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SUBMITTED BY:
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UNDER THE GUIDANCE OF:


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FACULTY GUIDE - CUIM
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DECLARATION BY STUDENT 4

CERTIFICATE BY THE GUIDE 5

ACKNOWLEDGEMENT 6

EXECUTIVE SUMMARY 7

Abstract

Objectives of the study

Research Methodology

Hypothesis

Limitations of the study

CUSTOMER LOYALTY‘‘ ‘ ‘ ‘ ‘ ‘ ‘ ‘ ‘ 10

Introduction

History of customer loyalty

Types of customer loyalty

Factors influencing customer loyalty

Relationship between Customer Satisfaction and Customer Loyalty

Customer Loyalty Grid

Customer loyalty surveys

Measurement of customer loyalty

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CUSTOMER LOYALTY IN ORGANIZED RETAILING 26

Contemporary trends in Indian organized retailing

Buying behavior

Retail Promotion and Branding

Merchandising Management and Selling Environment

RESPONDENTS PROFILE 32

DATA PRESENTATION AND ANALYSIS 35

FINDINGS 55

RECOMMENDATIONS 57

CONCLUSION 59

BIBLIOGRAPHY 60

MY LEARNING 61

ANNEXURE 62

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This is to state that the dissertation titled ³A study of the drivers of customer
loyalty in organized retail brands.´ is an original work carried out by me
under the guidance of Prof. Ashwini Srinivasan towards partial fulfillment of
the requirement for the award of the Degree of Master of Business
Administration by Christ University Institute of Management, Bangalore.

This has not been submitted in part or full towards any other degree or
diploma.

Date
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Mayank Singh
Place: Bangalore (08PG0019)

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This is to certify that the dissertation titled ³A study of the drivers of

customer loyalty in organized retail brands..´ by Mayank Singh bearing
Registration Number 08PG0019 relates to the Marketing stream of
specialization towards partial fulfillment for the award of the Degree of
Master in Business Administration by Christ University Institute of
Management, Bangalore.

PLACE: BANGALORE

______________________

DATE: Prof. Ashwini Srinivasan

Faculty guide
Christ University Institute of Management
Bangalore

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I take this opportunity to pay gratitude to all the people who have helped
me complete this project successfully.

My heartfelt gratitude to Father Thomas T.V. ± Director, CUIM, and Professor

C.K.T. Chandrasekhar, HOD, CUIM for giving me the opportunity to carry out
this study.

With all respect and regard, I would like to thank Prof. Ashwini Srinivasan for
constantly encouraging me. Her support and guidance has helped me
explore my potential.

A sincere appreciation to all the respondents for their valuable time and
interactions, which gave useful insights to complete this dissertation report.

I would also like to thank my friends and batch mates for their support.

Finally, I would like to thank my parents and family for their love and
prayers that has lead to the successful completion of the report.

Mayank Singh

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Recent years have shown a growing interest in customer loyalty. The
globalization of competition, saturation of markets, and development of
information technology have enhanced customer awareness and created a
situation where long-term success is no longer achieved through optimized
product price and qualities. Instead, companies build their success on a
long-term customer relationship. According to former studies, it can cost as
much as 6 times more to win a new customer than it does to keep an
existing one. Depending on the particular industry, it is possible to increase
profit by up to 60% after reducing potential migration by 5%. (Reichheld
1993: 65) Hence we can see that the increase and retention of loyal
customers has become a key factor for long-term success of the companies.
The main emphasis in marketing has shifted from winning new customers to
the retention of existing ones.

Traditionally there are two approaches to treat customer loyalty. Some

researchers have investigated the nature of different levels of loyalty; others
have explored the influence of individual factors on loyalty. In this study
both treatments are combined. The starting point of the paper is to test
whether the list of most important factors affecting customer loyalty is
dependent on the levels of loyalty of costumers. More specifically the study
is going to estimate which specific factors in the organized retail brands
sector influence the loyalty rate of the various customers segmented by
loyalty.


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-‘ To ascertain the key factors those have impact on customer loyalty in

organized retail sector.
-‘ To gauge the relative significance of the above factors.
-‘ To establish relationship between level of customer loyalty and the
loyalty factors.
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#0#!-'3‘#)3%4%5%".‘

Sample size: 200 retail customers

Sampling technique: Random sampling

Time Period: 5 months (approximately)

Location: Bangalore City

Retail brands considered for study- Big Bazaar, Total, Star, Spars, and
Reliance.

Tools for Data Collection:

-‘ Primary Data: Customer loyalty survey using questionnaire.

-‘ Secondary Data: Websites, Books, Research Papers and Journals

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.6%)3#0*0‘‘

.6%)3#0*0‘: Factors such as Customer service, Product quality,

Timeliness & ease of delivery, Pricing & promotions Professionalism of staff,
Accessibility References and Overall ambience have a positive influence on
customer loyalty.

