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Effectiveness of Loyalty Program in Readymade Garment Retailing

2009

Presented by Ashish Kumar and Lal Chand Bhamare, PGPM, IIIrd Sem, IBMR-A’bad
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Effectiveness of Loyalty Program in Readymade Garment Retailing
2009

Presented by Ashish Kumar and Lal Chand Bhamare, PGPM, IIIrd Sem, IBMR-A’bad
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Effectiveness of Loyalty Program in Readymade Garment Retailing
2009

Certificate

This is to certify that Mr. Ashish Kumar (A-25) and Lal Chand Bhamare (A-
72), bona fide student of III-Sem PGPM bearing in INSTITUTE OF BUSINESS
MANAGEMENT & RESEARCH, Ahmedabad has carried out a project Report
entitled a study on ―Effectiveness of Loyalty Program in Readymade Garment
Retailing‖ under my supervision & guidance. The project report prepared by him/her
is original to the best of my knowledge.

Date : Signature of the Supervisor


Place:

Date: Signature
Place: R.K. Balayan
(Dean & Director)

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Effectiveness of Loyalty Program in Readymade Garment Retailing
2009

Preface
The PGPM programme is well structured and integrated course of business
studies. The main objective of practical training at PGPM level is to develop skill in
student by supplement to the theoretical study of business management in general.
Industrial training helps to gain real life knowledge about the industrial environment
and business practices. The PGPM programme provides student with a fundamental
knowledge of business and organizational functions and activities, as well as an
exposure to strategic thinking of management.

In every professional course, training is an important factor. Professors give us


theoretical knowledge of various subjects in the college but we are practically exposed
of such subjects when we get the training in the organization. It is only the training
through which I come to know that what an industry is and how it works. I can learn
about various departmental operations being performed in the industry, which would,
in return, help me in the future when I will enter the practical field.

Training is an integral part of PGPM and each and every student has to undergo
the training for 45 days in a company and then prepare a project report on the same
after the completion of training.

During this whole training I got a lot of experience and came to know about the
management practices in real that how it differs from those of theoretical knowledge
and the practically in the real life.

In todays globalize world, where cut-throat competition is prevailing in the


market, theoretical knowledge is not sufficient. Beside this one need to have practical
knowledge, which would help an individual in his/her carrier activities and it is true
that ―Experience is best teacher‖.

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Effectiveness of Loyalty Program in Readymade Garment Retailing
2009

Contents
Sr. No. Contents PAGE
1. Executive Summary
2. Introduction:
1. Introduction to Indian Readymade Garment Industry,
2. Retailers’ Profile,
i. 3Cs Analysis of retailers,
ii. SWOT Analysis of retailers.
3. Introduction to Effectiveness of Loyalty Program in Readymade
Garment Retailing,
3. Background of the Study,
1. Statement of the Problem,
2. Objective of the Study,
3. Scope of the Study.
4. Research Methodology,
5. Literature Review (Effectiveness of Loyalty Program in Readymade Garment
Retailing)
1. Loyalty Program,
2. Customer Information is Key,
3. What Customer Expects,
4. Types of Rewards,
5. Types of Loyalty Programs,
6. Retailer Benefits,
7. Importance of studying Effectiveness of Loyalty Program in
Readymade Garment Retailing,
8. Problem faced during field work.
7. Data Analysis
8. Limitations
9. Findings
10. Suggestions
12. Bibliography

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Executive Summary:

Indian organized retail industry is poised for growth. Readymad Garment sector
in particular has a great opportunity with alignment of Indian economy to globalised
markets. With the widespread use of customer retention-Long term activities which
provide material inducements to consumers and trade it becomes imperative for
managers to understand such practices and understand challenges. This study
investigates Customer retention activities of five organized readymade garment
retailers in Ahmedabad market and compares them on various dimensions. It
presents major findings and provides insights on consumer loyal buying behavior.
Lifestyle, for instance, has a loyalty programme called `The Inner Circle', while
Pantaloons offers a `Green Card' Rewards programmes, Westside has `Club West' to
woo the customers. Managerial challenges are posed in planning and implementing
such activities. The paper concludes with future bright outlook.

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Effectiveness of Loyalty Program in Readymade Garment Retailing
2009
Introduction to Indian Readymade Garment Industry:
The Garment Industry of India is an Rs one trillion industry. Almost 33 % of its
knitwear production and about 20% of its woven-garment production, both by volume,
enters export markets. Overall about 25 % of the volume of its garment production
goes into export markets, leaving 75 % for domestic consumption. The Industry
covers over one lakh units and employs about 6 million workers, both directly and
indirectly in almost equal proportion. The indirect portion helps to sustain the direct
production sector in the shape of items associated with the garment industry
production including sewing/embroidery thread, buttons, buckles, zippers, metal
plates, cardboard sheets, plastic butterflies and packaging material.

Organized sector of the garment industry is roughly 20% of the total industry,
concentrating chiefly on exports. These are usually limited Companies while the rest
are proprietary or partnership Companies. Geographically, men's garments are largely
produced in western and southern India while production of ladies garments
predominates in North India. Eastern section of India specializes in children garments
where in fact, these took their birth.Fibre-wise, 80% of the production is of cotton
garments, 15% of synthetic/mixed garments and the rest of silk and wool garments.
The industry manufactures over a 100 different types of garments for men, women and
children. These includes overcoats/raincoats, suits, ensembles, jackets, dresses, skirts,
trousers, shirts, blouses, inner-garments, T-shirts, jerseys/pullovers, babies garments
as well as accessories like shawls/scarves, handkerchiefs, gloves and parts of
garments.Fabric constitutes 65 to 70% of the cost of production with labour making up
a further 15% and the rest go for overheads and manufacturer's profit. Retail trade in
India is spread over department stores, hyper markets/discount stores and specialty
stores. A number of shopping malls have sprung up all over the country, especially in
the metros. Due to this, land prices have spiraled. Attention now shifts to "B" class,
"C" class cities and the rural area.

