Interim Mt

AN INTERIM REPORT ON “A STUDY ON CUSTOMER RETENTION STRATEGIES ADOPTED BY VISHAL MEGA MART, BERHAMPUR”

Under the Guidance of

Mr. Ajit Narayan Mohanty Faculty Member, Marketing A report submitted in partial fulfillment of The requirements of THE MBA PROGRAM (The Class of 2009)

Prepared By

Rakesh Kumar Malu Enrollment No- 7NBBH049

CONTENTS

 Background of the study  Profile of Vishal Mega Mart, Berhampur  Summary of the progress till date  Introduction  Body of the thesis  References

Background of the Study The retail industry is divided into organized and unorganized sectors. Organized retailing (Vishal Mega Mart) refers to trading activities undertaken by licensed retailers, that is, those who are registered for sales tax, income tax, etc. These include the corporate-backed hypermarkets and retail chains, and also the privately owned large retail businesses. The unorganized retailing refers to trading activities done by local retailers which are not registered like kirana shops, fruits and vegetable vendors etc. The term "Retailing" refers to any activity that involves a sale to an individual customer. In India, the unorganized retailing sector comprises of 96.5% while that of organized sector just 3.5% that is mainly in major metropolitan and urban areas. Indian retailing traditionally dominated by a small family run "Kirana" store. Retailing in India is the second largest untapped market after China. Professional management and strong customer focus characterize organized retailing. Despite the huge size of the industry, only 8% of the country's population is engaged in retailing while that in United States of America it is 20%. The positive factor such as increased purchasing power, rise in number of double income families and demanding customers, due to change in life style and paucity of time, customers are increasingly looking for convenience. To woo the customers to the store retailers are providing a wide product range, quality and value for money, apart from creating a memorable shopping experience. If economy continues to register a growth of 7- 8 %of the GDP annually, estimated by 2010, retailers will comprises of $300bn industry .retailing is the last stage of distribution process. Retailing is one of the fundamental building block of the Indian economy. Indian retail market has undergone an immense transformation in the post liberalization & witnessing tremendous

growth. Indian retail growing at the rate of 30% per annum and provides the highest employment after agriculture in India. The growing sophistication in retailing like A.T Kearney & Kurt Salmon Associates have become active in India. Industrial houses take to Retailing and set up retail chains like R.P. Goenkas, Nandas, K Rahejas,Tata, Birlas, Piramals, ITC, Ambanis, find a place in the list. Many others have worked out their plans and are likely to enter the line in the next couple of months. Customer retention is not only a cost effective and profitable strategy, but in today's business world it's necessary. This is especially true when you remember that 80% of your sales come from 20% of your customer and clients. With these statistics I am wondering why most marketing and sales campaigns are designed for the new customer.

Profile of Vishal Mega Mart Vishal Group - launched their first hyper market Vishal Mega mart in Udaipur this month. Spread over 25,000 sq.ft, the store offers extensive range of men's, women's and kids' range of fashion clothing. Beside fashion attire, it will also have separate sections and counters for watches, sunglasses, fashion accessories, gifts and novelties, electrical appliances, digital diaries, perfumes, cosmetics and grocery items etc. Currently, Vishal Mega Mart operates 29 fully integrated and self-owned stores spread over a total shopping area of 5,70,000 sq.ft in 21 cities across India Vishal Retail Ltd. is one of fastest growing retailing groups in India. Its outlets cater to almost all price ranges. The showrooms have over 70,000 products range which fulfills all your household needs, and can be catered to under one roof. Each store gives you international quality goods and prices hard to match. The cost benefit that is derived from the large central purchase of goods and services is passed on to the consumer. In Berhampur Vishal Mega Mart is situated at R. C. Church Road in an independent building. It is a central market place where all sorts of customers come from all sorts

of places. This place is very convenient in various aspects like its reach, parking facility, market coverage. Due to rise in the per capita income, augmented product availability, exposure to international lifestyle brands& media explosion all adds to the booming retail industry investment in this area is poised to reach Rs 40000 crore by 2006.