.6%)3#0*0‘: The relevance of factors affecting customer loyalty depends

on the levels of loyalty of customers.
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-‘ The number of respondents is not very large as compared to the

general customer loyalty surveys.
-‘ Loyalty questions may appear to measure very different aspects of
loyalty but customers do not make those same distinctions when
ratings these questions.
-‘ Sample comprises of respondents from a limited number of retail
brands

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The term customer‘ loyalty is used to describe the behavior of repeat

customers, as well as those that offer good ratings, reviews, or testimonials.
Some customers do a particular company a great service by offering
favorable word of mouth publicity regarding a product, telling friends and
family, thus adding them to the number of loyal customers. However,
customer loyalty includes much more. It is a process, a program, or a group
of programs geared toward keeping customers happy so he or she will
provide more business.

Customer loyalty can be achieved in some cases by offering a quality

product with a firm guarantee. Customer loyalty is also achieved through
free offers, coupons, low interest rates on financing, high value trade-ins,
extended warranties, rebates, and other rewards and incentive programs.
The ultimate goal of customer loyalty programs is happy customers who will
return to purchase again and persuade others to use that company's
products or services. This equates to profitability, as well as happy
stakeholders.

Customer loyalty is the result of well-managed customer retention

programs; customers who are targeted by a retention program demonstrate
higher loyalty to a business. All customer retention programs rely on
communicating with customers, giving them encouragement to remain
active and choosing to do business with a company.

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Customer loyalty may be a one-time program or incentive, or an ongoing
group of programs to entice consumers. Buy-one-get-one-free programs are
very popular, as are purchases that come with rebates or free gifts. Another
good incentive for achieving customer loyalty is offering a risk free trial
period for a product or service. Also known as brand name‘ loyalty, these
types of incentives are meant to ensure that customers will return, not only
to buy the same product again and again, but also to try other products or
services offered by the company.

Excellent customer service is another key element in gaining customer

loyalty. If customer has a problem, the company should do whatever it takes
to make things right. If a product is faulty, it should be replaced or the
customer's money should be refunded. This should be standard procedure
for any reputable business, but those who wish to develop customer loyalty
on a large-scale basis may also go above and beyond the standard. They
may offer even more by way of free gifts or discounts to appease the
customer.

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*0)%-.‘%2‘'(0)%,#-‘5%.!5).‘

In 1929, Betty Crocker issued coupons that could be used to redeem for
items like free flatware. In 1937 the coupons were printed on the outside of
packages, and later the Betty Crocker points program produced a popular
reward catalog from which customers could pick rewards using their points.
In 2006, it was announced that the Betty Crocker Catalog was going out of
business and that all points needed to be redeemed by December 15, 2006.
With it, one of the earliest loyalty programs ends a 77 year tradition.

On May 1, 1981 American Airlines launched the first full-scale loyalty

marketing program of the modern era with the AAdvantage frequent flyer
program. This revolutionary program was the first to reward "frequent fliers"
with reward miles that could be accumulated and later redeemed for free
travel. Many airlines and travel providers saw the incredible value in
providing customers with an incentive to use a company exclusively and be
rewarded for their loyalty. Within a few years, dozens of travel industry
companies launched similar programs. The AAdvantage program now boasts
over 50 million active members.

American Airlines' AAdvantage program can trace some of its roots to S&H
Green Stamps, which were a popular retail reward coupon issued very
commonly from the 1930s through the 1980s. Typically, as a consumer
shopped at various grocery and dry goods stores, they would receive a set
number of Green Stamps that could be pasted into booklets and redeemed
for prizes.

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.6#0‘%2‘'(0)%,#-‘5%.!5).‘

Loyalty has two definitions, /#3!+*%-!5‘ 5%.!5). and !))*)(4*$!5‘ 5%.!5)..

Behavioral Loyalty means the act of customers making repeat purchases of
their current brand, rather than choosing a competitor brand. Loyalty
behavior is also called "customer retention." Attitudinal are those judgments
and feelings about your product, service, brand or company that are
associated with repeat purchases.

Sometimes customers exhibit loyalty behavior without having loyalty

attitudes, as in markets dominated by a monopolist. And sometimes
customers exhibit loyalty attitudes without demonstrating much loyalty
behavior, as in the case of true blue customers who buy very infrequently.

#3!+*%-!5‘%.!5).

The value of the behavioral loyalty is that it directly relates to sales and
market share. Loyalty behavior is measured by analyzing customers' sales
transactions, revealing customer retention rates and customer defection
rates over various time periods. As transactions of individual customers are
tracked over time, this shows their repeat purchases and "lifetime value."
Then lifetime value is linked to demographics, and used in developing
marketing strategies that target high value customers.

))*)(4*$!5‘%.!5).‘‘

Attitudinal loyalty is a softer measure than behavioral because people can

feel one way and behave quite differently. Sometimes customers are
classified into loyalty attitude groups such as "new arrivals", "repeat
buyers," "advocates," "loyalists" and so on as they slowly bond with your
company over time. Loyalty attitudes are measured by means of customer
surveys. There is no widely accepted standard for what questions to ask or

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what is a "good" score. Instead you need a good process that produces
useful information.

