India - the shift to loyalty

20 March 2012

If you were to ask an Indian he would say that the country is not growing as fast as in 2009. Ask the same question to anyone else and you would get a very different response. Indeed India is still growing at a rate of 7%, only second to China in the world.

In addition over the next two decades, the country's middle class will grow from about 5% of the population to more than 40% and thus create the world's fifth-largest consumer market1. The report also states that if the growth rate in India continues in the same vein, its income will triple over the next two decades and it will become the world's 5th-largest consumer economy by 2025 (currently 12th now).

Digital explosion

Clearly this reinforces that India presents a massive commercial opportunity for brands looking to grow internationally or domestically. Whilst the middle class segment will increase significantly in the future, today this segment accounts for just 5% and therefore every new entrant and existing brand is looking to grab a share of this audience's wallet. Businesses are no longer able to rely on their product and pricing to win over the customer, it is now vital to create and maintain a direct relationship to be top of mind.

There are multiple instances where companies are looking to capture customer attention through personalised offers across multiple media such as mobile phones and other digital channels like websites, kiosks and social media platforms. The marketing trend in India is towards a more dynamic customer relationship approach where relevancy and personalisation are becoming increasingly important.

Social media is changing the brand-customer relationship in India and is being rapidly adopted by consumers, particularly the younger generation. During 2012, it is predicted that 45 million Indians will interact via social media2. Additionally, 30 million online Indians are also members of one or more social media platforms3   - which is why companies are so enthusiastically exploring how they can reach and offer propositions to their audience via these channels.

Whilst the telecoms provider Tata Docomo entered the market with a new and differentiated per second billing proposition, it is recognised as a shining example of how to use social media to build customer relationships, drive advocacy and create a strong and loyal fan base. Not only are they the top Indian brand on Facebook with over 6.6m fans, it is also the fastest growing4. They genuinely use all of the social media platforms in different ways to create customer engagement, whether it is to provide customer service and support, share and gain new product ideas and feedback and recognise advocates who continue to champion the brand through initiatives like declaring a fan of the week on Facebook and Twitter.

Overall Tata Docomo have proven themselves to be particularly successful in using social media channels to create one-to-one customer relationships by building profiles, recognising individual members and communicating with fans and followers to build a more relevant and personal relationship with the brand.

Not many brands have been able to achieve the same level of success as a result of getting involved without a considered strategy. It is vital that any brand innovating in this space takes sufficient time to step back, learn from other markets and listen to customer's needs in the local market - so they can formulate a solid strategy to genuinely connect with consumers through this channel.  It is clearly important that brands ensure that this strategy is tailored to be locally relevant and meet the needs of the Indian consumer.

Extending the customer relationship

In an increasingly competitive market, being able to drive customer engagement and loyalty to enhance the commercial value of each customer is becoming a top priority.  It is no longer just about customer acquisition.  In the example of the automotive industry, where to date the undisputed leader in the sector has been able to sit back and expect the customer to return and continue the relationship beyond the purchase, competitive pressures have dictated the need for a much more proactive approach. This is not a new strategy for developed countries, but in India the car brand will now re-engage the customer to offer maintenance service and other value added offers such as insurance.  

Being able to extend the relationship across a greater range of touch-points is now a much more common occurrence, recognising the shift to up and cross-selling to increase revenue and profitability throughout the lifecycle.

Customer intimacy

The Indian retail sector is growing at a compounded annual growth rate of 47% and is the fastest growing sector in the Indian economy5. Whilst the growing middle class has attracted both foreign and national brands to set up big retail stores, the retail sector remains highly fragmented with the majority of businesses being family-owned shops and corner stores. It was expected that the larger stores would threaten the family outlets but this has not been the case due to their success in knowing their customers personally, and engaging them on an individual and emotional level.  

The new and larger Indian retailers have now followed their example and have had to look at how they can better compete on a more personal and direct relationship level. This includes extending their services such as providing home delivery above a certain purchase value in addition to looking at loyalty programmes.  

Direct or shared brand relationships?

Loyalty programmes, whether coalition or company-branded, are certainly not new in India but there is a renewed focus on how they can be used to drive both new customer acquisition and longer term customer relationships. Whilst the Payback coalition model continues to demand attention, more companies have been adopting a more prudent view to their inclusion, value and challenging whether this approach is right for their brand and customers, whether they are already part of the programme or considering joining.

Clearly the increased earning and burning opportunities offers a strong customer value proposition with national partners like Big Bazaar, Hindustan Petroleum and ICICI Bank as well as the inclusion of smaller partners. However this might result in a weakened position for the coalition partner in being able to build and own a more direct relationship given that the coalition brand is in control. Determining the most appropriate customer strategy will be driven by well-defined business objectives and an understanding of what is important and what compromises need to be made to ensure success.

More growth to come

In the end, even with all the challenges and issues governing India, it has outpaced the world and itself over the last decade and remains a key growth market for domestic and international corporations. The growth trend is expected to continue which will result in a more exciting and dynamic marketplace having consumer with greater disposable income. As industry and the general population look positively towards the future, the time is ripe for brands to seize the opportunity to grab its share in the region's success.  


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