Recently I visited a supermarket, after my shopping when I was about to pay my bill, the cashier offered me their membership at nominal joining price and showed me a few benefits for enrolled members. The same incident is repeating at every retail outlet. Every retailer is trying to tie the customer by issuing a membership at a nominal price and showing them a few benefits. Same is the case with Loyalty programs, instead of building true customer loyalty these loyalty programs are becoming sales campaigns which only aim at increasing revenue from customer. With so many programs and memberships customers are treating these as sales pitches rather than relation enhancement/building programs. Companies are forgetting the basics of building relationships and are actually trying to tie customer to their outlets through memberships and Loyalty programs. Customers are humans and not mindless creatures to stay still if tied to something.
One decade back before the emergence of organized retail sector, Indian retail market was dominated by “Kirana*” shops, where the shopkeeper/owner was a part of the same community where the customers lived. These Kirana merchants knew the preferences, interests, needs, wants, any events in the customer family, any emergencies, financial issues, etc of the customers. This is more than 360 degree view of a customer; this helped the Kirana merchant to sell the right product to right customer and even give credit at times, if required. Since they know the customers personally Kirana shopkeepers could give customers credit based on their financial abilities and based on the need and situation of the customer. They rendered a helping hand during emergencies and thus gained customer trust and loyalty. Before the advent of organized retail such a strong bond existed between customers and retailers in Indian retail market, but as the organized retail is increasing its presence, these bonds are loosening and artificial relationships are being built where customer loyalty, customer trust, etc are either superficial or doesn’t exist. What is happening now is that companies are trying to do everything artificially, build artificial relationship with customer by enrolling them as members, artificial loyalty by enrolling customer for a loyalty program, and so on. The fact is that the customer still doesn’t trust the retailer since for the customer there is no real relationship! How many customers are willing to share their personal information with the retailers? Companies think about building customer relationships, but talk about experience, satisfaction, delight and so on, but forget the foremost thing which is “customer trust”. Your customer service might be excellent, customer might be happy, but if customer feels that he/she is paying more for a nominal product packaged with excellent service the trust is broken. Retailers are totally different from manufacturers, manufactures can sell more products if they build good brand image and have good retailers in their distribution chain, but retailers cannot sell if they don’t build good relationships. Though a retail chain might have a great brand value, if the relationship quotient is low, then they fail miserably. Terms like Brand Loyalty etc have very minimal controlling effect when we talk about retailers. There are several big brands which failed miserably in retail business. The emergence of Social CRM might help in building customer relationships if properly leveraged to build trust rather than considering them as tools to gain customer information. If companies continue with the latter perception, soon the customer relationships die as Social CRM sites can spread the negative image of companies as fast as they can spread the positive image! This approach will not build the trust factor and which will in turn lead to customer playing safe and not revealing their personal details. Hence companies should try to be a part of the communities and build trust in the customers. Loyalty should be from both sides, don’t expect customer loyalty if you are not loyal to the customer. This holds true for retailers globally, what is your opinion and any inputs on how retailers can leverage on Social CRM?
* “Kirana Stores” are the typical “Mom and Pop stores” operated in a single location in towns and cities where the shop owners are the members of the local community
Comments
Vamsi, very nice article. In my own experience, our Kirana shop owner takes care of each and every customer personally. He knows his customers personally and understands their needs. He even accepts payment by Cheque and delivers at home at a nominal price. This is totally lacking with any of the retail stores.
Posted by: Suhas | September 9, 2009 3:11 AM
Hi Suhas,
As you have mentioned accepting cheque is one example of trust between customers and shop owner. This is applicable to Stores globally where the Shop Owners were a part of the local community. But now companies are not building the trust factor, instead they are trying to build “Esteem value” for a product/brand, but again such products with high “Esteem Value” are highly priced and are not in the reach of every customer.
Posted by: vamsi K | September 9, 2009 5:59 AM
Hi Vamsi,
Its a very nice article. You mentioned about KIRANA shops and a customer's relationship with those shop owners, which was really true in the times we grew up. But now a days even those realtionships are fading up because of ever growing competition even in small localities.
and I agree with your perception, as a customer I endorse more on the trust factor than the Esteem value of the brand. Brand retailers must do a thorough root check and they may find the missing links in their CRM process.
All in all a very interesting article.
Thanks
Posted by: Supreet | September 9, 2009 4:32 PM
Thank you, Supreet. Exactly as you said, "Brand retailers must do a thorough root check and they may find the missing links.” In addition, they should understand the customer relationship tactics of Kirana shops and try to implement feasible strategies. Like Dabbawalas are a classic example of supply chain excellence operating at Six Sigma level, Kirana Shops can be a classic example of customer trust.
