AN INTERIM REPORT ON

“A STUDY ON CUSTOMER RETENTION

STRATEGIES ADOPTED BY VISHAL MEGA MART,
BERHAMPUR”

Under the Guidance of

Mr. Ajit Narayan Mohanty
Faculty Member, Marketing

A report submitted in partial fulfillment of

The requirements of

THE MBA PROGRAM (The Class of 2009)

Prepared By

Rakesh Kumar Malu

Enrollment No- 7NBBH049
 CONTENTS

 Background of the study

 Profile of Vishal Mega Mart, Berhampur

 Summary of the progress till date

 Introduction

 Body of the thesis

 References
Background of the Study
The retail industry is divided into organized and unorganized sectors.
Organized retailing (Vishal Mega Mart) refers to trading activities
undertaken by licensed retailers, that is, those who are registered for sales
tax, income tax, etc. These include the corporate-backed hypermarkets and
retail chains, and also the privately owned large retail businesses. The
unorganized retailing refers to trading activities done by local retailers
which are not registered like kirana shops, fruits and vegetable vendors etc.

The term "Retailing" refers to any activity that involves a sale to an individual
customer. In India, the unorganized retailing sector comprises of 96.5% while
that of organized sector just 3.5% that is mainly in major metropolitan and
urban areas. Indian retailing traditionally dominated by a small family run
"Kirana" store. Retailing in India is the second largest untapped market after
China. Professional management and strong customer focus characterize
organized retailing. Despite the huge size of the industry, only 8% of the
country's population is engaged in retailing while that in United States of
America it is 20%. The positive factor such as increased purchasing power,
rise in number of double income families and demanding customers, due to
change in life style and paucity of time, customers are increasingly looking
for convenience. To woo the customers to the store retailers are providing a
wide product range, quality and value for money, apart from creating a
memorable shopping experience.

If economy continues to register a growth of 7- 8 %of the GDP annually,

estimated by 2010, retailers will comprises of $300bn industry .retailing is
the last stage of distribution process. Retailing is one of the fundamental
building block of the Indian economy. Indian retail market has undergone an
immense transformation in the post liberalization & witnessing tremendous
growth. Indian retail growing at the rate of 30% per annum and provides the
highest employment after agriculture in India. The growing sophistication in
retailing like A.T Kearney & Kurt Salmon Associates have become active in
India. Industrial houses take to Retailing and set up retail chains like R.P.
Goenkas, Nandas, K Rahejas,Tata, Birlas, Piramals, ITC, Ambanis, find a place
in the list. Many others have worked out their plans and are likely to enter
the line in the next couple of months.

Customer retention is not only a cost effective and profitable strategy, but in
today's business world it's necessary. This is especially true when you
remember that 80% of your sales come from 20% of your customer and
clients. With these statistics I am wondering why most marketing and sales
campaigns are designed for the new customer.

Profile of Vishal Mega Mart

Vishal Group - launched their first hyper market Vishal Mega mart in
Udaipur this month. Spread over 25,000 sq.ft, the store offers extensive
range of men's, women's and kids' range of fashion clothing. Beside fashion
attire, it will also have separate sections and counters for watches,
sunglasses, fashion accessories, gifts and novelties, electrical appliances,
digital diaries, perfumes, cosmetics and grocery items etc. Currently, Vishal
Mega Mart operates 29 fully integrated and self-owned stores spread over a
total shopping area of 5,70,000 sq.ft in 21 cities across India

Vishal Retail Ltd. is one of fastest growing retailing groups in India. Its
outlets cater to almost all price ranges. The showrooms have over 70,000
products range which fulfills all your household needs, and can be catered to
under one roof. Each store gives you international quality goods and prices
hard to match. The cost benefit that is derived from the large central
purchase of goods and services is passed on to the consumer. In Berhampur
Vishal Mega Mart is situated at R. C. Church Road in an independent building.
It is a central market place where all sorts of customers come from all sorts
of places. This place is very convenient in various aspects like its reach,
parking facility, market coverage.

Due to rise in the per capita income, augmented product availability,

exposure to international lifestyle brands& media explosion all adds to the
booming retail industry investment in this area is poised to reach Rs 40000
crore by 2006.

Summary of the progress till date

There is a boom going on in the retailing sector in the present world. The
business environment in India as well as in other countries like China, South
Korea, Germany, France, UK, Japan, Thailand, Hong Kong, Indonesia etc is
becoming very complex and opportunistic with respect to various sectors as
of now “Customer is the KING”.