Summary of the progress till date There is a boom going on in the retailing sector in the present world. The business environment in India as well as in other countries like China, South Korea, Germany, France, UK, Japan, Thailand, Hong Kong, Indonesia etc is becoming very complex and opportunistic with respect to various sectors as of now “Customer is the KING”. The customer retention strategies of Vishal Mega Mart as observed by me in the SIP period and for last one and a half month have been customer oriented and time or season oriented. That means it is undertaking these strategies on a regular basis so as to make the customers more loyal towards the products or services in Vishal Mega Mart. Vishal mega mart has been trying to differentiate itself from other local stores like Lohiya Brothers, Sri Durga Cloth Stores, other franchisee outlets, local kirana stores so that more number of existing as well as new customers will enter and be converted into regular loyal customers. From time to time it is providing discounts, offers, schemes, better ambience, wide assortment of goods with innovative visual merchandising, competitive pricing, better

customer value, better service through employees etc. it has been very difficult for the management of the store for making the customers loyal towards the store because of the complexities of the consumers and competitors.

Introduction Aim of the Study The principal aim of the study is to find out the customer retention strategies adopted by Vishal Mega Mart, Berhampur on a regular basis or daily basis. Another aim of this study is to analyze the relationship between the customer retention strategies and the sales turnover or customer walk-ins into the showroom of Vishal Mega Mart. "Customer retention strategies include all front office interactions with potential and existing customers, including sales and marketing as well as customer care and help desk support. Rather than customer relationship management which focuses on managing customer data, a dynamic customer retention strategy allows a business to grow its revenue among existing customers".

My Live Experience: A foundation of my philosophy (in business and in the rest of my life) is that we need to treat everyone well. Another way to look at this is we're here to serve others. And the best way to serve others (or at least, the best way to start) is by putting others first. This means treating them with courtesy, dignity and kindness. It also means putting their interests ahead of ours. One day I walked into a store that sold cabinets and related products for homes. The owner approached me with a friendly smile and greeting. But when he learned I was not there as a customer he changed completely. No more "Mr. Nice

Guy".

I

left

shaking

myhead.

A few weeks later, just for fun, I stopped in the same store and acted like a customer. The same guy helped me and he was as nice as a person could be. Then I shared with him the details of my prior visit to his store. I asked him what he thought of people who treat others differently based on who they are, such as a customer vs. a salesman. He had no coherent answer. So I helped him. I let him know very clearly I would NEVER do business with him or anyone who treated people based on rupee signs.

Purposes of the Study The main objectives of the study or analysis are as follows.  To get the knowledge of the customer retention strategies.  To know about the customer retention.  To find out the customer retention strategies adopted by Vishal Mega Mart, Berhampur.  To find out the impact of the strategies on the daily business activities in the store.  To analyze the effect of customer retention strategies on the performance of the employees, top management, sales of the divisions, merchandise turnover etc.

Methodology Applied The methodology for the above study can be taken as the Questionnaire method and Sampling Design so that important information and aspects can be taken from the company. As this is not the topic in which I can put some calculation and analytical applications, what they had, what they have and

what they should to improve the sales performance and to increase conversion rate.

Body of the Thesis The customer retention strategies used by Vishal Mega Mart, Berhampur are not sufficient but they are giving the results. So it should try to establish the long term relationship with the customers so that they will become brand “VISHAL” loyal. It sounds good in a town like Berhampur it is putting efforts towards the retention. But there are some suggestions through which it can derive more benefits in the long run.

Customer Buying Process Word of Mouth

Good Product Good Service In- Store display & Promotion Existing

VMM Store

New Customer

Customer

Marketing

Customer Entry “Number of people who entered our store during store hours” A customer entering in a store means that he/she is interested in the store “Court every individual who walks into Store” Proportion of Expenses made for four Strategies in Vishal Megas Mart Sales Promotion Loyalty Program Database Marketing Customer Retationship Marketing

Measuring the Customer’s Value Every customer relationship is an asset and has a economic value or Lifetime Market Value (LMV). A customer’s Lifetime Market Value is determined by taking your average customer transaction amount and multiplying it by the number of transactions he or she will conduct with your organization over time. For example, if your average customer buys Rs700 worth of product every quarter for roughly three years then your average customer’s LMV is: Rs700 x 4 = Rs2,800 x 3 = Rs8,400. When you create customer retention initiatives, you will need to justify them based on the return on investment they will generate. This can be easier or harder depending on the position in the customer life cycle. Generally, the later in the life cycle, the easier it is to attribute results to your customer

retention initiatives and, therefore, prove a suitable return on investment. However, intervening earlier is less expensive and more effective but harder to prove. Don't let the difficulty of proving the ROI for early intervention deter you, because it can pay very good returns. Companies who devote the majority of their energies and resources to getting new customers usually do so at the expense of their existing customers. The resulting neglect can erode the trust and “equity” found in repeat customer relationships.