Another classification of customer loyalty is as follows:

4+%'!'.‘ %.!5).: Reflects the degree to which customers will be

advocates of the company (average across satisfaction, recommend, choose
again, and purchase same)

(-'3!0*$"‘%.!5).: Reflects the degree to which customers will increase

their purchasing behavior (average across purchase different, purchase
increase, purchase frequency)

#)#$)*%$‘%.!5).: Reflects the degree to which customers will remain with

a given company (single defection item ± reverse coded)

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Source: Peter Clark, |
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1.‘ %-#‘%22#-*$"
The companies that boast the highest levels of fiercely loyal customers
have built that loyalty not on card programmes or gimmicks, but on a
solid, dependable, core offering that appeals to their customers. These
companies have focused intently on what they know appeals to the
type of customers they want to attract, and have determinedly
concentrated on delivering what is expected every time. North
American retailer, Nordstrom, is well known for the loyalty of its
customers. It built this loyalty by understanding what its customers
wanted and then empowering its employees to deliver those needs
consistently.

Elements of the core offering that have a large role in building

customer loyalty include:

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Whether selling services or products, the level of service
perceived by the customer is generally key to generating loyalty.
It can be argued that some customers buy only on price, so all
that is necessary to retain their loyalty is consistently low prices.
To certain extent that is true. But in most cases, any loyalty
shown will be only to the prices instead of the business. Should a
competitor offer even lower prices, those customers are likely to
defect. Companies that have adopted a policy of everyday low
prices (EDLP) can be more vulnerable to competition than those
who have built their customers' loyalty on superior products or
service.

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The products or services offered must be what customers want.
The days when businesses could decide what they wanted to sell
or supply, and customers would buy it, are long past.

2.‘
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Clearly, satisfaction is important; indeed essential. But, taken in
isolation, the level of satisfaction is not a good measure of loyalty.
Many auto manufacturers claim satisfaction levels higher than 90%,
yet few have repurchase levels of even half that. The situation is
stacked against the business: if customer satisfaction levels are low,
there will be very little loyalty. However, customer satisfaction levels
can be quite high without a corresponding level of loyalty. Customers
have come to expect satisfaction as part and parcel of the general
deal, and the fact that they are satisfied doesn't prevent them from
defecting in droves to a competitor who offers something extra.

The point is that, while high levels of customer satisfaction are needed
in order to develop loyal customers, the measure of customer
satisfaction is not a good measure of the level of loyalty.

3.‘ 5!0)*'*).‘5#+#5
Elasticity expresses the importance and weight of a purchasing
decision - effectively the level of involvement or indifference. This
applies to both the customer and the business.

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The customer's involvement in the category is important: the
more important the product or service is to the customer, the
more trouble they have probably taken in their decision to do
business with you, and the more likely they are to stick with
what they have decided. Most customers would be highly
involved in the category when choosing a new car, a new jacket,
or a bottle of wine. However, when choosing a new pair of
shoelaces, involvement is not usually high. Businesses dealing in
commoditized products and services cannot expect high
involvement and need to earn loyalty in other ways.

½‘ Ê



The customer's level of ambivalence is also important. Few
decisions are clear cut. There are usually advantages and
disadvantages to be balanced, and vacillation is unstable. Again,
we see that the more commoditized a product or service, the
more difficult it is to cultivate loyalty. It is only when points of
differentiation are introduced that the customer has a valid
reason for consistently preferring one particular supplier.

4.‘ 3#‘,!-7#)65!'#
The marketplace is a key factor in the development of loyalty. The
elements most closely involved are:

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If the number of competing suppliers is high and little effort is
required to switch, switching is clearly more likely. Conversely,
the more time and effort invested in the relationship, the more
unlikely switching becomes. The level and quality of competition
has a significant effect on how easy it is for a customer to switch
from any one particular supplier. When competitors are offering
very similar products at similar prices, with similar levels of
service, some means of useful differentiation has to be found in
order to give customers a reason to be loyal.

½‘ ÷

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This is the opposite of ease of switching. Most banks enjoy a
high level of inertia loyalty simply because it's often so difficult
and time-consuming to change to a new bank and transfer direct
debits and standing orders.

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According to Jan Hofmeyr and Butch Rice, developers of The
Conversion Model (which enables users to segment customers not only
by their commitment to staying with a brand but also to segment non-
users by their openness to switching to the brand), more affluent and
better educated customers are less likely to be committed to a specific
brand. They say that the commitment of less affluent consumers to
the brands they use is often unusually strong - possibly because they
cannot afford to take the risk of trying a brand that might not suit
them as well. They also suggest that younger consumers are less
committed to brands than older consumers.

6.‘
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As markets become saturated and customers have so much more to
choose from, share of wallet becomes increasingly important. It is
cheaper and more profitable for a company to increase their share of
what the customer spends on them, than to acquire new customers.