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Retailers Profile:
This study is based on five retailers in Readymade Garment Industry. They are
as below:

3 Cs Analyses:

Pantaloon Retail India Ltd


Company:

Future Group, led by its founder and


Group CEO, Mr. Kishore Biyani, is one of
India’s leading business houses with multiple
businesses spanning across the consumption
space. Pantaloon Retail is the flagship
enterprise of the Future Group. Pantaloon Retail
(India) Limited has spread across various
businesses and cities in India.

Pantaloon owns multiple retail formats and is able to cater to a large section of
the society. The company has over 140 stores across 32 cities in India and 14000
employees. The headquarters of the company are situated at Mumbai. The
organization made an incursion into the modern retail (fashion) in 1997. Big Bazaar, a
hypermarket chain, was introduced in the year 2001, with an Indian touch of
convenience and hygiene. Food Bazaar, food and grocery chain, and Central Mall
located at various Metros are other important parts of the group.

Others include Collection (home improvement products), E-zone (consumer


electronics), Depot (books, music, stationery and gifts), Blue Sky (fashion accessories)

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and Shoe Factory (footwear). The company has also launched a retailing venture
known as futurebazaar.com. The vision of Future group is to "Deliver Everything,
Everywhere, Every time to Every Indian Consumer in the most profitable manner."

National Retail Federation gave Pantaloon the 'International Retailer of the


Year' Award.

Competitors: Westside, Globus, Lifestyle, V-Mart, etc.

Consumers: According to my observation at Pantaloon store, Gulmohar mall, A’bad


targets Upper middle and upper class people.

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Effectiveness of Loyalty Program in Readymade Garment Retailing
2009
Westside
Company:

Established in 1998 as part of the Tata


Group, Trent Ltd. operates Westside, one of
India's largest and fastest growing chains of
retail stores.

The Westside stores have numerous departments to meet the varied shopping
needs of customers. These include Menswear, Women’s wear, Kid’s wear, Footwear,
Cosmetics, Perfumes and Handbags, Household Accessories, lingerie, and Gifts. The
company has already established 36 Westside departmental stores (measuring 15,000 -
30,000 square feet each) in Ahmedabad, Bangalore, Chennai, Delhi, Gurgaon,
Ghaziabad & Noida (to be considered as 1 city), Hyderabad, Indore, Jaipur, Kolkata,
Ludhiana, Lucknow, Mumbai, Mysore, Nagpur, Pune, Rajkot, Surat, Vadodara and
Jammu. The company hopes to expand rapidly with similar format stores that offer a
fine balance between style and price retailing.

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Effectiveness of Loyalty Program in Readymade Garment Retailing
2009
Competitors: Pantaloon, Globus, Lifestyle, V-Mart, etc.

Consumers: Middle class, and upper middle class.

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Effectiveness of Loyalty Program in Readymade Garment Retailing
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Lifestyle International Pvt. Ltd.
Company:

Lifestyle International (P) Ltd is part of the


Landmark Group, a Dubai – based retail chain.
With over 30 years’ experience in retailing, the
Group has become one of the foremost retailers
in the Gulf.
Positioned as a trendy, youthful and vibrant
brand that offers customers a wide variety of
merchandise at an exceptional value for money,
Lifestyle India began operations in 1999 with
its first store in Chennai.
Currently there are 15 Lifestyle stores and 8
Home Centre stores across Ahmedabad, Banga-
lore, Chennai, Hyderabad, Jaipur, Mumbai, Pune, New Delhi, Noida, and Gurgaon.

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Effectiveness of Loyalty Program in Readymade Garment Retailing
2009

Competitors: Westside, Globus, Pantaloon,


V-Mart, etc.

Consumers: According to my observation


at Lifestyle, Galops mall, A’bad, Upper
middle and upper class people are being
targeted.

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2009
V-Mart

In 2003, V Mart opened its first


store at Law Garden, Ahmedabad and
today boast of its presence in almost all
the major cities across India. With chain
of 26 outlets in 22 cities V Mart is having
pan India presence, V Mart covers over
3,50,000 sq.ft. of area and delights
60,000 satisfied shoppers each day.

V Mart is a multi-branded family store that works on the ―Value for money‖ retail
concept thus providing the masses with the best quality at cheaper price. The vast
product range caters to every age and all the family needs with Apparels for men,
women & kids, Food & Home products, Health & Wellness, Lifestyle Products,
Footwear and Travel Accessories for men, women and kids.

The ―Sabse Sasta, Sabse Achcha‖ Story.

V Mart has positioned itself in the ―Value for Money‖ category thus providing
customers with the most economic and best of quality products. The Sabse Sasta,
Sabse Achcha theme says every thing about V Mart, the philosophy and the values.
One can find the best of products, quality, latest fashion and every thing that keeps
customers healthy and happy and of course the vast range to choose from.

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Effectiveness of Loyalty Program in Readymade Garment Retailing
2009

The company hopes to expand rapidly with similar format stores that offer a
fine balance between style and price retailing. V Mart targets to expand into a 100
outlets by March 2010.

Competitors: Westside, Globus, Lifestyle, Pantaloon, etc.