Reasons Customers Leave: - Move or Die 4% - Other Company Friendship 5% - Competition 9% - Product Dissatisfaction 15% - No Customer Contact Strategy 67% What happens if you lose a customer after only one year’s worth of transactions? In the above example, your company would have received only $2,800 of the $8,400 that would have come from maintaining a better relationship. Customer Retention - keeping customers - can be improved by explaining to your employees - especially those on the front line who deal directly with your customers - just how much each customer is worth to your business. Customer Attrition - losing customers - can be dramatically reduced when all of your employees work together to keep your existing customers satisfied.

The best customer retention initiative to implement for a specific customer often depends on that customer's position in the customer life cycle. What's more, the earlier in the customer life cycle that you execute a customer retention initiative, the more effective and higher the overall ROI of the initiative. So what should you do—and when? At Vishal Mega Mart, I divide the customer life cycle into four distinct sections. These sections are shown below along with the value, i.e. profit or gross margin that different types of customers contribute to the business at different parts of the cycle.

New This is the time when a customer is just starting his or her relationship with your company. The length of time a customer spends in this stage depends on your business, but it is normally anywhere from a few days to a couple of months. The largest group of customer retention strategies that can be implemented in the "new" stage of the customer lifecycle is "onboarding." Onboarding is the process of bedding a customer into your organization. It includes

ensuring that personal customer data is correct and that customers understand the products they have purchased and how to contact the organization. At Vishal Mega Mart, in the programs we have developed and implemented for our clients, we have proved time and again that customers that are properly onboarded will stay with the company longer and spend more money than other customers.

Existing These are your company's current customers and fall into several groups:  The ideal customers, who continue to use and grow their use of your products.  The unhappy customers, who still use your products but are discontented.  The customers in silent attrition, still have your products but no longer use them actively, such as credit card accounts with little or no spending. They are generally a drag on company value, because you still have to service them, although they add no profit to the business. For instance, for customers in silent attrition, you must determine why they are no longer using your product and then determine how to have them start to use your product again. For example, are you their "back of the wallet" card? If so, an initiative might be to target customers with a campaign to increase their use of direct debit orders. Once they have started using the card for regular purchases, they are more likely to use it in day-to-day shopping.

Exiting

These customers are on the way out. They may still use your product, but they are looking for the exit and actively seeking alternatives. Given time, they will leave. Your initial challenge in creating retention strategies for Exiting customers is to identify them. One way is to uncover the tell-tail signs that customers considering a move provide to your organization. For instance, if you are a bank, they may make a request for the loan pay-out details. As you uncover these indicators, you should create initiatives to target those customers with a proactive contact. Where customers purchase multiple products from you, you should also try to understand the order in which customers drop their product relationships when they are exiting, because this can give you another good early warning. Once you can spot exiting customers, you can create effective customer

retention

strategies

to

target

those

customers.

Exited Putting it simply, these are no longer customers. They have left. Strategies that are aimed at recapturing customers that have left the organization are generically called winback strategies. This is the most expensive and lowest ROI place to try to implement your customer retention strategies. Mentally, customers have already moved to another organization, and it takes a large inducement to bring them back. If you choose to execute winback strategies, you will need to carefully manage the level of incentive that your staff can offer to customers. For instance, you will need rules to tailor the incentive level to each specific customer to ensure that the level of inducement is not larger than the future business generated by that customer.

Customer Retention Rate:

The customer retention rate refers to the number of customers lost over a period of time. It is normally calculated by the percentage of lost customers versus existing customers over a quarterly or annual period, without tallying new customer acquisitions. While there are obvious benefits to keeping customers loyal and maintaining high customer retention rates, it can be extremely challenging for management to keep retention rates up. This guide will explore some of the best customer retention strategies, important topics and common challenges related to customer retention: A. Understanding customer retention B. Build a customer retention strategy C. Implementation of a customer retention program D. How to calculate retention rate