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Customer satisfaction is a measure of expectations being exceeded, met, or

not met. Customer loyalty is based on total perceived value of a product or
service, not merely a single element, such as customer service level, price,
accuracy, technical proficiency, completeness, brand image, etc. Satisfaction
measures only attitude, superficial feelings about these elements. If the gap
between expectation, perception and delivery of customer service is
managed at a high level, the customer will perceive that the relationship is a
mutually beneficial one where there is equilibrium of commitment. This in
turn will encourage repeat purchase and give a greater share of the
customer, which is the defining factor in customer loyalty.

The two can be differentiated broadly on the following factors:

1.‘-*'*$" You negotiate prices with satisfied customers. You negotiate

costs with loyal customers.
2. !.,#$) Satisfied customer pay at their discretion. Loyal customers pay
on time.
3.
#2#--!50 Satisfied customers become referrals of your competitors.
Loyal customers willingly provide referrals to you.
4.‘(-$%+#-‘Generally, you will experience turnover rates of 15% or higher
of satisfied customers. The turnover rate of loyal customers will be less than
5% and will be for reasons out of your control.
5. %,6#)*)*+#‘4!)! Your satisfied customers are seeking competitive
data. Your loyal customers are sharing competitive data.
6. #-'#6)*%$‘Satisfied customers perceive you as a commodity provider.
Loyal customers perceive you as a partner.
7. %$)-!') You will need a contract to keep many satisfied customers in
place. You have a virtual lifetime contract with your loyal customers.

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8. *22*'(5)‘)*,#0 Satisfied customers will leave you. Loyal customers will
stay by your side.

In short we can say, loyalty comes primarily from a customer¶s emotional

connection and experiences with an organization¶s people. Customers¶
experiences with people, products, and processes will determine their
emotional connection and loyalty to an organization. An analysis in the
Harvard Business Review showed that a 5% increase in customer retention
could increase profits by as much as 100%. Secondarily, Customer Loyalty is
driven by customer experience with products and processes.

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This includes all those customer needs and wants that are basic to fulfilling
the contract between the company and customers.

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This is where the customer actually discloses what is important to them.
Meeting a customer's needs here will cause satisfaction, whereas not
meeting them will cause dissatisfaction.

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This is where the customer hopes for something, asks for it, but really does
not expect the company to provide it. This is an opportunity to provide
something beyond their expectations and by so doing create delight.
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This is where the company¶s expertise and the customer's lack of expertise
can really pay off. Providing benefits above and beyond what the customer is
even aware of can create a loyal customer. This requires the company to be
proactive in suggesting to customers new innovations that they can really
benefit from. Many customers will be even willing to pay extra for this.

To get to the Zone of Loyalty, it is important to conquer the other zones;

there are no short-cuts. If an organization is really good at innovations (the
key factor in creating Loyalty), but struggles at reliability (the key factor in
creating Satisfaction), then it will end up struggling in all four zones.

In any attempt to design or redesign a product/service, in exploring each of

the zones, it is useful to have some framework, some standardized way to
categorize performance dimensions. The following dimensions have been
adapted from the ServQual model:
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keeping your promise, doing what you said you will do. Doing things right
the first time.

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Making the customer feel safe in their dealings with you, being thoroughly
professional and ethical.

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How the product/service looks to the client, the appearance of personnel and
equipment, etc.

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The degree to which the organization and service personnel understand the
individual client and their needs, the ability to adapt the service to each
client, the willingness to 'go the extra' for the client.

#06%$0*+#$#00
The availability, accessibility and timeliness of the service. The ability to
respond to enquiries and complaints in a timely fashion.

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Customer surveys remain a frequently used way to assess customer loyalty

despite the existence of objective measures of customer loyalty (e.g.,
defection rate, number of referrals). There are a few reasons for their
popularity. First, customer surveys allow companies to quickly and easily
gauge levels of customer loyalty. Companies may not have easy access to
objective customer loyalty data or may simply not even gather such data.
Also, surveys allow companies to assess customer perceptions and prioritize
initiatives to increase customer loyalty. Second, results from customer
surveys can be more easily used to change organizational business process.
Customer surveys commonly include questions about customer loyalty as
well as the customer experience (e.g., product, service, support). Used
jointly, these questions can be used (e.g., driver analysis, segmentation
analysis) to identify reasons why customers are loyal or disloyal. Finally,
objective measures of customer loyalty provide a backwards look into
customer loyalty levels (e.g., defection rates, repurchase rates). Customer
surveys, however, allow companies to examine customer loyalty in real-
time. Surveys solicit questions regarding expected levels of loyalty-related
behavior and provide opportunities for companies to ³look into the future´
regarding customer loyalty.

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#!0(-#,#$)‘%2‘(0)%,#-‘%.!5).‘

Customer loyalty, when measured through surveys, is assessed through the

use of questions or items, mirroring the objective measures listed earlier.
Typically, for each item, customers are asked to rate their level of likelihood
of engaging in a specific behavior. Commonly used customer loyalty survey
questions include the following items:

-‘ Overall satisfaction
-‘ Likelihood to choose again for the first time
-‘ Likelihood to recommend
-‘ Likelihood to continue purchasing same products/services
-‘ Likelihood to purchase different products/services
-‘ Likelihood to increase frequency of purchasing
-‘ Likelihood to switch to a different provider

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Loyalty behavior is worth almost any effort unless it is achieved by deep

price cutting or major promotional giveaways that destroy profits. Loyalty is
so valuable because it has a huge impact on market share. It is undeniable
that each customer who switches from Brand A to Brand B raises Brand B's
market share and lowers Brand A's market share. In most markets there is a
fairly high degree of this brand switching or "churn". Churn is a pool of
potential customers that smart competitors pursue.

