Customer loyalty - A view from retail
05 Dec 2018
“People who love only once in their lives are shallow people. What they call their loyalty, and their fidelity, I call either the lethargy of custom or their lack of imagination.” - Oscar Wilde
I know of this small and busy eating place in Mumbai which serves only one item- South Indian rice plate in two forms: limited and unlimited. The owner is a stiff-faced elderly gentleman who dispassionately issues tokens when you reach the cash-counter, after which there is a long wait to get a seat. Any effort at asking for a preferential entry in seating is always replied by a dispassionate “wait karna hai to karo varna paise vaapis lo.” (Wait if you need to; else please take back your cash) in an Udupi accent. When he is not shooing away requests, he is bluntly reminding people seated inside not to idle time on the seats after the meal. When I was initially subjected to this “rude” attitude years ago, I was sure that such joints will have no loyalty what so ever. With a few years gone by, I am “a loyalist” of this place and have found that this is one of the few places that seem to have a strong and growing set of “loyal” patrons. Why does this happen ? Good food, consistent service, no-nonsense pricing – I have still not found the real answer, but this small place has made me question my own understanding of “customer loyalty”.
How often do we exhibit loyalty-demonstrating behaviour as customers? “I want only Mustaqbhai to cut my hair at the saloon”, “Sirf dadu's ki cutting-chai mein dum hai”, “Only Maria understands the henna requirement of my hair”, “Only Thums-up for my rum”. I have heard these and many more comments and they often make me think that loyalty is a state/goal worth chasing in our business.
At my workplace, I often meet consultant gurus who want to vend customised loyalty programs. Having shifted to the retail business, I have come to realize (maybe like the stern Uduipi restaurant owner) that the only truth about loyalty is that “there is NO such thing as loyalty”, atleast in the conventional way. Let's try to debate five “traps” of the conventional understanding of loyalty . These “traps” are also experienced in the many existing loyalty programs. More often, these “traps” are shaped in form of “rules” that turn into major pitfalls.
Guess what! I pawned my gold ornaments and shopped all day; I have become eligible for the Gold Card.
Trap 1: Loyalty is primarily about setting “relationship rules”
Many of us are exposed to special schemes for “loyal customers” which reward people more on 'buying more'. The scheme promises special benefits when you “spend more and become the golden-card member”. Closer at workplace I have seen teams get heady with the success of such schemes. I discovered the pitfall in this rule when a simple housewife told my team in an interaction that “I hate this because you always make me spend more than my budget. It disturbs my home budget balance.” In this case , our enthusiasm of giving her special discounts was putting loyalty in the reverse gear.
Trap 2: Loyalty pertains to conditional relationships and is always “reciprocated”
Crowded cash tills in hypermarkets of India have often been a discouraging factor to many customers. This crowd is most accentuated on Saturdays and Sundays. Faced by this challenge, our retail teams would try “happy hours” for customers. Those who shopped before 2 pm on Saturdays and Sundays would be rewarded. Not only did this scheme fail to work with customers, it created potential “dissonance” among customers who would shop with their spouse and children only after 2 pm. We still battle the crowded weekends at our stores but a significant opportunity got created when the visionary promoter of our organisation suggested “why don't we create a weekend environment in the middle of the week”. This resulted in a strong “bazaar” getting created every Wednesday. Homemakers who would be busy over weekends, working couples and singletons now throng our stores on Wednesdays leaving space for many more families to shop on weekends with us. This has led to good business gains and importantly, more happy customers who come “again and again”- some on Wednesdays and others on Sundays. Would you have called this as a “loyalty-creation” thought? Conventionally-No.
