Transformers - Colloquy

An ever-changing landscape
Though the India market is still
relatively unexploited, Jayaraj explains
that it is also becoming increasingly
complex and competitive as more
private equity pours into a growing
retail sector. “It’s becoming increas -
ingly important for organizations to
understand their customers in a
more systematic and professional
way,” he says. “India used to be made
up of small retailers or mom-andpop
shops where the shopkeepers
and customers knew each other
personally—by name, their father
and grandfather and family.” In
today’s growing marketplace, however,
as some retailers move toward
becoming national chains, knowing
customers individually becomes
impossible—and access to data and
data analysis becomes far more
important.
That’s where loyalty programs come
into play, says Vijay Bobba, Founding
CEO and Managing Director of
i-mint, a Mumbai-based coalition
loyalty rewards program launched in
2006 that now claims over 9 million
members, more than 2,000 network
partners and 3,000 points of pres -
ence. “For businesses, their interest
is in future access to customer data,”
he says. “And the only way you can
build customer data is to have
some kind of a loyalty program.”
As is fairly typical of most markets,
India’s earliest loyalty programs
were based in the travel and hotel
industries, and those verticals
remain strong as loyalty marketing
expands across the country. For
example, Brian Almeida, Group
Managing Director of Direxions, a
loyalty marketing and direct
marketing agency with offices in
Mumbai, Kolkata, Delhi and the U.S.,
says his company began by managing
programs such as the British Airways
Executive Club in South Asia, Jet
Airways’ JetPrivilege program, and the
Taj Inner Circle. Direxions today runs
India’s largest fuel program for
Bharat Petroleum (India’s second
largest oil retail company), a smartcard
program with over two million
members.
Today, more financial services
companies have integrated loyalty
into their offerings, and retailers
such as gasoline retailers, grocers and
department stores have developed
loyalty programs. “Three or four
years ago, the primary focus for
retailers was real estate,” Almeida
says. “Today, they are more focused
on how to acquire customers, how to
retain the customers, and what kind
of margin they need to be offering.”
Next-generation challenges
The next generation of loyalty
marketers and programs faces some
significant systemic challenges as
they seek to expand their efforts. For
example, despite its huge population,
only a small percentage of house -
holds make over USD$60,000
annually, limiting the number of
people able to regularly participate
in some kind of reward programs—
those who can afford, say, to fly on an
airline, stay at a hotel, or shop at a
more-expensive department store.
In addition, compared to the U.S.,
India’s consumers are savers; nearly
24% of their salaries are saved.
Combined with the fact that only
20% of India’s customers are
considered bankable, there’s not a
natural tracking mechanism on credit
and debit purchases for a vast
percentage of economic transactions.
Large retail formats, while seeing
growth, remain a small percentage
of India’s total retail landscape—
93-95% of retailers are typically
small convenience stores. The
national chains that could anchor
a partnership or coalition are, in
general, still evolving.
Finally, consumer awareness of
loyalty programs, explains Loylty
Rewardz’s Jayaraj, remains low.
However, awareness is increasing
as new loyalty programs spring up
regularly. “Given that this is a large
country, [program introductions]
are beginning to happen in a rapid
fashion, and people are beginning
to understand what this space is all
about,” he says.
Despite these issues, however, no
one should underestimate how
quickly India will catch up to markets
that have been running loyalty
programs for decades.
Firing up India’s loyalty future
The future of India’s loyalty industry
is bright, believes Direxions’
Almeida. “A lot of new technology is
coming in, with many new players
and more brand competitiveness,”
he says. “Those brands are going
to look at retention and loyalty
programs far more than they have
in the past.”
The prospect of partnerships and
expanded coalition programs, too,
hold a great deal of promise in India,
Economic and cultural contrasts provide specific challenges
to loyalty marketing in this fast-changing part of the world,
and they form a vivid metaphor for the evolution of loyalty
marketing itself: Promising opportunities abound.
say experts, since such business
models offer consumers a greater
value proposition and small- to midsized
businesses a way to increase
reach alongside national chains.
“I strongly believe that coalitions
appeal to the core of the Indian
psyche,” says Praphul Misra. “Indian
consumers are value conscious
customers, and if they are able to
generate value from across multiple
sectors of the purchase basket, from
fuel, to grocery to my telecom bill,
I think we are responsive to a value
proposition like that.”
Coalitions do face obstacles, of
course. “India is such a large
geographic area that it’s difficult
to get large national players that
have an equal presence across the
country,” says Almeida, which may
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