Established repeat customers may often generate superior profit margins.

They require less customer care, have less price sensitivity, need fewer
advertising and promotional inducements; they refer their family and friends
to your brand and so on.

The battle to gain customers and more importantly, their loyally is

intensifying as the major retailers continue to position themselves as the
main point of contact for shoppers. Given this contentious environment,
retailers are now vying for the consumers' attention and more importantly
for consumers' loyalty.

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%$)#,6%-!-.‘)-#$40‘*$‘$4*!$‘%-"!$*=#4‘-#)!*5*$"‘

The major trends for retailing is in relation to the development of technology

and one of the most important of these is the merging of traditional retailing
techniques with new mail, telephone and internet retailing techniques that
have emerged with technological developments. Traditionally the shopping
centre has played an important role in the retail industry due to its
popularity with consumers. Markham (1998) argues that due to the fact
consumer's interests are changing dramatically in terms of fashion, style and
usage shops in shopping centers have sought to provide up-to-date goods
which match these needs. Similarly they have used well-presented
merchandise using innovative design techniques in order to create better
shopping environments for their customers.

However smaller retailers have witnessed a trend whereby they have offered
also more flexible services to customers. Due to the reason that big
shopping centres are often placed next to urban concentrations the
advantages gained from an urban location are important benefits for smaller
retailers who are able to provide flexible shopping times and flexible delivery
channels.

Internet retailing enables marketers to establish one to one relationships

with consumers and also to build consumer databases for carrying out online
consumer research to quickly respond and adapt to customer preferences,
(Peppers & Rogers, 1993). Furthermore consumers have learnt to be more
sophisticated in their purchasing habits thus they require for example
information on corporate attitudes towards environmental issues and the
Internet has become a major source of such information.

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Many retailers have put more resources into public relations. This is seen as
playing an increasingly important role in communicating with customers and
maintaining brand loyalty

Another important trend in the retail industry has been internationalization

in response to the process of globalization.

(.*$"‘/#3!+*%-‘‘

It is critical to realize that management cannot be effective unless it has an

understanding of the process of how retail consumers make decisions and
act in relation to retail products. Blackwell, Miniard and Engel (2000) define
the initial step of this decision-making process as need recognition in terms
of emotional and psychological needs recognition. However the extent to
which the consumer intends to resolve the problem depends on the relative
perceived importance of the problem to them and the degree of difference
between the current and desired situation. If the problem recognition is of a
sufficiently strong degree then information search and evaluation of
alternatives stages will occur.

It can therefore be seen that potential customers go through a series of

stages before they choose a brand or product to purchase. Hence branding
strategies used by retailers need to be aware of elements in these first
stages which might have an effect on later choices. Additionally a
determinant of the degree to which customers evaluate a brand is their level
of involvement, i.e. high levels of involvement mean extensive evaluation
processes, (Hawkins, Best and Coney, 1989). Price is often seen as an
indicator of involvement level because people spend more time searching
and comparing prices.

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In retail contexts women have been identified as the major class of
consumers, (Domosh, 1996). Men are certainly involved in retailing activity
however women's involvement has been suggested to be more complex and
meaningful for marketers. Since the mid-19th century women have been
targeted as consumers and Abelson (1989) argues that shopping has
become a daily ritual for middle-class women in shaping their social and
economic activities. The changing role of women in social and economic life
in terms of increased participation in the labor force and hence more
purchasing power but less leisure time has altered shopping habits. Retailers
then need to assess branding strategies by using reference groups to
identify, maintain and create new fashion images.

#)!*5‘-%,%)*%$‘!$4‘-!$4*$"‘‘

A popular strategy for gaining customer loyalty is through branding strategy.

Keller (1998) defines a brand as a set of mental associations held by the
consumer in relation to a product. This definition focuses on the gain in
perceived value brought by the brand name. Kapferer (2004) points out that
brands are conditional assets supported by economic business models but at
the same time are names that influence buyers based on relationships.
Word-of-mouth about previous experiences is essential for customer's future
choices and as such public relations have become a major part of the
promotional mix.

Branding clearly has advantages for the retailer since it helps to differentiate
a product from competitor's products. This is true in particular for own-label
ranges. Branding also has advantages for the consumer because it is easy to
recognize the product and identify with it in terms of the needs they
possess. Word of mouth messages about products carried by consumers are
not only about traditional product attributes but also deal with other issues

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of concerns such as for example environmental or ethical ones to do with the
company.

The retail marketplace is at the growth stage in the industrial lifecycle.