Trap 3: Loyalty should primarily aim at getting customers over and over again
As I type this para, I can see my son counting the stamps on his doughnut loyalty card. The local doughnut store has designed a card that will give me a stamp on a special card every time we buy “six doughnuts”!. We should get 12 such stamps within 3 months. At this rate I will be asking my children to swap parathas for doughnuts and of course make them believe in the maxim “have a doughnut a day and hope to keep diabetes away”. This brings me to the third and a significant trap of conventional loyalty schemes. The best illustration of the trap is the example of Tukaram Patil. He holds the record of the biggest (and longest) bill in our hypermarkets. Patil saab is from Ichalkaranji, Maharashtra and visits the hypermarket in Sangli immediately after the harvest, full family perched on his bullock-cart. This is his only visit for the year but the purchases humbled many of our managers who always believed in selectively rewarding frequent shoppers. How do these schemes recognise the many Tukaram Patils of the country who get all their shopping done in one visit. In the headline of the article, I have taken the liberty of quoting Oscar Wilde out-of-context. His controversial statement on love and wedlock norms brings me to the fourth trap which we also see in many of the wedlocks around us , the trap of possessiveness
Trap 4: Loyalty is to dominate, own and possess the customer- Exclusively
In your last visit to the cosmetic counters at the departmental store, have you been hounded by the smart and aggressive counter sales persons. They readily dish-out fragrance Brands A and B and provide lip-liner demos for Brands C and D. It appears that they are perennially in the rat-race to edge out all brands other than theirs. The aggression and exclusive sales-pitch often ends up appealing only to the people who have come prepared to buy cosmetics be it brand A or brand B. All these sales boys and girls believe that customers come specifically to buy their brands. That's true, but what's often overlooked by all of them is that such customers are a minority comprising not more than 5%. The majority 95% are non-users who could be seeking some 'beauty' product, some starting advice. But this need is overlooked by the 'Buy ONLY me' attitude of the three brands. If all three brands had made an inclusive sales-pitch 'a cosmetic' first (and a Brand later), to this customer group, many more customers would have tried beauty products. The mantra therefore could be “inclusive growth”. At first this may appear to diminish loyalty but it is strongly felt that people who follow this mantra will eventually have a larger share-of-mind.
Trap 5: Loyalty is about keeping scores
Most of the loyalty schemes “keep scores”. They keep building an artificial sense of comfort that some value is being continuously piled up by our “loyal” purchases or patronage. Often there is an artificial scarcity being created of lapsing unused points, missing freebies if we don't act early, "never before discounts for loyal customer”, the list can go on. However this contrasts most of the loyal relationships we enjoy in the real world. Imagine a mother keeping scores for all the nights she stayed up for her kid; friends keeping a tally of all the times they kept company in bad times; a teacher keeping a tally of the good grades he earned for the top-ranking student. If there is no score-keeping in the real world, why should any customer relationship have a tally. Scores “compare”, scores add the mortality into relationships. The obvious downside of a tally-system is that the moment another score-keeper enters the fray with more efficiency and efficacy, the customer switch is imminent. I believe its time to move beyond a score-keeping mechanism in any relationship that recognises and compliments loyalty.
The straight norms to avoid the traps
Make the consumer devise the rules of engagement, break all conditions, compliment the customer irrespective of the “buy” frequency remaining low/high, have an inclusive relationship and make score-keeping redundant. I would therefore strongly advocate building an intimate understanding of the customers' life-cycle and mirror this in every engagement, in every solution offered to the consumer. I am reminded of a bindery machine producer, headquartered in Kerala, who advocated cost-efficient manual tips of handling paper wastage to one of his small customers. After many years, when the customer bagged a sizeable order, the machine manufacturer coached the customer on automation and assessing demand through forecasting model. In this case, the relationship had blossomed into a close understanding of the evolution of the customer and this relationship is likely to stand all tests of time.
Let me conclude this note with another food example – this time from the crowded markets of Thiruvananthapuram. There is a small food-shack serving 'limited' non-veg meals. Here the owner personally supervises the serving of meals to his customers who sit on two narrow benches. If you are a loyal customer, it is usual to hear things like “since when have you started eating 1 chapati less” or “today is Tuesday, I know you will opt for vegetables over chicken”. Many new customers are often taken aback by a strong rebuke from the owner “please don't come here if you intend to eat so little, there are other places which will be much cheaper for your small needs”. The owner of this joint reminds me of the simplest yet impactful maxim of loyalty- “You've got to give loyalty down, if you want loyalty up”
Sadashiv Nayak is one of the most sought after name in food retailng in India today. Mr Nayak has brought in an innovative approach to food & grocery retailing and is recognized for his role in the rapid expansion of Big Bazaar.
Will education drive print in India?