The customer retention strategies of Vishal Mega Mart as observed by me in

the SIP period and for last one and a half month have been customer
oriented and time or season oriented. That means it is undertaking these
strategies on a regular basis so as to make the customers more loyal towards
the products or services in Vishal Mega Mart.

Vishal mega mart has been trying to differentiate itself from other local
stores like Lohiya Brothers, Sri Durga Cloth Stores, other franchisee outlets,
local kirana stores so that more number of existing as well as new customers
will enter and be converted into regular loyal customers. From time to time it
is providing discounts, offers, schemes, better ambience, wide assortment of
goods with innovative visual merchandising, competitive pricing, better
customer value, better service through employees etc. it has been very
difficult for the management of the store for making the customers loyal
towards the store because of the complexities of the consumers and
competitors.

Introduction
Aim of the Study
The principal aim of the study is to find out the customer retention strategies
adopted by Vishal Mega Mart, Berhampur on a regular basis or daily basis.
Another aim of this study is to analyze the relationship between the
customer retention strategies and the sales turnover or customer walk-ins
into the showroom of Vishal Mega Mart.

"Customer retention strategies include all front office interactions with

potential and existing customers, including sales and marketing as well as
customer care and help desk support. Rather than customer relationship
management which focuses on managing customer data, a dynamic
customer retention strategy allows a business to grow its revenue among
existing customers".
My Live Experience:
A foundation of my philosophy (in business and in the rest of my life) is that
we need to treat everyone well. Another way to look at this is we're here to
serve others. And the best way to serve others (or at least, the best way to
start) is by putting others first. This means treating them with courtesy,
dignity and kindness. It also means putting their interests ahead of ours. One
day I walked into a store that sold cabinets and related products for homes.
The owner approached me with a friendly smile and greeting. But when he
learned I was not there as a customer he changed completely. No more "Mr.
Nice Guy". I left shaking myhead.
A few weeks later, just for fun, I stopped in the same store and acted like a
customer. The same guy helped me and he was as nice as a person could be.
Then I shared with him the details of my prior visit to his store. I asked him
what he thought of people who treat others differently based on who they
are, such as a customer vs. a salesman. He had no coherent answer. So I
helped him. I let him know very clearly I would NEVER do business with him
or anyone who treated people based on rupee signs.

Purposes of the Study

The main objectives of the study or analysis are as follows.

 To get the knowledge of the customer retention strategies.

 To know about the customer retention.

 To find out the customer retention strategies adopted by Vishal Mega

Mart, Berhampur.

 To find out the impact of the strategies on the daily business activities
in the store.

 To analyze the effect of customer retention strategies on the

performance of the employees, top management, sales of the
divisions, merchandise turnover etc.

Methodology Applied
The methodology for the above study can be taken as the Questionnaire
method and Sampling Design so that important information and aspects can
be taken from the company. As this is not the topic in which I can put some
calculation and analytical applications, what they had, what they have and
what they should to improve the sales performance and to increase
conversion rate.

Body of the Thesis

The customer retention strategies used by Vishal Mega Mart, Berhampur are
not sufficient but they are giving the results. So it should try to establish the
long term relationship with the customers so that they will become brand
“VISHAL” loyal. It sounds good in a town like Berhampur it is putting efforts
towards the retention. But there are some suggestions through which it can
derive more benefits in the long run.

Customer Buying Process

Word of Mouth

Good Product

Good Service

In- Store display &

Promotion

Existing VMM Store New

Customer
Customer

Marketing
Customer Entry
“Number of people who entered our store during store hours”

A customer entering in a store means that he/she is interested in the

store

“Court every individual who walks into Store”

Proportion of Expenses made for four Strategies

in Vishal Megas Mart

Sales Promotion

Loyalty Program

Database Marketing

Customer Retationship
Marketing

Measuring the Customer’s Value

Every customer relationship is an asset and has a economic value or Lifetime

Market Value (LMV). A customer’s Lifetime Market Value is determined by
taking your average customer transaction amount and multiplying it by the
number of transactions he or she will conduct with your organization over
time.

For example, if your average customer buys Rs700 worth of product every
quarter for roughly three years then your average customer’s LMV is:

Rs700 x 4 = Rs2,800 x 3 = Rs8,400.