Posted by: vamsi K | September 10, 2009 3:23 AM
Very thought provoking article, Vamsi. I know exactly what you mean by the Kirana Shop experience from many years spent in the Caribbean.
I live in London now and have witnessed the way many of the larger retailers attempt to push their loyalty schemes even when you've barely made a few transactions with them. Although Social CRM may be one of the strategic keys to unlocking Kirana Shop-style customer relationships, many of these programmes will fail unless the retailer recognises that the benefits of Social CRM do not come overnight. By the very nature of it being 'Social', they must expect to encourage rich and meaningful dialog with the customer over a period of time before that all important Trust you rightly talk about crystallises. I just wonder how many retailers have the stamina to see it through before falling back completely to old habits.
Posted by: Julian Alfred | September 10, 2009 9:38 PM
Hi Julian, as you have mentioned, retailers should understand that the benefits of Social CRM do not come overnight. Unlike marketing campaigns which have an end date, the Social CRM approach should be a continuous process with an objective to enhance customer trust/relation quotient of the retailer.
Posted by: vamsi K | September 11, 2009 3:36 AM
Hi Vamsi, Truely a very interesting article.
The way you conveyed the message of Customer Trust through the example of Kirana stores was superb, but again thanks to organised retail, else we would have never understood the value of kirana stores.
Retailers are known to operate on wafer thin profit, and so intoduce such membership/loyalty programs to better their bottom line. The retailers are confident that we will come back to them for low prices. Today the competition is between kirana stores and Organised retailers, unless the latter face competition among their category, till then the piece of customer trust from CRM will be kept aside. The bigger question however still remains unanswered, do we ourselves seek customer trust or low price?
Posted by: Amit Dixit | September 11, 2009 4:47 AM
Thank you Amit, I am framing the question in a different way “do retailers seek customer trust or increase the bottom line with offers and loyalty programs?” and the answer is implicit, no retailer wants to get a hit on their bottom line, but at the same time they cannot afford to lose the customer trust. Due to competition and thin margins retailers might be concentrating more on the bottom line, but to sustain them in the long run retailers have to build customer trust and customer loyalty. Kirana shops also give “offers” generally they offer some free goods to customers at the billing counter, and these “offers” are very specific to each customer that the offer is well appreciated by the customer and creates customer loyalty. This is due to the fact that the Shop owner knows the customer’s needs very well as they are a part of the same community.
Posted by: vamsi K | September 11, 2009 7:39 AM
Vamsi, i agree with you completely. but do you really think time has come for them to go for Social CRM? i dont think so because: 1) they are achieving their numbers; 2) no cut throat competition in their category; 3) Customers are contended with low price. Customers expect personalised service when they are paying a higher price.
Today, does any retailer track which customer gave them what business? NO.
Going forward, once we have more retailers coming in and increasing the competition, then definately these retailers will wake up from their deep sleep and run for customer retention. Until then customers have to live with the status quo.
Posted by: Amit Dixit | September 11, 2009 1:54 PM
Amit, not all retailers are able to achieve numbers, and yes retailers are tracking the revenue from each customer (atleast top 10%) and they are sending some personalized offers to them. I feel that customers feel delighted with personalized service whether they are paying low price or premium for the same products/services, more importantly Kirana shops created trust and not just personalized services. Be it today or tomorrow companies have to wake up and understand that customer trust is the key to loyalty. Now the point is how to use Social CRM for gaining customer trust? since we have been seeing companies using Social CRM as platforms to gain customer information as well as for sales.
Posted by: vamsi K | September 12, 2009 3:00 AM
What should be understood with the advent of Organized retail is that such artificial relations are the main tool for CRM. With an customer base of thousands, such practices are expected. But to tell the truth, this artificiality is the main reason why some Kirana shops are thriving by leveraging on personal services such as home delivery, etc. Unless anyone finds a way to combine the advantages of both these worlds, this practice is commonplace.
Posted by: Seshadri V. | October 8, 2009 2:56 PM
Hi Vamsi Krishna,
What an article! You have very successfully put your view and critically revealed the entire facts what and how modern retailers are trying to steal our wallet's strength by offering silly products in their respective stores.
We, the consumers, are flexible to reveal our personal information with the retailers and henceforth -- the chances are very high -- the retailers may be selling our data in the market, because they are entirely business minded guys and they don't understand the privacy of others, who have proved their loyalty by revealing their personal info.
Most of us get numerous unwanted calls and messages in a day when we are damn busy with our work. And the limit crosses when you receive such unwanted calls on roaming and your mood becomes tensed because you have gone out of your home town for some important meeting or so.
Thanks again for this article. THUMPS UP! to you.
Regards
Diwakar Sharma (Indian Journalist)
Posted by: Diwakar | October 28, 2009 7:43 PM