Payback The Multi Partner Loyalty Program Marketing Essay

Published Date: 23 Mar 2015

Payback is Europes largest and Indias first loyalty program. Payback is a pioneer in multichannel loyalty program. Customers collect points from more than 480+ outlets, online shops and redeem these for vouchers, rewards. Payback offers companies a chance to learn the actual needs and purchase patterns of their online and offline customers and customize products for them. This helps in better demand estimation and customer retention. Companies can also position their brand prominently, decide on the apt promotions and make tailor made offerings for the customers. Targeted placement of content will help companies to improve cross selling and up-selling. Primarily, Payback provides support for customer acquisition, reacquisition and assists with customer loyalty. This helps partners and the advertising industry to conduct particularly efficient and effective communication. In India PAYBACK has more than 65 partners in the network, some of them being ICICI bank, HPCL, BIG Bazaar, makemytrip, Megamart, UniverCell, Hometown, Food bazaar, Ezone, Central, Brand factory, bookmyshow.com, Letsbuy.com and flipkart.com. [1] 

Literature Review

Loyalty cards are a relatively new concept being pursued by several large business units in India in an attempt to build a strong a sustainable consumer base for their products and services. The concept of loyalty cards or schemes is at a nascent stage in India and not much of dedicated market research has gone into it. In the absence of proper historic reference data, we decided to look beyond the boundaries of the country to have fundamental idea and understanding of the drivers of this market. A fundamental literature review was undertaken by us, mostly using prior research data outside India, to provide us an understanding of the drivers of the market, to provide definition and a framework for this project. The literature review explored some prior research done in this particular field and it was instrumental in culminating a sense of direction and understanding of the methodologies to be utilized in the project.

Extent of Previous Research

Business houses in India are slowly waking up to the realization of capturing and sustaining a stable consumer base as a buffer to the increasing competition. This particular trait can well be attributed to the entry of more and more foreign MNCs in to the regular Indian market foray. Although new in India, the source of Customer loyalty can be dated back to 1990s in the USA where the frequent flier programs were predominant and are attributed to be the beginning stages of Loyalty schemes. Our first point of reference has been the question asked by Lisa O'malley "Can loyalty schemes really build loyalty?" [2] . The research predominantly asked the following questions and came up with insights about Loyalty schemes across the globe:

What is the origin of Loyalty schemes?

What is loyalty and how is loyalty increased?

Loyalty schemes and the concept of value.

What should be the objectives of a loyalty program?

How well do loyalty schemes manage loyalty?

The response to these created a platform for us to launch into our research project and provide deep insights into the market dynamics. It pointed out a few critical areas of focus which includes the absence of a definitive measurement criterion. The qualitative nature of the data makes it hard to convert it into a form or quantitative unit of measurement. It also points out the collateral damage of such schemes promoting the "deal" rather than the "brand". The most significant contribution of this paper was perhaps the Categories of loyalty [3] which immensely helped us by providing a deep insight into the STP analysis of our research.

This particular literature survey was aptly followed up by a more comprehensive and quantitative study on "The impact of Loyalty Programs on repeat purchase behaviour" [4] .The research paper looked at quantifying the reach and effect of loyalty programs around the world. Even though it was still not evident whether loyalty programs actually affect repeat purchasing behaviour [5] , they again emphasized on the fact that data & methodology incapability hinder proper assessment of the reach of loyalty programs. The highlight of the research project was the explanation & utilization of the NBD/Dirichlet multinomial model [6] which contributed by elaborating and outlining empirical methods using the Theory of Repeat Buying [7] , which has been prevalent over 40 years. It introduced to us the parameters like penetration and average purchase frequency per brand and per category, can be used to forecast and comprehend various aspects of loyalty behaviour. The paper publishes the methodology and its corresponding results in details and will form the framework for us to engage in our research.

The methodologies and insights provided in these papers will form the foundation for u=our approach towards unravelling the yet nascent loyalty market scenario in India. We will heavily rely on our understandings from these papers to structure our project and analyze the results from both quantitative & qualitative perspectives, and provide a fruitful insight into the market.

Secondary research on cases based in Germany

As payback is relatively new in India, we focused on secondary data collection from German companies. We have studied two cases where Payback has improved the customer acquisition and retention rate.

Case Study Aral AG [8] 

Fig. Aral AG Card [9] 

Aral is a brand of automobile fuels and gas stations present in Germany and Luxembourg. Till 2006 Aral used a separate customer card. On May 2006 they moved to Payback programme.

Why Payback, a multi-partner loyalty card?

1. A multi-partner programme is more attractive for customers.

2. It is a perfect tool for winning new customers. Payback card is already carried by a broad customer base, which makes the potential for winning new customers particularly large.

3. Customers also have the opportunity to collect points in various spheres of everyday life and to exchange these points for attractive rewards.

Benefits of using Payback

After introducing Payback, Aral was able to win market share from its direct competitors. According to Aral, perceived value of their products in the eyes of the customer increased. Relative cost of switching over to Payback card was more than offset by the perceived value for customers and acquired market share. Almost every second customer buying fuel used payback cards. Market share of Aral improved half a percent to around 23 percent.