When you create customer retention initiatives, you will need to justify them
based on the return on investment they will generate. This can be easier or
harder depending on the position in the customer life cycle. Generally, the
later in the life cycle, the easier it is to attribute results to your customer
retention initiatives and, therefore, prove a suitable return on investment.
However, intervening earlier is less expensive and more effective but harder
to prove. Don't let the difficulty of proving the ROI for early intervention
deter you, because it can pay very good returns. Companies who devote the
majority of their energies and resources to getting new customers usually do so at
the expense of their existing customers. The resulting neglect can erode the trust
and “equity” found in repeat customer relationships.

Reasons Customers Leave:

- Move or Die 4%
- Other Company Friendship 5%
- Competition 9%
- Product Dissatisfaction 15%
- No Customer Contact Strategy 67%

What happens if you lose a customer after only one year’s worth of
transactions? In the above example, your company would have received only
$2,800 of the $8,400 that would have come from maintaining a better
relationship.

Customer Retention - keeping customers - can be improved by explaining

to your employees - especially those on the front line who deal directly with
your customers - just how much each customer is worth to your business.

Customer Attrition - losing customers - can be dramatically reduced when

all of your employees work together to keep your existing customers
satisfied.
The best customer retention initiative to implement for a specific customer
often depends on that customer's position in the customer life cycle. What's
more, the earlier in the customer life cycle that you execute a customer
retention initiative, the more effective and higher the overall ROI of the
initiative. So what should you do—and when?

At Vishal Mega Mart, I divide the customer life cycle into four distinct
sections. These sections are shown below along with the value, i.e. profit or
gross margin that different types of customers contribute to the business at
different parts of the cycle.

New

This is the time when a customer is just starting his or her relationship with
your company. The length of time a customer spends in this stage depends
on your business, but it is normally anywhere from a few days to a couple of
months.

The largest group of customer retention strategies that can be implemented

in the "new" stage of the customer lifecycle is "onboarding." Onboarding is
the process of bedding a customer into your organization. It includes
ensuring that personal customer data is correct and that customers
understand the products they have purchased and how to contact the
organization. At Vishal Mega Mart, in the programs we have developed and
implemented for our clients, we have proved time and again that customers
that are properly onboarded will stay with the company longer and spend
more money than other customers.

Existing

These are your company's current customers and fall into several groups:

 The ideal customers, who continue to use and grow their use of your
products.

 The unhappy customers, who still use your products but are
discontented.

 The customers in silent attrition, still have your products but no longer
use them actively, such as credit card accounts with little or no
spending. They are generally a drag on company value, because you
still have to service them, although they add no profit to the business.

For instance, for customers in silent attrition, you must determine why they
are no longer using your product and then determine how to have them start
to use your product again. For example, are you their "back of the wallet"
card? If so, an initiative might be to target customers with a campaign to
increase their use of direct debit orders. Once they have started using the
card for regular purchases, they are more likely to use it in day-to-day
shopping.

Exiting
These customers are on the way out. They may still use your product, but
they are looking for the exit and actively seeking alternatives. Given time,
they will leave. Your initial challenge in creating retention strategies for
Exiting customers is to identify them. One way is to uncover the tell-tail signs
that customers considering a move provide to your organization. For
instance, if you are a bank, they may make a request for the loan pay-out
details. As you uncover these indicators, you should create initiatives to
target those customers with a proactive contact.

Where customers purchase multiple products from you, you should also try
to understand the order in which customers drop their product relationships
when they are exiting, because this can give you another good early
warning. Once you can spot exiting customers, you can create effective
customer retention strategies to target those customers.

Exited
Putting it simply, these are no longer customers. They have left.
Strategies that are aimed at recapturing customers that have left the
organization are generically called winback strategies. This is the most
expensive and lowest ROI place to try to implement your customer retention
strategies. Mentally, customers have already moved to another organization,
and it takes a large inducement to bring them back.

If you choose to execute winback strategies, you will need to carefully

manage the level of incentive that your staff can offer to customers. For
instance, you will need rules to tailor the incentive level to each specific
customer to ensure that the level of inducement is not larger than the future
business generated by that customer.

Customer Retention Rate:

The customer retention rate refers to the number of customers lost over a
period of time. It is normally calculated by the percentage of lost customers
versus existing customers over a quarterly or annual period, without tallying
new customer acquisitions.

While there are obvious benefits to keeping customers loyal and maintaining
high customer retention rates, it can be extremely challenging for
management to keep retention rates up. This guide will explore some of the
best customer retention strategies, important topics and common challenges
related to customer retention:

A. Understanding customer retention

B. Build a customer retention strategy

C. Implementation of a customer retention program

D. How to calculate retention rate

A. Understanding Customer Retention

Those getting started with a customer retention strategy might initially

assume that retention rate is based on customer satisfaction. However,
several studies have indicated that there is little correlation between
customer satisfaction and retention or future purchases.