Consumers: The vast product range caters to every age, lower middle and upper
middle.

Presented by Ashish Kumar and Lal Chand Bhamare, PGPM, IIIrd Sem, IBMR-A’bad
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Effectiveness of Loyalty Program in Readymade Garment Retailing
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Globus Stores Pvt. Limited

Company:

Launched in January 1998, Globus is a


part of the Rajan Raheja group. The
company opened its first store in 1999 at
Indore followed by the launch of its second
store in Chennai (T-Nagar). Soon to follow
was another in Chennai located in Adyar.
The flagship store in Mumbai was opened on
1st November 2001 followed by a swanky
new outlet in New Delhi in South Extension
Part-2.
The sixth & seventh stores are in Bangalore
in Koramangala & Richmond Road
respectively. The Eighth store in Ghaziabad
at Shipra Mall followed by the ninth, tenth
and eleventh in Kalaghoda, Mumbai, Thane
and Ghaziabad, twelfth store at Kanpur and
thirteenth store in Ahmedabad & fourteenth
store in Lucknow.As of May 2008, Globus
has opened its 24th Store in Nagpur and the
journey continues...

Competitors: Westside, Pantaloon,


-Lifestyle, V-Mart, etc.

Presented by Ashish Kumar and Lal Chand Bhamare, PGPM, IIIrd Sem, IBMR-A’bad
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Consumers: According to my observation at Globus store, Galops, mall, A’bad,
Lower and upper middle class people are being targeted.

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Effectiveness of Loyalty Program in Readymade Garment Retailing
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SWOT Analysis
Pantaloon Retail India Ltd
Strength:

Pantaloon Retail was the first retail chain with pan India presence.
Maximum number of formats to cover most of the consumer classes.
Strong supply chain mechanism.
Higher bargaining power due to maximum number of stores, higher customer
footfalls and covering most types of formats.
Green Card loyalty program which ensures loyalty of customers and helps in
maintaining cordial relationship.
Human Capital – attracting the most talented pool from best business schools
across India.
Shopping Experience is customized according to store format. Like Big Bazaar
has a Indian bazaar like appeal whereas Central which is into lifestyle segment
gives altogether different experience.
Understanding of Fashion – After studying Indian Markets excessively and then
delivering the product. For example: certain colors have more influence in a
particular region, so merchandise would have more of those colors.
Unique Discounting/ Markdown - Special discounting during Independence and
Republic days which attracts more number of customers than any other stores.
Private label brands like John Miller, Bare, UMM etc considered as national
brand and performing well.
Trained customer relationship agents to guide customers.
Tie-ups with many national as well as international brands – like liliput,

Weakness:

Shrinkage rates are higher than industry norms.


Store renovations of older stores not done.
Low employee retention levels at shop floor level due to better pay package by
competitors.
Floor level Customer Relations Executives not having proper product, store etc
knowledge due to lack of proper training.
Loyalty program of competitors is more effective due to better scheme and
merchandise.
Merchandise and product focus not consistent and clear.

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Effectiveness of Loyalty Program in Readymade Garment Retailing
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Opportunities:

Geographical Expansion:
Untapped market in terms of tier II
and tier III cities.
Untapped segments such as ethnic
wear, Organic cotton wear etc.
Luxury segment with brands like
Gucci, Tommy, Armani etc.
Stand alone stores of other brands
like Bare, UMM etc.
Getting license agreement of
smaller regional brands.
More effective online shopping for
garments.
Custom Tailoring business
untapped.
Suiting brand from Future group
can be feasible.

Threats:

Economic slowdown and scanty rainfall which has major impact on Indian
Economy. Consumer spending on non-essential fashion items, garments etc
have been reduced significantly.
Competitive rivalry in the industry like Big Bazaar is facing competition from
Fashion Yatra (Trent Ltd), HyperCity (Shoppers Stop), Max ( Landmark group),
Megamart (Arvind). Pantaloon & Central is facing competition from Westside
(Trent), Shoppers Stop, Relaiance Trends, Lifestyle, Globus etc.
Foreign players like Carrefour, Tesco, Walmart lined for their Indian operations.
Increasing cost of raw material, power and transportation.
Delay in store delivery – due to increased price and economic slowdown, the
infrastructure sector in India is affected and hence the construction of new malls
have been halted or slowed down.

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Effectiveness of Loyalty Program in Readymade Garment Retailing
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Westside
Strength:

It is growing at the faster pace


Has good brand name of TATA’s.
It has many outlets all over India. It has a good customer base.
Apparels are cheaper by 5 to 10% while the price difference on the other
products varies between 5 to 20%.
Attractive promotional schemes and heavy discounts
Quality and branded stuff only
The Westside has been positioned to the customer as a place where the
customer can shop for each & everything for which he goes to a market
except groceries.
Locational advantage- All Westside stores are located in prime locations of
the city like Shivajinagar, Camp etc.

Weakness:

Westside has not yet trapped the whole market- rural market is still
Untapped. Not much product range for middle class people
Facing problems due to political environment-Subsidy from octroi, different
Taxes like land tax and water tax
• Need help in taking over properties and real estate
• Need some concessions from labor laws
Lack of differentiation among the malls that are coming.
Poor inventory turns and stock availability
No involvement in food retailing business.

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Effectiveness of Loyalty Program in Readymade Garment Retailing
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Opportunities:

Huge untapped market


Rising disposable income- Increase in number of people in earner category,
Women earning
Urbanization-Changing consumer habits and lifestyles as the disposable
Income is increasing per family.

