Today, with the tremendous growth of the retail market, customers are spoiled for choice.

With
stores vying for footfalls, companies have resorted to offering more for less – more quantities, better
prices and better services available at the same cost to the consumer.

The focus of marketing efforts has also changed today. From merely increasing footfalls, and then
focusing on top-line growth, the focus of firms has now changed to customer lifetime value.
Customer lifetime value (CLV) is the value the customer generates over the whole period of
association with the firm. It considers all the future cash flows of that customer arising from him
consuming in the future. CRM should lead to increased CLV. When one thinksof maximizing CLV, one
has to take a long term perspective and hence focus on customer retention rather than just making a
sale. This, coupled with the concept of the Pareto principle – that 80% of a company's sales come
from 20% of their customers – has made firms have realized that retaining that 20% is integral to
their increased profitability.

The design of the loyalty schemes is important as small changes can often have a large impact.
Standard approaches, while being inexpensive and the easiest to conceive and implement, run the
risk of being ineffective. For an effective scheme, it is necessary to take advantage of consumer
behavior and economics that differ from the average. The best loyalty programs look to reward
customers for their spending in terms other than mere discounts. It is necessary to encourage the
customer to spend more in the store by building a relationship with him, and by offering him
rewards that he will not get anywhere else, thus delighting him and inciting him to stay loyal.

1.5 million Customers since August 2006 have registered for i-Mint, an innovative co-
branded loyalty program with partners like Airtel, Indian, ICICI, HPCL, and Lifestyle-
International. In the program, cardholders earn points by shopping at any of the partner
companies and will be made available to 5 million by 2007 end.

Similarly, the new Tata Credit Card offers cardholders the opportunity to earn and redeem

loyalty points across 18 brand categories through one unit. The

card, in association with the SBI card and MasterCard is a partnership of leading brands
across all conceivable categories like airlines, books, departmental stores, durable goods,
fuel, hospitality, telecom etc. The program is three tiered and features include: global
acceptance, free insurance of up to Rs. 3 million, and zero-percent balance transfer charges
for up to 75 days.

The above are just two examples of the new age loyalty programs emerging in the retail space
in India. Loyalty programs will only get bigger and better with the anticipated entry of
international retail giants.

Multi-partner coalition programs are the dominant loyalty model outside the U.S.,
and these two cases are signs of the accelerated pace of Indian marketing efforts
in this arena.
Loyalty programs have been active in India since 1995, when British Airways
launched the South Asia version of its Executive Club frequent-flyer program in
India. That year, Shoppers’ Stop, launched its First Citizen Club (which has
reached a headcount of 644,500 at the end of Q1-2007, one of India’s best known
loyalty programs.)

Today, loyalty efforts have penetrated every major vertical: hospitality, travel,
retail, telecoms, media outlets, and consumables.

The biggest challenge facing Indian marketers is the one facing marketers the
world over: deriving actionable insight from customer data. While the more
established sectors of fuel retail, travel are fairly established, most marketers still
exist in a patchwork of segments with little knowledge of how to construct,
administer and use loyalty programs.

The Indian loyalty industry is still in its infancy as most programs are very much
standalone, points-driven or discounting schemes. They haven’t matured to the
extent of providing differential treatment at all customer interface points.
Without segmented databases, it’s difficult to benefit from a CRM program.