Employees are capable of directly contributing to both customer

disappointment and customer delight. It is essential that companies have a
research and analysis method that links staff performance engagement
directly to customer behavior, so they can hire, train, recognize and reward
employees for how they contribute to customer value."

B. Build a Customer Retention Strategy

Customer loyalty is all about driving perceived value, whether that is rational
(functional, quality, cost, etc.), emotional (trust, service, communication,
information, brand equity, etc.) or a combination of these two dimensions.
His advice for building a customer retention strategy?, first, identify what
leverages top-end customer commitment and advocacy behavior, and then
build customer experience around it.

When it comes to getting started with building a customer loyalty strategy, it

is advised businesses to use these six questions as a guide:

1. What are the expectations of our customers and what it will take to
exceed them?
2. What differentiates our company in the eyes of our customers?
3. To what extent can we grow our business with our existing customers?
4. How do our interactions with our customers affect their satisfaction and
buying behavior?
5. Do we have any customer segments that require different treatment?
6. How loyal is our customer base and how can we improve it?

C. Implementation of a Customer Retention Program

A road map for implementing a customer loyalty program should include the
following:

 Appropriate research for identifying the benefits

 Testing them for prospective customer interest and effectiveness

 Following up with further research once implemented to make certain

that the loyalty program's benefits are working

D. How to calculate Retention Rate

The customer retention rate is calculated by determining the number of
customers lost over a period of time compared to repeat customers over the
same amount of time. "A customer is one who continues to make purchases,
and a lost customer is one who has made purchases, but does not repeat
these purchases for some time. The key is to analyze the repeats over a long
enough horizon." The calculation is:

(Total number of customers minus the number of repeat customers)

divided by total number of customers

Customer Relationship Management

CRM is at the core of any customer-focused business strategy and includes

the people, processes, and technology questions associated with marketing,
sales, and service. In today's hyper-competitive world, organizations looking
to implement successful CRM strategies need to focus on a common view of
the customer using integrated information systems and contact center
implementations that allow the customer to communicate via any desired
communication channel. Lastly, CRM is a core element in any customer-
centric eBusiness strategy.
Loyalty Program at Vishal Mega Mart, Berhampur

The plan objectives for this program are:

1. Effectiveness, cost savings, profitability, etc.

2. Develop a greater sense of concern and loyalty about the company or

brand

3. Strengthen communications between customers and companies.

4. Provide financial rewards to customers who have demonstrated

performance or contribution

5. Enhance the Company’s ability to meet or exceed its target goals.

The customer retention process begins with the first contact…

before they are even a customer.

• Expectations

• Solutions

• Delivery

• Value

• Relationship
Recommendations

1. Serve your Customers.

Serving your customers means putting them first. It means helping them get
what they want. The customers come to the store to accomplish something
they want or to avoid something they don’t want. They believe you can help
them. (Otherwise they would have gone somewhere else.) They have chosen
you!

Honor their choice by doing everything within your ability to help them. This
means focusing your attention and efforts on discovering what they want
and helping them get it. You put their interests and desires first. It means
your sole motivation is helping them get what they came for.

2. Connect with your customers.

Connecting with your customers means getting to know them as a person.

You develop a relationship with them. Of course you keep it professional and
in the context of your business. But it’s okay to learn about them as you help
them. In fact, the better you get to know them, the better you can help
them.

This does not have to take long. Sometimes a “social chemistry” can develop
within minutes. It shouldn’t be phony or manipulative. It needs to happen
naturally. If you care about your customers, if you use your people skills, if
you ask pertinent questions, if you listen and really focus on helping them,
then you’ll develop a great rapport with them quickly.

3. Have fun.
One of the biggest reasons customers don’t return is they have no reason to.
Sure they might get what they want but they often get it with no personality,
no sparkle, no sizzle. Their experience is a dud. It’s about as exciting as
cleaning your ears. There’s nothing memorable about it. Or worse,
employees are crabby, grouchy or even angry and they show it.

4. Be flexible.

With most things there is no one right answer. There is almost always more
than one way to accomplish something. But we don’t always admit it. Too
often we focus on one way to do something. Maybe it’s the only way we
know. Maybe it’s the fastest, cheapest or easiest route to helping our
customer. But that doesn’t make it the best.