Threats:
Competition from organized retail players which are in market and
emerging like Reliance, Shopper’s stop, Wal-Mart –Bharti etc.
Competition from local retailers.

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Lifestyle International Pvt. Ltd.

Strength:

Increasing demand (Rising living standard of people).


Flexibility of product mix (they can add different category of apparels to their
product mix).
Well management.
Good Quality of product.
Availability of wide range of
Varieties.
Availability of Large space.
Trained employee.
Well structure.

Weakness:

Few stores are available across the


india
Not affordable price to common
people
No music system
Less advertising

Opportunity:

Opportunity to capture increasing population.


Well opportunity for developing business.

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Effectiveness of Loyalty Program in Readymade Garment Retailing
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Increasing productivity
Scope of strategic alliance/ Merge.

Threats:

Cut throat competition


Entry of local brand with good quality.

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Effectiveness of Loyalty Program in Readymade Garment Retailing
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Globus Stores Pvt. Limited
Strength:

Increasing demand (Rising living standard of people).


Flexibility of product mix (they can add different category of apparels to their
product mix )
Attracting people through Well music system.
Good Quality
Trained employee

Weakness:

Fewer Varieties.
Selling only apparels.
Limited space.
Not economical.

Threats:

Increasing global competition


Upcoming local competitors with good quality of product.

Opportunity:

Domestic market too presents immense opportunities with spending on the rise
and organize retail sector.
Opportunity to capture international market.

Presented by Ashish Kumar and Lal Chand Bhamare, PGPM, IIIrd Sem, IBMR-A’bad
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Effectiveness of Loyalty Program in Readymade Garment Retailing
2009

Introduction to the topic:

Loyalty programs are structured marketing efforts that reward, and therefore
encourage, loyal buying behavior — behavior which is potentially of benefit to the
firm.[1]

In marketing generally and in retailing more specifically, a loyalty card, rewards


card, points card, advantage card, or club card is a plastic or paper card, visually
similar to a credit card or debit card, that identifies the card holder as a member in a
loyalty program. Loyalty cards are a system of the loyalty business model. In the
United Kingdom it is typically called a loyalty card, in Canada a rewards card or a
points card, and in the United States either a discount card, a club card or a rewards
card.

A readymade garment retail establishment or a retail group may issue a loyalty


card to a consumer who can then use it as a form of identification when dealing with
that retailer. By presenting the card, the purchaser is typically entitled to either
a discount on the current purchase, or an allotment of points that can be used for future
purchases. Hence, the card is the visible means of implementing a type of what
economists call a two-part tariff.

The card issuer requests or requires customers seeking the issuance of a loyalty
card to provide a usually minimal amount of identifying or demographic data, such as
name and address. Application forms usually entail agreements by the store
concerning customer privacy, typically non-disclosure (by the store) of non-aggregate
data about customers. The store — one might expect — uses aggregate data internally
(and sometimes externally) as part of its marketing research. These cards can be used
to determine, for example, a given customer's favorite brand of beer, or whether she is
a vegetarian.

Where a customer has provided sufficient identifying information, the loyalty


card may also be used to access such information to expedite verification during
receipt of cheques or dispensing of medical prescription preparations, or for other
membership privileges (e.g., access to a club lounge in airports, using a frequent
flyer card).

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Background of the Study

A Statement of the problem:


Many Readymade Garment Retailers are aiming for high satisfaction and
delightness of the customers because customers who are just satisfied still it find it
easy to switch when better offer comes along. Those who are highly satisfied are much
less ready to switch. High satisfaction creates an emotional bind with the brand not
just a rational preference. The result is highly customer loyalty. Hence an attempt is
made to create loyal customer by Readymade Garment Retailers. Readymade Garment
Retailers carry out some activities know as loyalty program in order to create existing
customer as loyal customer as well as create new loyal customers. Now the problem is
whether loyalty program is effective to the retailer as well as customers or not.

Objectives
This project is based on consumer loyalty towards Readymade Garment
Retailer. Hence, Objectives of study are:
1.) From the consumer’s perspective, are rewards attainable?
2.) From the consumer’s perspective, are rewards relevant?
3.) From the firm’s perspective, is the LP design aligned with the desired
goal(s)?
4.) To full fill the partial requirement of PGPM degree.

Scope of study:
Customer Loyalty is an important element in the marketing activities. This
customer loyalty decides the fate of the product and organization. There is various
factors influence to the customer loyalty. These factors are,
Post purchase behavior, Reputation, Product availability, Branding, and
convenient etc.

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Research Methodology

The study of Effectiveness of Loyalty Program in Readymade Garment


Retailing is mainly concerned with Loyalty of consumer towards Readymade
Garment Retailing. In the study, we used survey method to collect various data
regarding effectiveness of loyalty program which is a primary source of data and we
also used secondary data method to prepare this project report. Hence various data
and methodology is considered in finding out effectiveness of loyalty program. The
main data sources are:

Primary Data:
The primary data refers to original information gathered for a specific purpose
and provides up to date, accurate and relevant information and it is gathered in an
investigation according to the needs of the problem.

Tools Used To Collect The Primary Data:


The primary data is collected on the basis of survey method with the help of
questionnaires, and interviews, personal observation, direct consultation with
consumers and dealers. Both open and closed end questions are used in the
questionnaire.

Methods:
The survey method is used to collect the primary data with the help of
questionnaire based on explorative and conclusive research.

Sampling Unit:

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Effectiveness of Loyalty Program in Readymade Garment Retailing
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It refers to the individuals who are to be surveyed in the study and it is the
customer who is consuming or using or who has bought AMUL milk and milk
products are surveyed.