A. Understanding Customer Retention Those getting started with a customer retention strategy might initially assume that retention rate is based on customer satisfaction. However, several studies have indicated that there is little correlation between customer satisfaction and retention or future purchases. Employees

are

capable

of

directly

contributing

to

both

customer

disappointment and customer delight. It is essential that companies have a research and analysis method that links staff performance engagement directly to customer behavior, so they can hire, train, recognize and reward employees for how they contribute to customer value." B. Build a Customer Retention Strategy

Customer loyalty is all about driving perceived value, whether that is rational (functional, quality, cost, etc.), emotional (trust, service, communication, information, brand equity, etc.) or a combination of these two dimensions. His advice for building a customer retention strategy?, first, identify what leverages top-end customer commitment and advocacy behavior, and then build customer experience around it. When it comes to getting started with building a customer loyalty strategy, it is advised businesses to use these six questions as a guide: 1. What are the expectations of our customers and what it will take to exceed them? 2. What differentiates our company in the eyes of our customers? 3. To what extent can we grow our business with our existing customers? 4. How do our interactions with our customers affect their satisfaction and buying behavior? 5. Do we have any customer segments that require different treatment? 6. How loyal is our customer base and how can we improve it?

C. Implementation of a Customer Retention Program A road map for implementing a customer loyalty program should include the following:  Appropriate research for identifying the benefits  Testing them for prospective customer interest and effectiveness  Following up with further research once implemented to make certain

that the loyalty program's benefits are working

D. How to calculate Retention Rate

The customer retention rate is calculated by determining the number of customers lost over a period of time compared to repeat customers over the same amount of time. "A customer is one who continues to make purchases, and a lost customer is one who has made purchases, but does not repeat these purchases for some time. The key is to analyze the repeats over a long enough horizon." The calculation is: (Total number of customers minus the number of repeat customers) divided by total number of customers

Customer Relationship Management CRM is at the core of any customer-focused business strategy and includes the people, processes, and technology questions associated with marketing, sales, and service. In today's hyper-competitive world, organizations looking to implement successful CRM strategies need to focus on a common view of the customer using integrated information systems and contact center implementations that allow the customer to communicate via any desired communication channel. Lastly, CRM is a core element in any customercentric eBusiness strategy.

Loyalty Program at Vishal Mega Mart, Berhampur The plan objectives for this program are: 1. Effectiveness, cost savings, profitability, etc. 2. Develop a greater sense of concern and loyalty about the company or brand 3. Strengthen communications between customers and companies. 4. Provide financial rewards to customers who have demonstrated performance or contribution 5. Enhance the Company’s ability to meet or exceed its target goals.

The customer retention process begins with the first contact… before they are even a customer. •

Expectations

•

Solutions

•

Delivery

•

Value

•

Relationship

Recommendations 1. Serve your Customers. Serving your customers means putting them first. It means helping them get what they want. The customers come to the store to accomplish something they want or to avoid something they don’t want. They believe you can help them. (Otherwise they would have gone somewhere else.) They have chosen you! Honor their choice by doing everything within your ability to help them. This means focusing your attention and efforts on discovering what they want and helping them get it. You put their interests and desires first. It means your sole motivation is helping them get what they came for. 2. Connect with your customers. Connecting with your customers means getting to know them as a person. You develop a relationship with them. Of course you keep it professional and in the context of your business. But it’s okay to learn about them as you help them. In fact, the better you get to know them, the better you can help them. This does not have to take long. Sometimes a “social chemistry” can develop within minutes. It shouldn’t be phony or manipulative. It needs to happen naturally. If you care about your customers, if you use your people skills, if you ask pertinent questions, if you listen and really focus on helping them, then you’ll develop a great rapport with them quickly. 3. Have fun.

One of the biggest reasons customers don’t return is they have no reason to. Sure they might get what they want but they often get it with no personality, no sparkle, no sizzle. Their experience is a dud. It’s about as exciting as cleaning your ears. There’s nothing memorable about it. Or worse, employees are crabby, grouchy or even angry and they show it. 4. Be flexible. With most things there is no one right answer. There is almost always more than one way to accomplish something. But we don’t always admit it. Too often we focus on one way to do something. Maybe it’s the only way we know. Maybe it’s the fastest, cheapest or easiest route to helping our customer. But that doesn’t make it the best. Our goal is to help our customers get what they want, within our ability. So we always need to look for alternatives. We need to be creative. We need to think beyond the first solution that comes to mind when we’re working with our customers. 5. Make them happy. This is the most important thing you can do with your customers. If they are happy with your service they will come back. They will help increase your job security because they’ll stick with you and your company. Note, this does not mean you do anything and everything to make your customers happy. You’re always limited by the resources and policies of your company. But it does mean you do everything within your ability to make them happy. Get creative and look for ways to give your customer a great experience.