Our goal is to help our customers get what they want, within our ability. So
we always need to look for alternatives. We need to be creative. We need to
think beyond the first solution that comes to mind when we’re working with
our customers.

5. Make them happy.

This is the most important thing you can do with your customers. If they are
happy with your service they will come back. They will help increase your job
security because they’ll stick with you and your company. Note, this does not
mean you do anything and everything to make your customers happy. You’re
always limited by the resources and policies of your company. But it does
mean you do everything within your ability to make them happy. Get creative
and look for ways to give your customer a great experience.

Establish clear expectations and communicate them regularly

and often.

• Reinforce the buying decision every chance you get

 • Stay in touch – No Hit and Run Selling!

• Be Aware of “Buyer’s Remorse”

Establish multi-level relationships

• Power – Decision Maker

• End-Users

• Sponsors

• All Stakeholders

If something is broken…fix it! Be willing to face the truth.

• It is never too late…it just seems like it is

• Small steps can and do make a difference

• Don’t go it alone; use your resources

Repairing Customer Relationships at Vishal Mega Mart

Preventative: Restorative:

• Communicate in writing • Back-up and start over

• Never make any • Leverage the positive

assumptions • Take Responsibility

• Be honest and upfront • Be proactive

• Be accountable • Develop a mutual plan

Must take action!

Their advertising and sales programs are designed to find and promote their
products and services to new customers. The company is organized on a
product or brand basis, not on a customer segment basis. While they all have
customer service departments, and most have a customer service toll free
number, they lack an integrated marketing strategy that is directed at
retention, and that defines retention as the measurement of success.

We have often heard it said that "It is five times more profitable to spend
your marketing rupees to retain the customers that you have than to use the
dollars to beat the bushes for new customers." Most people would agree with
this statement, even though they have no way of proving it.

The gold customers should not be bombarded with marketing programs. On

the contrary, they should be rewarded with super services. These are 80%
(or some other large percentage) of our revenue. We must retain these loyal
folks. We spend our marketing dollars on the middle three quintiles:
encouraging them to move up, to get in to Gold Heaven. On the other hand,
the bottom quintile may be costing you more than they are worth. Don’t
waste marketing dollars here. We don’t want to retain them.

Companies today have tens of thousands– in some cases millions-- of

customers. We do not know who they are. We cannot recognize them and
talk to them as the old corner grocers did. Loyalty has disappeared.
Customers are loyal until tomorrow’s newspaper, when they see a coupon for
something at another store and – woosh, they are gone.

There is one key principle at work here, however. Database marketing only
works to build retention if the customer benefits from the retention
strategies. It works if the customer says to herself, "I’m glad that I’m on that
database, because…" The company running the database has to complete
the sentence by designing and running programs that capture the loyalty of
their customers. If the customer does not see some value to herself in the
database activities, he/she will chuck out your newsletters unread. She will
ignore your communications. He/she will leave your gold cards in her top
bureau drawer. For the database program to be successful, the marketer
must design the program from the customer’s point of view. If you can come
up with a strategy that makes customers happy, then they will reward you
with something that you want, but which costs them next to nothing:
loyalty.

Last but not the least

You‘ve got all the right stuff. The shelves are stocked, the door
is open, the Welcome sign is in the window. You have
successfully attracted potential Customers; but now, to
convert them, you have to invite them to interact, to engage in
a transaction, and to come back.
References

 EdMckinley, India's Top retailers ready to face off with foreign

chains, www.Icsc.org,2006

 Emerging market priorities for global retailers",

www.atkearney.com,2006

 Indian Retail sector- Tremendous Growth Potential.

www.smallbiz.nws.gov.au,2006.

 Indian Retail: on fast tract bridging the capability gaps,

www.kpmg.com,2006.

 Marketing Management- I & II, ICFAI University Press

 Marketing Management, Eleventh Edition, Philip Kotler

 www.about.marketing.com

 www.vishalretail.com

 www.scribd.com
Questionnaires
1. What is customer retention?

2. What are your customer retention strategies?

3. Why are you using these strategies?

4. What are the implications of these strategies?

5. What is the contribution of the employees towards the retention

strategies?

6. What is the effect of the customer retention strategies on the sales

performance of the store?

7. How does it enhance brand loyalty among the customers?

8. What are the different strategies for calling new customers and
retaining existing customers?

9. What are the sales promotional strategies of Vishal Mega Mart,

Berhampur?

10.How are the customer retention strategies different from sales

promotional strategies?

11.What is the success and failure rate of these strategies and

recommendations for the effective and efficient application of
customer retention strategies?

12.