Sample Size:
It refers to the number of people surveyed for this topic, in the study 100 people
were surveyed and responses drawn.

Secondary Data:
The secondary data can be defined as data collected by son\me one else for
purposes other than solving problem being investigation and previously meant for
another purpose. A secondary data is collected from the books, periodical journals,
magazines, papers, company records, internet and other publication.

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Literature Review:

Loyalty Programs:
Building Customer Loyalty to Build Profits

“Loyalty is one of the great engines of business


success”
Frederick F. Reicheld, author of The Loyalty
Effect
Today’s successful Readymade Garment Retailers recognize the importance of
customer retention in their efforts to grow operational profits. To achieve this, more
and more retailers are implementing loyalty programs as a competitive marketing
strategy to build long-term relationships with customers, allocate marketing Rupees
based on the customer’s value and derive as much as revenue as possible from them
over a lifetime.

Of course, loyalty is more than a business strategy. It is an ongoing, two-way


relationship based on respect, trust and commitment – a relationship in which the
customer feels all-important. A successful loyalty program builds and nurtures such a
relationship by accomplishing two critical tasks. The first is to gather information that
will help retailers understand their customers’ tastes, needs and expectations. The
second is to offer recognition and rewards (loyalty card, rewards card, points card,
advantage card, or club card) that are relevant to their customers as a reward for
their loyalty – and as a trade for the personal and transactional data that starts the
loyalty cycle and keeps it going. By tracking members’ transactions, companies can
identify the various segments of their customer base to create strategies that keep their
customers coming back for more.

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Customer Information is Key:

Effective loyalty programs generate incremental spending – more rupee spent,


more frequently, from customers whose needs and expectations are understood and
met. With 80% of retailers’ business being generated from as little as 20% of their
customers, identifying and understanding their needs and expectations of this 20% is
crucial. By gathering customer information, retailer can make intelligent marketing
decisions that will keep their best and most profitable customers more loyal. They can
also leverage this thinking to increase sales the under-performing segments of their
customer base.

The most valuable loyalty programs to retailers are those which utilize advanced
technology to collect data at the point of sale, track valuable information about
customer purchase behavior, and provide access to rich database reports and analysis
that can be used to increase the effectiveness of retailers’ marketing campaigns.

What Customers Expect:

Today’s consumers are more savvy and sophisticated than ever. They expect
loyalty programs to offer:
Easy participation
Instant rewards
Flexible rewards
Fast accumulation of rewards
Rewards claimed at any participating
establishment
Special offers
Instant win opportunities

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Membership Cards
Greetings on special occasion
Gifts
Coupons/Vouchers

Types of Rewards:

Hard benefits and Soft Benefits

Loyalty program rewards can be classified into two main categories: hard
benefits and soft benefits. Hard benefits appeal to the rational component of customer
loyalty with "tangible‖ rewards such as free travel. Hard benefits compel customers to
immediately take advantage of an extraordinary opportunity that may not last long.
Conversely, soft benefits appeal to the emotional component of customer loyalty and
are slower to reward. Discounts are considered soft benefits, as they require the
member to spend in order to receive and do not differentiate retailers from the
competition. Focusing the member's attention on price and not on the issue of a
compelling reward, soft benefits are equally important to Retailers’ most valuable
customers, whose loyalty demands legitimate evidence of their special status. Special
status means special treatment, special deals, special access and special events -
whatever it takes to reinforce the sense of importance of a retailer’s top-tier, high-
value customers. Defining soft benefits sets apart your relationship with your best
customers, offering experiences unique to your product or service and unavailable to
non-members.

Types of Loyalty Programs:

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Effectiveness of Loyalty Program in Readymade Garment Retailing
2009
Mid-market retailers or groups of retailers owned by a parent company will
benefit from using a program that will enable them to increase their customer
transactions and retention through membership card, points programs, electronic
couponing, instant messaging and special offers, while the customer is present in their
location – in real time, at the point of sale. There are several types of programs to
choose from.

“Closed-Loop” Programs:

A ―closed-loop‖ loyalty program involves only one company or chain of locations


within a particular industry, such as Marie Calendar’s in the restaurant industry. In a
closed-loop program, points are exchanged exclusively within participating outlets,
greatly reducing the cost base of issued and outstanding points.
Closed-loop programs require a private-label or in-house co-branded credit card to
enable transactions.
Using ―Private Label‖ cards, national, regional and small to mid size retailers can
operate their own ―closed loop‖ loyalty programs. Generally, cardholders are instantly
enrolled at the participating retailers’ POS and in all cases a co-branded or generic
private label card is issued to the party enrolling.

o How “Closed-Loop”, Private Label Programs Work:

―Private Label‖ programs are executed through the following steps:


1) Customer presents his or her designated (specific bank or affinity) credit card or
―Private Label‖ Loyalty Card at a participating Retailer
2) When the card is swiped through a certified terminal or electronic cash register
system, the payment processing and customer transaction data are captured at the
loyalty program’s host.

