Move to woo and keep buyers.
Three months after Groupon introduced a loyalty programme to woo consumers, global deal and coupon-selling internet giant’s newly minted Indian counterparts are emulating the strategy in a bid to ensure repeat buying and consumer loyalty.
Consider the case of Deals and You. The daily deals website owned by the Gurgaon-based Smile Group says that it will be among the first players in the market to introduce a loyalty programme. Necessity? Partly following a stabilisation in deals and price points across players.
“We will institute a tiered loyalty programme,” says Gaurav Kachru, CEO Deals and You. “This, along with additional investments in consumer servicing, is expected to boost the business. Most of the $17 million we raised last month will go toward this.”
According to Kachru, the programme is important, especially given the fact that repeat buying will play a big role in the ability of the business to scale operations. The proposed loyalty programme for Deals and You offer discounts and cashback after a consumer attains a certain level of buying.
Loyalty programmes are structured tools for marketing. They aim to reward and, therefore, to push loyalty in consumer buying towards the brand and the business. Traditionally, the tool is used by brick-and-mortar retailers. Example: the green card points that one gets on purchases in Pantaloons.
These are important given that for most businesses, one of the primary costs and a big hindrance to growth comes from the cost involved in the acquisition of new consumers.
Naaptol, which was the largest spender on print advertising last year, also plans to come up with a loyalty programme. “The plan will have a three-tier membership structure. It should be in place by the end of next quarter,” says Manu Agarwal, founder and CEO, Naaptol. “As members graduate from one structure to the next, they will get Naaptol rewards that can be redeemed as gifts and discount vouchers.”
According to Agarwal, the concept helps motivate the customer to stick around, especially at a time when price points are becoming stabilised. Also, loyal customers will be given previews on select merchandise, and will get access to certain discount schemes.
According to industry experts, each ecommerce website has to spend anywhere between Rs 1,000 and Rs 2,000 in promotional costs for the acquisition every new buyer.
According to filings this September, Groupon’s per head spend on acquisition trebled between June and September, going up from $7 to $23. According to the same regulatory fillings, the company spent $378.7 million in marketing efforts in the first half of 2011, up manifold times from $35.5 million it spent in the corresponding period last year.
While no one is willing to reveal numbers, it is significant that some of the biggest advertisement campaigns last year were undertaken by online players like Snapdeal, PolicyBazar and Naaptol.com, resulting in an upswing of their consumer acquisition costs. “The second-time buyer is a lot more important than someone who buys just once, and does not come back,” says Krishna Motukuri, MD, Tradus.In. “We will implement a programme next quarter to ensure multiple buys per consumer.”
More importantly, repeat customers are significant because, besides the problem of getting buyers to adjust to a new technology, most businesses are startups and are facing issues of last mile delivery and credibility. “One bad transaction equals multiple complaints on social networking forums,” says an owner of an ecommerce business. “While of 1,200 deal coupons sold everyday, on one site just 2-3 per cent come back with complaints, the pile-up effect is a lot stronger.”
According to estimates by analysts, an average of 20,000 deal transactions and over 50,000 product transactions transpire every day on just the top 10 sites put together. The numbers will only grow. Also significant is the fact that India currently has 100 million internet users. This is about 10 per cent of the total population that now is 1 billion people.
Some are still reticent, though, especially the ones that have already invested in brand building extensively.
Flipkart says it is working on providing a great differentiated shopping experience at very competitive rates.
“We believe these are bigger drivers of loyalty than reward programs,” says Ravi Vora, its vice president (marketing). “As a matter of fact we have a repeat rate in excess of 70% at Flipkart.”