05 Dec 2018
India has made substantial gains in education. This is a country where 250 million children attend schools. Yet one of its most stubborn development challenges is the fact that 33 million children of primary school age still are not enrolled in school. Right to education is enshrined in the Constitution. The central government launched an ambitious scheme for education. The Sarva Shiksha Abhiyan is an effort to universalise elementary education by community-ownership of the school system. The SSA hopes to provide useful and relevant elementary education for all children in the 6 to 14 age group by 2010. There is also another goal to bridge social, regional and gender gaps, with the active participation of the community in the management of schools. India may boast the record for producing and selling the cheapest textbooks in the world Education is one of the key demand drivers for the growth of print world over. The sheer size of the education market in India ensures that this would probably be the largest factor. However, there are challenges in turning this into a value proposition. Free education – free books Innumerable interventions have been planned for the growth of enrollment. One of it includes: Free textbooks to all girls and socially backward children at primary & upper primary level within an upper ceiling of Rs. 150/- per child (less than $4). The state will continue to fund free textbooks being currently provided from the state plans. As a result, the state government textbook boards form the largest segment of publishers – in terms of quantity of books, produced. All such boards put together are estimated to produce anywhere between 1.5 to 1.7 billion textbooks per annum. That’s not all. The government is laying tremendous thrust on innovative activities for girls’ education, early childhood care and education, interventions for children belonging to backward and needy section of the society. There is a thrust on computer education especially for upper primary level. There is a big opportunity for the book printing industry in India; since the preliminary requirements of the SSA include huge quantities of publishing: school wise/EGS centre wise incentives of free textbooks and notebooks, teaching materials and information system etc. The state government textbooks are printed by empanelled printers selected through a tendering process. Often such tenders see unhealthy compe-tition leading to unrealistically low rates for printing. Huge compromises are then made in the production process, in terms of machines, consumables and quality control. This, in turn, leads to poor quality in production as well as delays in supplies. At times, one has to educate the state board government authorities that one three-side trimmer is the equivalent of three or four automatic cutting machines in productivity of trimming books. And similarly, four automatic pinning machines is equivalent to one online saddle stitching machine. Make and age of machines, special attachments, capacities – these are often not given much importance. In most cases there are no gradations for vendors. The ignorance among government authorities and the unhealthy competition deter highly successful printers who can produce books with better presentation quality. The rate card of NCERT, the premier national textbooks publishing body is a good example. For binding 1,000 signatures of A4 size book, the rate is about Rs 40 (about $1). That means a book of 10 signatures will fetch 40 paise – this is less than the cost of adhesive used in binding the book. Ironically, their tenders have always seen more and more new printers joining the bandwagon. Private education Private publishing The other side of the spectrum is the enormous growth seen in Investment in Private education. With growing income, the huge Indian middle class queue up to send their children to private schools. Today this is a significant part of their annual spend. There are the private publishers who produce textbooks and guides based on the various national (ICSE, CBSE) and state syllabus. Every such segment has a few national players; many more at the state levels. One can estimate about 700-800 million books per annum from this segment. Even in this segment we’ve witnessed a high level of fragmentation and competition. This ensures that the cover prices are very low. In fact India may boast the record for producing and selling the ‘cheapest’ textbooks in the world. “When a textbook on physics reaches a teacher for evaluation and recomme-ndation, there are 30 plus options on the table. The books maybe in different sizes, varying in presentations and in price; but how can the teacher evaluate so many books and decide which is the best for his / her students? Even if your teaching is based on a new book, it will take months before realising if the product (read content) is good. So, then, content is no more the king. It is price and relationship with teacher and school that sells the book. The low entry barrier in publishing ensures that the pressure on pricing is huge,” says Vivek Govil, President and CEO of Pearson Education India. (At the GLOBALOCAL Conference in New Delhi). Also, this makes the value chain unbalanced. Because the student at the top of the pyramid is willing to pay the right price, which is much higher than what the publisher is staking his claim to. (It is only the books on specialisation or super-specialisation subjects that command a premium). The cost of books, as a part of the school education budget in India is a humble 5%. We are not talking about the subsidised books published by the government. For example, a student studying in a private school in Mumbai, following the state board syllabus, would spend anywhere between Rs 20,000-40,000 per annum (about $450-900) on school fees alone. As against this he or she will spend a maximum of Rs 800-1000 ($22) on textbooks, guides and workbooks - all put together. This is an example where the consumer can afford and is willing - but the supplier is not in a position to ask. As there is no value realised, huge levels of compromises are made on both presentation and content quality. Content is often “cut and paste”. Poor quality of paper (50 gsm cream wove white printing paper from a b-grade paper mill is the norm), compromises on design to reduce cost, mono-colour printing, shabby binding and so on. This has made companies