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Effectiveness of Loyalty Program in Readymade Garment Retailing
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3) The Retailer’s financial institution handled credit/debit authorization as normal.
There is no effect to the Retailer’s existing banking or processing relationship.
4) The Loyalty Host recognizes loyalty transaction through encoded information and
processes it accordingly. The customer has the option to redeem earned rewards at
the point of sale or continue accumulating. The receipt generated from the Program
Terminal provides the customer with a mini-statement each time they use their
card.
5) The transaction details are collected, tracked and stored at the Loyalty Host’s Data
Warehouse, maintained by Global Loyalty.
6) Loyalty Host maintains the program’s Data Warehouse and can produce specialized
database marketing reports for the Retailer based on their requirements.
7) Retailers can disseminate precise information and implement innovative new
marketing programs or judge the effectiveness of existing ones. Specific customer
behavioral data opens the door to establish new markets while maintaining the
needs of current ones.
8) At the point of sale, a Retailer can then inform his customers of new promotions,
special privileges, events and increased rewards. A Retailer can also tailor a
specific message (up to 160 characters) live, on-demand (host change required,
done within 24 hrs), on all customer receipts.

Open/ Cross-Sell Programs:

An ―open‖ or cross-sell loyalty program involves multiple types of companies and


industries. Participating Retailers are typically national or regional chains (category
killers) that do not compete for each other’s customers, but share similar demographic
and psychographic profiles.

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Effectiveness of Loyalty Program in Readymade Garment Retailing
2009
An open program consists of a group of participating Retailers that allow
customers – cardholders –to earn and redeem points at each participating Retailer
within the group. For example, if Marie Calendar’s were to become part of an open
program with The Gap, a customer could use their Marie Calendar loyalty points at the
Gap, and vice versa.

Using advanced systems developed by top-tier loyalty program specialists, chain


Retailers using their existing terminal or POS system can operate multiple cross-sell
programs between departments and in parallel with other non-competitive chains. In
an open or cross-sell program, revenues are generated from membership points
(optional) and transaction fees and through system access fees and program set-up fees
if applicable.

Real-Time Points Programs

Real-time points programs are a powerful tool for Retailers to reward loyal
customers for making purchases. Points are accumulated as a percentage of the Rupee
amount spend and a reward for frequenting your location. Points can be adjusted to
align with Retailers’ seasonal business cycles (double points, bonus points, etc.).

All points are accrued and or redeemed at the POS in real-time. Points in effect
instantly become an electronic currency that can be redeemed at all Retailers
Participating in the coalition program. This means Retailers can avoid the hassle of
producing expensive month-end statements for customers, and customers experience
the excitement for instant gratification each time they use their card.

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Effectiveness of Loyalty Program in Readymade Garment Retailing
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Real-time points programs offer POS instant statements that include customers’
current point total, accrued balance, life time points and up to 360 characters of instant
custom messaging or the printing of an electronic coupon.

Retailer Benefits:
Regardless of what type is chosen, an effective electronic loyalty program offers
Retailers:
Automated marketing through the elimination of coupons rolls of till tape,
manual intervention or back-end processing required.
Ability to target selected customers rather than employing blanket-marketing
strategies.
Ability to reward customers at point-of-sale rather than at another time,
avoiding fulfillment costs.
Ability to cost effectively run incentive programs for small transactions and
modifies programs regularly.
Prevention of fraud and over-claiming
Rewards tailored to various customer groups (ex., a restaurant’s best customers
can be automatically identified and given a better or increased reward over an
infrequent guest)
Compatibility with any and all payment methods
Ability to operate multiple programs can simultaneously
Multiple programs for each transaction
Cross sell opportunities and incentives
Ability to change parameters based on business cycles
Detailed reports of transactions – purchases and redemption
Re-loadable electronic gift cards and coupons

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Effectiveness of Loyalty Program in Readymade Garment Retailing
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Importance of studying Effectiveness of Loyalty Program in Readymade
Garment Retailing:
Take notice of the word "choose." Customers are not entitled to stick to just one
brand for the rest of their purchasing lives. If they feel that the brand is no longer
delivering well, then they can go to another brand. Therefore the former brand lost a
loyal customer.

With the use of survey, these retailers are updated on how well they are
delivering their products. Customers can express whether they are satisfied or not.
However, these retailers must know that the results from a survey do not necessarily
mean that the satisfied customers are loyal, as mentioned in the previous paragraph.

If these retailers manage to retain the customer loyalty programs, then they
demonstrate high possibilities of customer loyalty to their business. By encouraging
them to remain active in purchasing the services they provide and the products they
offer, the company is doing well when it comes to customer loyalty.

The models and date that are reflecting on the surveys conducted on how
customers respond can also predict on how long they will be loyal to your these
retailers. If they show good results, then that means your front-end marketing program
is running well and you do not have to wrap it up. It also means that you are meeting
the customer's expectations. The data that you see right in front of you allows you to
promote it even further, therefore saving rupee, because you don't have to come up
with a new approach.

Problem faced during field work:

Linguistic Problem: Even though I have well convincing power, I faced a lot
of linguistic problem due to the unawareness of the Gujarati language.

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Effectiveness of Loyalty Program in Readymade Garment Retailing
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Data Analysis and Interpretation

In this study, Five Readymade garment retailers in organized sector were


selected for studying effectiveness of loyalty program in readymade garment retailing.
As the purpose of the study was exploration, sample of five was deemed fit as they
would represent the population of organized apparel retail outlets in Ahmedabad
market- a mini metro in western part of India. We surveyed 100 Readymade Garment
Customers. The collected data were not easily understandable, so I analyzed the
collected data in a systematic manner and interpreted with simple method.

The analysis and interpretation of the data involves the analyzing of the
collected data and interpretation it with pictorial representation such as bar charts, and
pie charts.

Below is the questionnaire which was used to collect data from customers:

Q.1) Gender:

Male (70%)
Female (30%)

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Effectiveness of Loyalty Program in Readymade Garment Retailing
2009
Interpretation: According to this survey, it is clear that male is keener to prefer
these retailers than woman.