Key Takeaways

Aral used Payback card to collect data about consumers and used to segment customers based on behaviour clusters. Customers loved the programme as it gave them rewards and it acted as an incentive to use Aral over the competitors.

Case Study-Galeria Kaufhof [10] 

Galleria Card [11] 

Galleria Kaufhof is one of Europe's leading department store chains. Till 2000 they used Galleria card, a stand-alone loyalty card. In October 2000 they shifted to Payback.

Why Payback, a multi-partner loyalty card?

1. A multi-partner programme reaches significantly more participants, which justifies the investments in systems and know-how.

2. A multi-partner programme offers clear cost advantages for the service processes which can be used by all partners.

Benefits of using Payback

Use of payback improved the direct sales management. Kaufhof got many new customers because of Payback and was able to retain them successfully. People with Payback card spent more than others and this improved the sales figures of the company. Competitive advantage of the company improved as it got more information about the consumers and their buying patterns. They were able to come up with differentiated and target marketing campaigns for their customers.

A study done by Kaufhof on the effects of issuing Payback card reveals that

1) Customer satisfaction - Members of PAYBACK are more satisfied with the services of Kaufhof than non-members

2) Intention to make additional purchases - Members are much more likely to make an additional purchase than non-members

3) Intention to purchase again - Members are much more likely to purchase again, compared to non-members

4) Price sensitivity - Members are less price-sensitive than non-members

5) Further recommendation - Members recommend Kaufhof to others much more frequently than do non-members

6) Customer loyalty (aggregation of all components) - Members display much greater customer loyalty than non-members [12] 

Key Takeaways

In a super market it is extremely profitable to use payback cards. In a low price high volume scenario it is easier to entice the customer in to using a loyalty card. Customer data management gives a competitive advantage over others. Company can come up with specific promotion scheme based on the pattern found from analysis of the Payback data. From the customer end, he/she will be happy when they get personalised discounts and rewards.

Industry Scenario

Retail Industry in India

The Retail industry in India is growing at a rapid rate. According to Global Retail Development Index 2012, India ranks fifth among top 30 emerging markets for retail [13] . The size of India's retail sector is estimated at $ 450 billion. With the changing trends, this is expected to grow to $900 billion, according to a report by PricewaterhouseCoopers [14] . According to A T Kearney, the global consulting firm, this sector is expected to grow at more than 15% every year [15] .

The reasons for the growth of the retails sector in India are multiple. The Indian economy is growing and as the disposable incomes of Indians are increasing, resulting in an increase in the purchasing power. Purchasing trends are also changing, with increasing readiness to spend on luxury and branded goods in categories like apparel, accessories, bookstores, footwear and electronics [16] . A large portion of the retail sector is still unorganized and organized sector amounts to only 5% of the industry. The reforms of the Indian government with respect to Foreign Direct investment (FDI) is attracting global retail majors to set up stores in India. Bharti-Wal Mart, Reliance Industries Ltd and Future Group are among the groups investing heavily in the Indian retail industry.

The sectors that are important in the retails industry are [17] 

Apparel

Fashion and Lifestyle

Food and Beverage

Pharmaceutical

E-commerce

E-Commerce Sector in India

E Commerce or online retail business has a high potential for growth. Currently at $360 million, is expected to grow to about $ 1.25 billion by 2015 [18] . A Nielsen Global Online Shopping Report of 2012 showed that almost 25% of Indians spend 11% of their monthly shopping expenditure on online purchases. Another study shows that 4 out of 5 internet users shop online, which implies a 50 million strong online consumer base. [19] 

Loyalty Program Market

The first loyalty program was started by American Airlines. Their frequent flier program aimed to reward repeat customers and thus, build loyalty towards the brand [20] . Since then, loyalty programs have been introduced by companies throughout the world. The Indian markets have seen the trend of loyalty programs increase over the last decade. India's loyalty program market is estimated at $ 4 billion [21] . Around 25% of shoppers in India have opted for a loyalty programme [22] and 42% of Indians from SEC A, B, and C are a part of at least one loyalty program [23] . However, only 15% of the people who are a part of a loyalty program actually use their loyalty cards [24] . The major reason for the less use of loyalty programs is the complication involved in the process of being a part of such a program to finally redeeming the points earned.

Competition in the Customer Loyalty Space

First Citizen - Chandru L Raheja Group [25] 

First Citizen is the customer loyalty program offered by Shoppers' Stop, an Indian department store chain established in the year 1991.

Consumer Base: At present there are 2 million members enrolled for this loyalty program and this huge customer base attributes to almost 73 per cent of Shoppers Stop's total sales throughout the country.

Competencies:

- Being in the multi-brand retail market since 2 decades Shoppers Stop has outlets almost in all the major cities in India.

- 'First Citizen Citibank Titanium Credit Card' a Co-branded credit card with Citibank, through which the customer can also earns points for purchases at other outlets.

Card Acceptance: Points earned only on purchases made in Shopper Stop outlets. However, through the First Citizen Citibank Titanium Credit Card customer can also earn points for purchases at other outlets.