like Pearson to focus on complete solutions - including training sessions for teachers, educational aids, question banks, workshops etc; where the book becomes one part of the package and its value is realised in relation to the solution. The academic publisher will forward integrate and invest in educational institutions, thereby realising the full potential of the content. Issues in distribution India is a large country and the rural India still has places that cannot be reached by motors. The free books seldom reach there. The private publishers stay away due to logistical issues. Unless the infrastructure develops in such areas, this will remain a major deterrent. We may need to think out of the box to provide solutions in the short term. For instance in 2009 during a heavy monsoon spell, thousands of school-going children in Bagalkot, Raichur, Bijapur, Koppal, Gulbarga and Gadag districts were distraught that their textbooks and notebooks were washed away in the monsoon floods. If their parents were worried about rebuilding their damaged houses, the children were disappointed at losing their books, with half the academic year over. Responding swiftly to their plight the textbook society, which was established by the State Government, had issued circulars to the Deputy Directors of Public Instruction (DDPIs) in the flood-hit districts to distribute textbooks stored in the block-level textbook godowns (in each taluk) for sale, free so that the children did not lag behind in the studies. The above incident underscores the disparity between India’s haves and have-nots. Even though publishing – and particularly educational publishing forms a large pie of the print market, most of the ‘better’ printers stay away from this for obvious reasons. Lessons to learn Today, a pricing battle is transpiring in other countries, as well. In December 2010, the US Supreme Court affirmed a lower court decision on “the pricing of products made outside the United States.” This has implications for textbook pricing because it effectively prevents the new introduction of low-priced academic books. That’s because internationally sold goods usually work like this: the manufacturer produces two types of the same product. One is expensive and lavish, intended to be sold in the developed world. The other version is cheap and basic, intended for sales in Third World countries. Textbooks work like this too. The real barrier that many students have to accessing inexpensive textbooks is that publishers will only sell them the expensive, lavish version. Publishers make the cheap version, which is really all the students need, but the economic version is available in the developing world. The case came down to this: if the producer makes something intended for foreign sales, can American companies buy the product abroad and sell it cheaply back in America? A victory would have meant yes, and might have allowed Americans to buy textbooks for less money. That would greatly cut into publishers’ profits. This is a victory for American printer-publishers. Perhaps a cue for Indian book printers to tread a similar path, soon...
Gandhiji and Experiments in Printing
05 Dec 2018
I came across this quote: "Contributors should have some pity for the editor and poor compositors. We should take pride in writing a clear and beautiful hand in our own language ... Especially when writing for a publication, everyone should regard it as his sacred duty to be doubly careful." The author is not a compositor or typesetter. It is Mahatma Gandhi and going by his advise, it seems nothing has changed since 1919. Statesman, author, printer Very few know that Mahatma Gandhi was an astute printer, publisher and journalist. Gandhi edited Indian Opinion, Young India, Navjivan and Harijan. On 7 Sept 1919, Gandhi bought out the Navjivan weekly. However, the British government was threatened by the critical writings of Gandhi. Since no printing press owner was willing to risk its business by publishing reports against the government, Navjivan felt the need to acquire its own printing press. Gandhi counted bad printing an act of himsa (violence). He insisted on clear types, durable paper and neat simple jackets Today, Navjivan's annual sales turnover is Rs 1 crore. These are mostly from highly subsidised in-house publications. Add-itional revenue is generated through the copyright of Gandhi's collected works which adds up to 1,000 books. This includes his autobiography, My Experiments With Truth published in 24 foreign lang-uages, including Braille. A glance through Gandhi's body of work is impressive. Gandhi counted bad printing an act of himsa (violence). He insisted on clear types, durable paper and neat simple jackets. He knew costly books in attractive jackets were out of the reach of readers of a poor country like India. During his lifetime, the Navajivan Press printed many books at a low price. His autobiography in Gujarati was priced 12 annas. There was also a cheap edition of this book printed in Devanagari. Gandhi had simple, practical suggestions. He felt children's books should be printed in bold types, attractive paper, and each item should be illustrated with a sketch. He preferred thin booklets. They do not tire out the children and are easy to handle. Curiously, Gandhi was not obsessed with saving money while printing. Once the Navjivan Press decided to publish a Gujarati translation of Gokhale's writings and speeches. The translation was done by an educationist. When the book was printed, Gandhi was requested to write the foreword. He found the translation poor and stiff and asked it to be destroyed. When he was told that Rs 700 had been spent, he said: "Do you think it desirable to place this rubbish before the public after spending more on binding and cover? I do not want to ruin people's taste by distributing bad literature." Gandhi stopped printing his journals when a Government order restricted him. His press was confiscated, his files were destroyed, his co-workers were jailed. He was never discouraged and remarked: "The press has a role to play. It has to become the people's Bible, Koran and Gita rolled in one. A newspaper predicts that riots are coming and all that sticks and knives have been sold out. It is the duty of the press to teach people to be brave, not to instill fear into them." In today's times, the print industry has a lot to learn from the Father of the Nation.