or influencing other such parameters or a combination of some of these aspects. Whichever way we look at it, they all correlate positively to the need to get more sales. For fashion brands, such initiatives are around influencing how you are positioned in the consumer’s mind, getting more walk-ins to your stores and thereby increasing sales.
I have seen a tendency in many retail-oriented businesses to delink their ‘brand’ initiatives from their ‘product’ initiatives. This is a strategy that is fraught with danger since the coherence in the brand offering will be compromised. In categories like FMCG, where Brand Management practices are very evolved, there are processes that control this. There is a product innovation pipeline that is aligned with the brand objectives and it is the specific SKUs that need to be sold in large quantities. In the business of fashion, the situation is different. Here, the business runs by launching collections what have a high number of garment styles in different categories like shirts, trousers and others. Therefore it is a challenge to ensure that product development plans are in sync with the brand identity. While there are products and looks that are typical to a brand, it is challenging to carry a brand signature across large number of designs. Also, there are some designs that are so much in trend that you might find similar products in different brand collections. Brands cannot escape from this reality since these styles are in demand and they need to be catered to, else your customer can go to other stores. So there are significant design management challenges around balancing the typical looks of the brand and the looks that are in trend. This, to me, is a major Brand Identity challenge in the fashion space and this is where the best of brands excel by getting the perfect mix for their customers.
Loyalty- A Misnomer?
Strong fashion brands stand for some values and they build their business around them. As customers, when do we say that we are loyal to a brand? When we go again and again to that brand’s store? If we ask the people in key management positions in these businesses, this is the answer we will get- this is how we use the word ‘loyalty’ in retail-oriented businesses. With organized retail booming in India, we also witnessed increasing efforts on the part of retailers to get maximum mileage out of their customers, through organized as well as not-so-organized initiatives to reward frequent customers. Loyalty Management is today, an important part of fashion retail. Literally, the word loyalty indicates a strong allegiance to a certain thing; the way many retailers treat their loyalty programs, they are built around reward points that can be redeemed which can be considered as an indirect form of discounting. So when we lure a customer with rewards and freebies, can we say that were are driving genuine loyalty? In this modern era of online shopping where mobile apps bring high streets to your finger tips, a lot of stores are within reach and we can search different stores for the same product and easily find out which one of them offers the best deal. I am not judging whether this trend is right or wrong, the consumer can decide what is best for him or her, the point being made here is the fact that the term loyalty, can be seen as a misnomer, maybe ‘Rewards’ or ‘Membership’ can be better ways of describing such initiatives. While I thought it is interesting to say this, let us not get lost in semantics and focus on what fashion brands try to achieve through these programs.
The Changing Landscape
Let us take a look at how loyalty or rewards programs have evolved. It is generally agreed that one of the earliest such organized initiatives was the S&H Green Stamp Program that originated around a century ago. As per this program, customers received stamps as they made purchases from participating merchants; they are then glued to pages in booklets and can be redeemed from stores when they reach a certain value, just like alternate currency. Another well-known initiative in the early days of loyalty programs was General Mills’ Betty Crocker Points Program in which customers collected points and redeemed them against kitchenware from a catalogue. In the early 1980s American Airlines made use of computerized databases and created their Frequent Flyer Program. Another program that is considered iconic is the one from Tesco that uses data analysis very effectively to drive transactions, long before such a practice became a hygiene factor. The membership card used to be the signature element of rewards programs till a few years back. With the impact of technology, such programs started taking a paperless route and this phase saw a huge jump in the practice of tracking the details of customers and their shopping patterns, among retail brands. The mobile number is now your unique identifier, from a retail-shopping context.
Key Success Factors
There are some aspects which I feel are golden rules as far as rewards programs are concerned.
- Loyalty program should be about data capture; the retailer need to capture as many customers in the system as possible, higher the percentage of transactions that come from customers who have enrolled for the program, the better it is.
- However, rewards need not be as spread out as information capture is, there has to be certain threshold of business before a customer avails rewards from the retailer.
- The higher the business from a customer, the more his rewards should be. For instance, if a customer who makes an annual purchase of Rs 30000 can get 3% of it as rewards, it is only fair that a customer who buys Rs 100000 in the same period gets 5% as rewards.
- It is always easier to increase reward commitments to customers, but it is tough to reduce the same. Therefore a cautious start is advisable. Even in terms of number of tiers in the structure, it is a good idea to start simple and increase as you get more idea on frequencies and transaction sizes.
- The use of data for driving business growth is most important. From the purchase patterns that the program throws up, we can develop schemes that drive frequency of purchase, complimentary product sales, average transaction value etc.
- Be cautious in not making wrong conclusions on the impact of schemes as part of the program, For instance, if customers who satisfy a certain criteria are offered a scheme which leads to some purchases from them, we also need to keep a control sample of customers who satisfy the same criteria, and are not offered the scheme, to know the differential performance.
Possibilities for Apparel
Apparel brands in India have leveraged rewards programs to gratify customers, drive incremental sales and get customer insights in a meaningful manner in recent years. Take for instance a menswear brand, for illustrative purposes. If we track purchases for a certain period of time, like a year, we can get information on customers who purchase only shirts or only trousers, or only cotton chinos, or only denims, for example. If there is a category that logically seems to suit a customer’s needs but he is not purchasing from you, it means that he is possibly buying them from another retailer. Such customers can be given offers on these categories and we could track the success rate of such schemes. It is also a good idea to know why they go to your competing stores, let’s not forget that you have his contact details with you! Think of another possibility – if x% of customer shop thrice a year, and y% shop only twice with both x and y being significant numbers, we could devise offers that trigger a third visit for those customers who shop only twice. A customer who buys only linen clothing can be sent personalized mailers whenever a new premium range of linen clothing hits the stores. One genuine test of loyalty towards a brand is in whether you are willing to use its products across categories including accessories like footwear, belts, wallets etc. As the category matures in a market, there are the strong brands that should lead this way and become truly iconic names that people like to associate themselves with. It is the customers with higher affinity for the brand’s core categories that should be positively predisposed to trying out new category offerings from them; this is something that can be influenced through structured rewards mechanisms for customers.
Today the world of mobile apps is bringing in a lot of new possibilities for consumers and retailers alike. The new buzzword today is ‘platform’! If we look at the startup eco- system in the Asian markets, there are very exciting initiatives in their early stages, many of which are retail platforms which bring customers and retailers together. In terms of their USPs they vary from one another- some are unique payment solutions, some facilitate easy checkout, while some offer unique rewards for customers like giving points for time spent in the store, there are loyalty aggregators who help you manage all your membership programs in a single app- a far cry from the days when it was a matter of prestige to carry aspirational membership cards that make your wallet bulky. The common thing here is the information that is getting captured at the back end, including the behavior of your customers outside your retail network, in different product categories. This leads to a major play for big data oriented business models.
The true strength of a retail membership program today is data. It always was, just that its application has moved to an altogether different level now. With the kind of data management and analytics tools at our disposal now, brands are raising the bar in terms or customer engagement. Today when you say you know your customers, the expectations are much higher that it used to be a few years back.
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