Q.2) Age:

15-25 (60%)
26-35 (24%)
36-45 (16%)
46 Above

Interpretation: Above data shows that young generation is keener to prefer this
branded readymade garment retailer than adults.

Q.3) Occupation:

Business Man (60%)


26-35 (24%)
36-45 (16%)
46 Above

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Effectiveness of Loyalty Program in Readymade Garment Retailing
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Q.4) Yearly Income:

< 1 Lac (24%)


1 lac-2.5 lac (46%)
2.5 lac-5.5 lac (20%)
> 5.5 lac (10%)

Interpretation: Survey shows that 24% customers, whose earning are less than
1lac per year (student who are Dependent on parents), 46% customers, whose earning
are between 1-2.5 lac, 20% customers, whose earning are between 2.5-5.5 lac, and
10% customers, whose earning are more than 5.5 lac prefer these retailers. It shows
that young generation and middle class as well as upper class are very keen to prefer
these retailers.

Q.5) How frequently do you shop from Branded readymade garment retailers?

5-7 times a month (10%)


3-5 times a month (16%)
1-3 times a month (74%%)
Other (0)

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Effectiveness of Loyalty Program in Readymade Garment Retailing
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Interpretation: According to data collected through this survey, 74%
customers prefer branded readymade garment retailer for 1-3 times a month, 16%
customers prefer these retailer for 3-5 times a month, and 10% customers prefer these
retailer for 5-7 times a month. Majority goes to 1-3 times a month, which shows
Indian organized readymade garment industry in growing process and needs to attract
customer by providing various offers and schemes.

Q.6) Which retailer do you visit for purchasing garments?

Pantaloon (48%)
Westside (24%)
Lifestyle (14%)
V-Mart (8%)
Globus (6%)

Interpretation: According to survey, 48% customers prefer Pantaloon, 24%


customers prefer Westside, 14% customers prefer Lifestyle, 8% customers prefer V-
Mart, and rest 6% customers prefer Globus. It shows that majority goes to Pantaloon,
Westside, and Lifestyle because of Qualitative product with better loyalty program
that retain customer with them.

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Effectiveness of Loyalty Program in Readymade Garment Retailing
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Q.7) Why do you prefer this garment retailer? (Give Rank)

Good Quality of products (70%) 1st

Discount Schemes (14%) 2nd

Variety of products (10%) 3th

Well Behaved Staff (6%) 4th

Ambience (0%) 5th

0 10 20 30 40 50 60 70

Interpretation: Data shows that while purchasing garments, first priority goes
to Quality of the product and second goes to discount, which show that in order to
retain customer with them quality and loyalty program both play very crucial role.

Q.8) What are they doing to retain customers?

Membership Card (44%)

Greetings on special
occasion (34%)
Coupons/Vouchers (16%)

Gifts (6%)

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Effectiveness of Loyalty Program in Readymade Garment Retailing
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Interpretation: According to data analysis, 44% customers say that in order to
retain customer they are providing membership card and 34% customers say that they
provide Greeting on special occasion, 16% customers say that they provide Coupon/
Vouchers, and 6% says that they provide gift. It shows that in order to retain customer
they are running some loyalty program which is really helpful to customer.

Q.9) Do you prefer this retailer because of the above mentioned loyalty
programs?

Yes (73%)
No (27%)

Interpretation: According to data, 73% customers prefer these retailers


because of the above mentioned loyalty program. It shows that loyalty program is
really effective in readymade garment retailing

Q.10) Have you ever been issued any loyalty card (Membership card) or club
card on bulk purchasing from these retailers?

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Effectiveness of Loyalty Program in Readymade Garment Retailing
2009

Yes (48%)
No (52%)

Interpretation: It shows that 48% customers have been issued membership


card but rest could be issued discount schemes.

Q.11) If yes, Is loyalty program really helpful for you?

Yes (58%)
No (42%)

Interpretation: According to data, It is found that Loyalty program is really


helpful to customers.

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Effectiveness of Loyalty Program in Readymade Garment Retailing
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Q.12) Would you like to shift from any readymade garment retailer who doesn’t
provide loyalty card to another readymade garment retailer who provides loyalty
card facility?

Yes (36%)
No (64%)

Interpretation: It show that still customer are quality conscious though they are
being offered various schemes.

Q.13) Retailer with high quality products but not running loyalty program and
other retailer with low quality products than first one but running loyalty
program then which one would be preferred by you?

Retailer with high quality


products (84%)
Retailer with low quality
products (16%)

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Effectiveness of Loyalty Program in Readymade Garment Retailing
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Interpretation: It again shows that quality of the product is major ingredient.
Though customer is provided loyalty card but if product is not qualitative than it is
nothing for customer.

Q.14) Is there any use of loyalty card a part from getting discount on purchasing
and points that are used for future purchase?

Yes ( 38%)
No (62%)

Interpretation: According to data, It is found that retailer needs to make


customer aware of additional use of this loyalty card.

Q.15) Would you recommend these retailers to your friends/relatives?

Yes ( 76%)
No (24%)

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Effectiveness of Loyalty Program in Readymade Garment Retailing
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Interpretation: 76% customers are ready to recommend these retailer to their
friends/ relatives because they are satisfied with their quality of the products and
loyalty program.