Effective acquisition and retention are vital for the building of a more
efficient competitive position for retailers. To acquire customers for example
an incentive to part with their personal information may be necessary for
any scheme and current methods used to retain customers need to take
account of data analysis of purchasing habits to construct more effective and
more tailored loyalty schemes for customers.

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The development and implementation of a merchandise plan is another

important aspect of a retail strategy.

First of all, the marketing considerations concerned with the four major
elements: product, place, promotion and distribution. In the retail context it
is vital to mention the selling environment particularly since it is in relation
to the store image, location as well as fashion trends. It is obvious that
advantages based on convenient location are vital for retailers however a
better shopping environment plays increasing important role.

It is argued that the selling environment comprises elements like customer

orientated display of goods in a convenient location supported by well-
presented merchandise. Above all customers have a conception of current
fashion and style which retailers need to match. Research demonstrates that
the changes of lifestyle have affected people's shopping behavior in terms of
them being more sensitive about the selling environment. The demands for

 
leisure goods as well as an entertaining shopping environment in which to
purchase these goods needs to be borne in mind by retailers.

Another critical factor in merchandising management is related to availability

and flexibility. This is essential in responding to the technological
developments in e-shopping. Thanks to modern technology it is easy to
control and centralize merchandise management through rapid
communication with sales and stock departments. Delivery schemes once
the domain of manufacturers can also be controlled by retailers. This allows
for the meeting of customer needs quickly through more effective control
over stock.

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The above diagram displays that Big Bazaar and Spar are the most two
most preferred retail brands in Bangalore. Together they have a preference
share of 74%.

 
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X Axis ± Satisfaction level where 1= very low, 2= low, 3= Reasonable, 4=

high and 5= very high)

Y Axis- Number of respondents

The above diagram reveals that the satisfaction level among the retail
customers is somewhat satisfactory with most of the customers being
reasonably satisfied with their retail brand. However, for strong brand
loyalty higher levels of customer satisfaction is essential.

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The following 8 diagrams are related to the eight major factors (drivers) of a
retail brand which affects the customer loyalty and the importance attached
to them by the customers.

3.1‘ Customer Service

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X Axis- Level of Importance where, 1= Least important, 2= Unimportant, 3=

indifference, 4= important and 5= Very important)

Y Axis- Number of respondents

Customer service means the facilities and value added offerings of the
retailer such as home delivery, credit facility etc. The above diagram clearly
shows that it is regarded to be a highly important factor for the customers in
choosing the retail brands.

 
3.2‘ Product quality

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X Axis- Level of Importance where, 1= Least important, 2= Unimportant, 3=

indifference, 4= important and 5= Very important)

Y Axis- Number of respondents

Product quality refers to the authenticity of the claims made by the retailer
with respect to durability, freshness, adherence to safety norms etc. it can
be observed from the above diagram that an almost equally number of
customers are indifferent as well as consider product quality to be important.
This reveals that Indian consumers are not highly quality conscious.
However, the trend is changing and more customers are getting concerned
about the quality.

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3.3‘ Timeliness & ease of delivery

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X Axis- Level of Importance where, 1= Least important, 2= Unimportant, 3=

indifference, 4= important and 5= Very important)

Y Axis- Number of respondents

Timeliness and ease of deliver refers to the time gap between product
selection and ownership by the customer. Some of the factors involved are
waiting time, type of deliver package etc. The diagram shows that the
respondents are widely divided over this factor, with no clear consensus.
Thus it cannot be regarded as a very important factor affecting loyalty.

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3.4 Pricing & promotions

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X Axis- Level of Importance where, 1= Least important, 2= Unimportant, 3=

indifference, 4= important and 5= Very important)

Y Axis- Number of respondents

Pricing and promotions include discount offers, gift coupons, exchange offers etc.
the diagram clearly reveals that this is a very important factor rated by the
respondents and reinforces the price sensitivity of the Indian consumer. This is one
of the reasons why Big Bazaar is rated as the most preferred retail brand as they
follow the Every Day Low Pricing strategy of Wal- Mart. Also they lure consumers by
promotions such as ³Wednesday sabse saasta din´ and by their punch line.

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3.5 Professionalism of staff

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X Axis- Level of Importance where, 1= Least important, 2= Unimportant, 3=

indifference, 4= important and 5= Very important)

Y Axis- Number of respondents

Professionalism of staff refers to the skills of the retail staff in dealing with
customers. Lack of quality manpower is a major concern in the retail sector.
As far as customer loyalty is concerned, the respondents are somewhat
indifferent to this factor. This maybe because of the fact that most of the
retail brands focus on self service. However, if the retailers improve upon
this factor and provide staff that can perform advisory function then
customer satisfaction is likely to increase which may favorably impact brand
loyalty.

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3.6 Accessibility

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X Axis- Level of Importance where, 1= Least important, 2= Unimportant, 3=

indifference, 4= important and 5= Very important)

Y Axis- Number of respondents

Accessibility refers to the location of the retail outlet and proximity to the
consumer. In the western countries where number of car owners is relatively
high, the stores are located in suburbs and location is not an important
factor. However, in India due to the number of vehicle owners being less,
location is considered to be an important factor. Customers prefer to shop at
outlets located near their residents.