Establish clear expectations and communicate them regularly and often. •

Reinforce the buying decision every chance you get

•

Stay in touch – No Hit and Run Selling!

•

Be Aware of “Buyer’s Remorse”

Establish multi-level relationships •

Power – Decision Maker

•

End-Users

•

Sponsors

•

All Stakeholders

If something is broken…fix it! Be willing to face the truth. •

It is never too late…it just seems like it is

•

Small steps can and do make a difference

•

Don’t go it alone; use your resources

Repairing Customer Relationships at Vishal Mega Mart Preventative:

Restorative:

•

Communicate in writing

•

Back-up and start over

•

Never make any

•

Leverage the positive

•

Take Responsibility

assumptions •

Be honest and upfront

•

Be proactive

•

Be accountable

•

Develop a mutual plan

Must take action! Their advertising and sales programs are designed to find and promote their products and services to new customers. The company is organized on a

product or brand basis, not on a customer segment basis. While they all have customer service departments, and most have a customer service toll free number, they lack an integrated marketing strategy that is directed at retention, and that defines retention as the measurement of success. We have often heard it said that "It is five times more profitable to spend your marketing rupees to retain the customers that you have than to use the dollars to beat the bushes for new customers." Most people would agree with this statement, even though they have no way of proving it.

The gold customers should not be bombarded with marketing programs. On the contrary, they should be rewarded with super services. These are 80% (or some other large percentage) of our revenue. We must retain these loyal folks. We spend our marketing dollars on the middle three quintiles: encouraging them to move up, to get in to Gold Heaven. On the other hand, the bottom quintile may be costing you more than they are worth. Don’t waste marketing dollars here. We don’t want to retain them. Companies today have tens of thousands– in some cases millions-- of customers. We do not know who they are. We cannot recognize them and

talk to them as the old corner grocers did. Loyalty has disappeared. Customers are loyal until tomorrow’s newspaper, when they see a coupon for something at another store and – woosh, they are gone. There is one key principle at work here, however. Database marketing only works to build retention if the customer benefits from the retention strategies. It works if the customer says to herself, "I’m glad that I’m on that database, because…" The company running the database has to complete the sentence by designing and running programs that capture the loyalty of their customers. If the customer does not see some value to herself in the database activities, he/she will chuck out your newsletters unread. She will ignore your communications. He/she will leave your gold cards in her top bureau drawer. For the database program to be successful, the marketer must design the program from the customer’s point of view. If you can come up with a strategy that makes customers happy, then they will reward you with something that you want, but which costs them next to nothing: loyalty.

Last but not the least You‘ve got all the right stuff. The shelves are stocked, the door is open, the Welcome sign is in the window. You have successfully

attracted

potential

Customers;

but

now,

to

convert them, you have to invite them to interact, to engage in a transaction, and to come back.

References  EdMckinley, India's Top retailers ready to face off with foreign chains, www.Icsc.org,2006  Emerging

market

priorities

for

global

retailers",

Growth

Potential.

www.atkearney.com,2006  Indian

Retail

sector-

Tremendous

www.smallbiz.nws.gov.au,2006.  Indian

Retail:

on

fast

tract

bridging

the

capability

www.kpmg.com,2006.  Marketing Management- I & II, ICFAI University Press  Marketing Management, Eleventh Edition, Philip Kotler  www.about.marketing.com  www.vishalretail.com  www.pdfcoke.com

gaps,

Questionnaires 1. What is customer retention? 2. What are your customer retention strategies? 3. Why are you using these strategies? 4. What are the implications of these strategies? 5. What is the contribution of the employees towards the retention strategies? 6. What is the effect of the customer retention strategies on the sales performance of the store? 7. How does it enhance brand loyalty among the customers? 8. What are the different strategies for calling new customers and retaining existing customers? 9. What are the sales promotional strategies of Vishal Mega Mart, Berhampur? 10.How are the customer retention strategies different from sales promotional strategies? 11.What is the success and failure rate of these strategies and recommendations for the effective and efficient application of customer retention strategies? 12.