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Effectiveness of Loyalty Program in Readymade Garment Retailing
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Limitation:

1. Readymade Garment Retailers complain that these loyalty program discount


goods to people that are buying their goods anyway, and that the expense of
doing these programs rarely pays.
2. The lower prices and rewards as bribes to manipulate customer loyalty and
purchasing decisions, or in the case of infrequent-spenders, a means
of subsidizing frequent-spenders.
3. Commercial use of the personal data collected as part of the programs has the
potential for abuse.
4. It is highly likely that consumer purchases are tracked and analyzed towards
more efficient marketing and advertising (in fact, this can be one of the
purposes of the loyalty card.) To some, participating in a loyalty program (even
with a fake or anonymous card) funds activities that violate privacy.

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Effectiveness of Loyalty Program in Readymade Garment Retailing
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Findings:
The table below gives Comparative Readymade garment retailers Profile and
information about Loyalty Programs activities.

Store name Pantaloon Lifestyle Westside Globus V-Mart


Format Multibrand/ Multibrand/ Exclusive Tata Multibrand/ Multi-brand/

Type Departmental Departmental Multibrand/ Departmental Hypermarket


store store Departmental store
store
Positioning Family store Style & Enjoying the Family Family Store.
affordability change shopping
Floor Size 28000 sq. ft 50,000 sq. ft 15,000- NA 3,50,000 sq.ft
30,000sq.ft
Location Goolmohar Gelops mall, Iscon mall, Gelops mall, Law Garden,
mall, Setellite, S.G. Highway, S. G. S.G. Ahmedabad
Ahmedabad Ahmedabad Highway, Highway,
(posh locality) Ahmedabad Ahmedabad

categories Apparel & Apparel & Stylized Apparel for Apparels for
accessories accessories for clothes, man an men, women
for men, men, footwear & Woman. & kids, Food
women & women, accessories & Home
children Footwear. Products,
Health &
Wellness,
Lifestyle
Products,
Footwear and
Travel
Accessories
for men,
women and

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Effectiveness of Loyalty Program in Readymade Garment Retailing
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Kids.
Targeted Upper middle Lower middle Lower middle Lower Middle For ever age,

Customer and and and and everybody as


Upper class Upper middle. Upper middle Upper middle. it is
class. Hypermarket
#of SKUs 45000 34 categories NA NA NA

#of suppliers 20-25 94 NA NA NA

Average Rs.1800 Rs 800 Rs199-1999 NA NA

billing per
customer
Average 1000 on 1200 in 25-45 per NA 60,000 each

footfalls weekday & week days & hour day.


1500 to 6000 during
2000 on week end.
Weekends,
holidays.
Loyalty Green Card, The Inner Club West Privilege Gift Voucher

Program ICICI bank Circle Card, Gold


central credit Card, Silver
offered
card, Card, Globus
gift voucher, Gift Vouchers
shopping
festival, PRIL
special offer.

Both mulitbrand and exclusive use loyalty cards to reward loyal users and
encourage them to visit the store often and buy more by offering wide range for
men, women and children. Some store also offer home furnishings, accessories
and footwear, thereby providing convenience for one stop shopping. Examining
the various terms and conditions of loyalty programme revealed that some
rewards were quite complex and confusing. e.g. lifestyle’s card- Inner circle.

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Effectiveness of Loyalty Program in Readymade Garment Retailing
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The conditions to be fulfilled are not very clear to a card member. For example,
if any other promotions are prevalent then purchase made during those
promotions would entitle for the card reward points or not was not very clear.

From the above table which gives comparative picture of various readymade
garment retailing and manner of announcement, evaluation etc., it is clear that
these retailers engage in end of season sale. This reinforces the fact that
seasonality affects apparel sector and hence it becomes critical for a retailer to
clear off the stocks at the end of season otherwise he may have to incur
substantial inventory carrying costs, allocate scarce shelf space and out of
fashion apparels maybe worthless- may remain unsold forever! Thus stock
clearance seems to be very important objective for apparel retailer in using end
of season sale twice in a year wherein discount given is up to 50% of the
MRP(Maximum retail price).

All the stores used in store media to announce promotions. However use of
mass media and electronic media varied across the sample under study. Use of
only instore media would restrict the announcement to those who walk into the
store. It can be assumed that only loyal/ frequent visitor would know about the
offers. Whereas variety of media used would enhance footfalls to the store and
trigger word of mouth.

In terms of type of consumer sales promotions, almost everyone used discount,


coupon programmes and few used lucky draws, contests, gift, buy one get one
free type of promotions. Only Pantaloon had a unique scheme of an exchange
offer which is normally prevalent in durable goods industry. Relating it to a
cause donating old pairs collected in exchange scheme to charity would enhance
the brand value among the consumers.

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Effectiveness of Loyalty Program in Readymade Garment Retailing
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Suggestions:

Loyalty card programmes require good administrative support and good


database records and data mining abilities to exploit to the fullest.

Too frequent use of rewarding may evoke indifferent attitude among


consumers or shape deal to deal buying. A manager needs to be aware of
these problems and have to plan strategies to overcome them.

Mangers also need to plan such activities which will synergise company’s
positioning and advertising campaign efforts rather than erode brand image
or equity.

Execution of these activities also require proper coordination of selling


effort, availability of promoted merchandise and managing product line
pricing.

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Effectiveness of Loyalty Program in Readymade Garment Retailing
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Conclusion:

From the findings it is apparent that use of loyalty program is quite widespread and
variety of activities are used to address variety of objectives; clear off old stock,
load the consumer, encourage brand switching, to reward the loyal user, to create
excitement at point of purchase etc. The manager in charge of apparel retail
operations need to understand impact of various types of promotions on consumer .

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Effectiveness of Loyalty Program in Readymade Garment Retailing
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Bibliography:

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