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3.7 References

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X Axis- Level of Importance where, 1= Least important, 2= Unimportant, 3=

indifference, 4= important and 5= Very important)

Y Axis- Number of respondents

References mean the approval from the family, relatives and friends of a
particular brand. It indicates the word of mouth publicity of the retail brand.
The respondents are also divided over this factor, thus it cannot be
considered to be an important factor.

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3.8 Overall ambience

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X Axis- Level of Importance where, 1= Least important, 2= Unimportant, 3=

indifference, 4= important and 5= Very important)

Y Axis- Number of respondents

Overall ambience means the atmospherics of the store, that is, the sound,
decors and lights etc. Respondents are mostly indifferent or attach
importance to this factor. In this context we can say that, overall ambience
may increase footfalls in the retail outlets but does not encourage loyalty by
enhancing purchases.

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X Axis ±Scope of improvement where 1= very low, 2= low, 3= Reasonable,

4= high and 5= very high)

Y Axis- Number of respondents

Scope of improvement here refers to the possibility of the retailers

improving on the eight factors discussed in point 3. A good number of
respondents opine that the scope of improvement is low; they maybe
considered being brand loyal customers. However, almost an equal number
of respondents opine that the scope of improvement is very high. They
represent customers who are least brand loyal.

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X Axis ±Scope of improvement where 1= very low, 2= low, 3= neutral, 4=

high and 5= very high)

Y Axis- Number of respondents

Likelihood of recommendation is an important factor in determining

customer loyalty. The customers who recommend their brands to others are
considered to be highly brand loyal. The above diagram shows that most of
the customers are not likely to recommend their brands to others. This
implies to low levels of brand loyalty amongst the retail consumers.

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The above diagram is concerned with the likely action the respondents take
in case they encounter a bad experience at a retail store. A very high
percentage of respondents avoid the problem, which basically the retailers
don not get to hear from 61% of their customers. Also, the use of public
forums such as websites and consumer forums are not very popular
amongst the retail consumers.

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Loyalty programs are one of the most popular means of attaining

customer loyalty. The above diagram shows that the respondents do not
attach very high importance to these programs when it comes to
determining loyalty. Almost 50% of the respondents consider such
programs to be important while 17% are indifferent to it. One of the
possible reasons for this maybe the fact that most of the retailers have
not been able to effectively implement the loyalty programs.

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Customer loyalty is often divided into various stages. In the above

diagram the four stages are:

-‘ Switch brand in future ± low loyalty

-‘ Infrequent visit, limited purchase ± somewhat loyal
-‘ Frequent visit, repeat purchase - loyal
-‘ Encourage others for trial ± highly loyal

The above diagram shows that the overall loyalty level of the respondents
can be said to be fairly loyal. However, a high level of loyalty which involves
brand promotion by the customer is low.

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The above diagram shows the probability of switching in case the

customers¶ expectations are not met. It clearly reveals that the
respondents are likely to switch in case their expectations are not met. It
establishes the demanding nature of the Indian consumer. The high
propensity to switch is also fostered by the increase in the number of
retailers.


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10.1 I take efforts to promote the brand with activities such as online
communities etc.

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This statement judges the customer loyalty in terms of brand

involvement. Favorable response for the above would indicate existence
of high levels of brand loyalty and vice versa. The diagram shows that
only a small percentage of the customers are highly loyal.

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10.2 I believe the services and products provided by the brand are best in
the industry

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This statement judges the degree of believability of the customers in the

brand. The diagram shows that almost half of the customers are
indifferent to this factor. This also implies to the lack of awareness
amongst the Indian consumers. In countries like US, UK etc consumers
often compare their brand with others on websites. This is not very
prevalent in India.

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10.3 I readily accept the claims made by the brand

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This statement judges the degree of trust worthiness customers have on the
retail brands. Trust is an integral factor for determination of customer
loyalty. The diagram shows that the trust worthiness level is not very high
amongst the respondents. More than half of the respondents are skeptical
about the claims made by their retail brand.

 
10.4 I would wait rather than buy from other brands in case of non
availability on an item

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This statement judges the extent to which consumers are willing to hold or
wait for the availability of item at the retail store. Customers having high
brand loyalty stick to the brand even if they have to wait. The diagram
shows that the respondents are unlikely to stand with the retail brand in
case of non availability of items. This further reinforces the high propensity
to switch.

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‘

From the above data presentation and analysis the following conclusions can
be made:

1.‘ The three most important drivers of customer loyalty for retail brands
are customer service, pricing and promotion and accessibility.
2.‘ Unlike the common perception loyalty programs do not play a very
significant role in determining customer loyalty. They are preferred
mainly by the high end consumers, who expect high and quality in
service level.
3.‘ The high preference level for Big Bazaar and Spar may be attributed to
their everyday low pricing strategy (EDLP) along with providing
satisfactory service to the customers. Also in Bangalore both have
favorable location.
4.‘ The overall loyalty level amongst the customers can be regarded as
average.
5.‘ The indicators of the above are high propensity of switching, low levels
of trustworthiness and low probability of recommendation.
6.‘ High propensity of switching maybe attribute to the increase in the
number to retailers and increasing popularity of e-tailing which has
broadened customers choice.
7.‘ High levels of customer loyalty which involves customer engagement
and word of mouth promotion by the customer is absent.
8.‘ A fairly close relationship between customer satisfaction and customer
loyalty can be established. The low levels of loyalty can be attributed to
somewhat low levels of customer satisfaction.


 9.‘ Consumer awareness is low considering the data that most of them
prefer to avoid a bad experience. This also indicates the lack of proper
feedback system being implemented by the retailers.
10.‘ Finally we can that organized retailers in India need to understand the
importance of customer loyalty and improve on the major drivers for
loyalty.

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Based on the above data presentation and analysis I would like to offer the
following recommendations:

1.‘ %,,($*'!)*%$- for building brand loyalty it is important for the

retailers to create awareness of their brand and their offerings. The
current promotion being done by most retailers seems inadequate.
2.‘ (0)%,#-‘0#-+*'#‘± the retailers will have to run the extra mile and
must offer quality customer service. In an increasingly competitive
market, customer service is the vital point of differentiation.
3.‘ ,65%.##‘#$"!"#,#$)- For providing quality customer service, a well
trained staff is indispensable. Customer loyalty depends on employee
loyalty and the latter may be attained by improving working conditions
training and incentive schemes.
4.‘ It is essential for the retailers to *$'-#!0#‘-#5*!/*5*).‘*$‘)#-,0‘%2‘
4#5*+#-.‘!$4‘6-%4(')‘!+!*5!/*5*). as the propensity to switch is high.
This basically implies to meeting expectations and delivering on
promises.
5.‘ (0)%,#-‘*$'#$)*+#0- it implies to providing the customer with
reasons to re visit. For e.g. Products which are new maybe offered on
trail basis. Such incentives would greatly improve customer loyalty.
6.‘ The retailers must provide a 0#$0#‘%2‘'%,,($*). to the loyal
customers. There are various ways of doing the same such as organizing
special events on festivals, providing loyalty rewards and distributing
free merchandise. This would also help in attracting new customers
through referrals.


7.‘
#",#$)!)*%$- the retailers must effectively segment their customers
according to the levels of loyalty and the accord the right treatment as
per the segment. Customers having high loyalty levels should be given
priority as far as possible.
8.‘ 0#‘%2‘)#'3$%5%".‘2%-‘'(0)%,#-‘7$%85#4"#‘- Most of the retailers do
not have adequate information about the customers with respect to their
buying behavior and history. The retailers must implement an effective
system such as a CRM package which would provide these details. This
would facilitate formulation of customer focused strategies.
9.‘ 4%6)*%$‘%2‘,(5)* '3!$$#5‘-#)!*5*$" - Multi-channel retailing can
enhance customer loyalty by offering them convenience and provide
retailers a greater share of the customer wallet. In cities such as
Bangalore where the internet penetration is fairly adequate and the
possibility of the 3G implementation in near future, internet must be
explored as a lucrative channel for retailing.

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 %$'5(0*%$‘

The main purpose of the study was to understand the drivers of

customer loyalty for organized retail brands. With growth of organized
retailing in India and increase in consumer awareness, customer
loyalty is the key to success. It was found during the study that most
of the retailers did not emphasis on understanding the role of various
factors involved in customer loyalty.

The study revealed that the overall customer loyalty level is low. Also
the eight factors which were identified as the drivers of loyalty were
found to have positive effect on loyalty. However, the magnitude of
significance of the factors varies. Thus, the null hypothesis 1 is
accepted.

It was also found that customers having high levels of loyalty are more
concerned with personalized treatment whereas those with low levels
of loyalty are more concerned with value offerings. The point is
retailers must segment their customer base according to the loyalty
status and customize their offerings accordingly. Thus, null hypothesis
2 is also accepted.

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 .‘#!-$*$"‘

Some of my major take away from this dissertation are:

-‘ Being courteous and humble. This holds significance while interacting

with the respondents.
-‘ Set SMART goals- it is important to set SMART goals during a project.
The goals should always be time bound and nevertheless should be
practical. The goals should always be set keeping a benchmark in
mind.

-‘ One must have the willingness to look for as many sources of

information and never readily accept a particular source.
-‘ The entire research must be objective based and devoid of any
personal bias.
-‘ Research must always be purposeful and the results useful for being
implemented.

3
 */5*%"-!63.‘

%   ! $!  

1.‘ Peter Clark- The Loyalty Guide

2.‘ Fred Reichheld - The Loyalty Effect (1996), Loyalty Rules! (2001)
3.‘ Michael Lowenstein - The Customer Loyalty Pyramid
4.‘ www.ibef.org
5.‘ www.indiaretailing.com
6.‘ www.economywatch.com
7.‘ www.brandkeys.com
8.‘ Marketing Research by Aaker, Kumar and Day 6th edition, Willy¶s
publication

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