USP: The name "First Citizen" reflects our commitment to offering you the ultimate shopping experience.

Empower Program - TATA Group [26] 

This is India's first multi brand loyalty program. This program is an exclusive benefit of the Empower Card and the Tata Credit Card. So, holders of any of these cards could avail the program.

Consumer Base: 5 million plus

Competency: TATA group being an erstwhile group has leading brands across a wider set of establishments. Through Coalition loyalty, customers get to earn and redeem points across a wider set of establishments.

Card Acceptance: Valid across all the TATA companies.

USP: The Empower Program, a unique ever growing alliance of leading brands, which allows customers to earn and redeem points across brand they use regularly.

SWOT analysis of Payback Cards

Strengths

Partnership with 67 [27] premier outlets , giving its customers a wide variety of choices

A strong online presence through social media. Payback India's Facebook page has 183,184 followers (as on 01-12-2012) [28] 

Partners get a wide pool of customers and information regarding their shopping patterns. They can use this data to create a competitive advantage over others

Innovative marketing ideas like Payback Fridays, Double points for certain products etc. are beneficial for partners and end consumers

Opportunities

CRM is a relatively new concept in India and Payback has the early mover advantage. This will give payback a chance to tap in to the wide opportunities

Rural market for this product is completely untapped.

Payback can look for partnership with other product segments like skin care, drug stores, movies etc.

A cross country reward point system will make payback a preferred choice for premium segment people who travel a lot.

Weakness

Fear about the personal data that Payback collects among the consumers

Long wait to get a reward

Not present in all segments and all locations

Partners play a major role in creating awareness. This may sometimes lead to suboptimal performance.

Threats

Stand-alone cards issued by companies.

Consumers not willing to move to a new reward system

Lack of awareness among the consumers

Consumer loyalty concept still in nascent stage in India

Business Model

Loyalty Programs around the world can be broadly divided in to three

Exclusive program offered by a single firm - This is basically programmed to increase the loyalty of the firm's most important customer, so it more narrowly focussed Eg. Bloomingdale's in the US and De Bijenkorf in the Netherlands.

Offered by a single firm to most of its consumers - This is basically programmed to increase the consumer loyalty base as a whole. A single firm will have tie ups with many outlets Eg. Tesco in the UK, Jet Miles in India

Cross Company Programs - This is offered by a third party vendor. Main idea is to promote cross selling. As this is a joint program, operation scale and benefits for customers are large. Payback loyalty cards falls under this category.

Payback uses cross company programs as a business model. Partners pay payback service and license fee for managing their loyalty programs and direct marketing services provided by Payback. Customers get discounts through accumulated points. Payback offers consumers a unique opportunity to pool rewards from multiple stores. This is their main point of differentiation compared to stand alone loyalty schemes. Because of this patrons will be able to accumulate points faster. A coalition with strong partners who offers good redemption possibilities is another advantage of payback.

Direct marketing using mails and advertisements from payback to end customers. End customers can redeem their points on multiple product categories. They will get personalized offers from payback.

Partners Pay service and License Fee to payback for managing their customers loyalty programs and for direct marketing service

Partners get access to database containing details about the consumers and their buying behaviours. End customers get a wide choice of shopping destinations

Analysis of Targeted Market Research

We have done a targeted survey on the customers of Central mall (Refer to Appendices C and D). We visited the store and asked individual customers about their preferences after explaining the different variables involved in the survey. Thus we made sure that our sample set depicts the real world scenario as closely as possible. We talked to a total 90 consumers in which we discarded the data of 26 customers because lack of clarity in their answers. So finally we have a sample set of 64 customers.

As the primary target of our survey was to study about the usage of loyalty cards we limited the number of respondents who do not use Payback cards to about 20%. So all our data basically tells about the consumers who use Payback cards. As we can see from the graph 70% of the people who shopped from central mall that day falls in an age group of 30-50. This is expected as this is the age group who would be buying for their family and mainly take the role of decision makers. The average age of consumers who use payback was 38.6, with maximum age 65. 53% of the respondents were female. 56% of the responds where married with children. This formed the basis for out targeting and positining.

Of the people who have heard about payback cards 84% used it . This shows that the conversion from awarness to trial is very high in the case of payback.

Our survey showed that majority of the people who uses payback cards prefer to buy electronics, apparel or clothing from a retail store and that 70% of the people spend more than INR 4000 per month on shopping. This is in line with our other studies that show that payback customers are basically urban customers with a high degree of disposable income.

People prefer to get cash back as the reward followed by lifestyle products. This forms the basis of Payback's reward programme planning. We suggest that Payback must prefer giving more cash backs as rewards and also introduce more lifestyle products as reward gifts.

People prefer to use Payback majorly because of the ease of point redemption and use. So more focus must be given in making both these much simpler. Use of M commerce and developing mobile and tablet apps will help in further simplifying the process.

Educating people regarding the benefits of using loyalty cards is a necessity. And among those people who uses some loyalty cards payback must induce the need for using a multichannel loyalty card. This can be achieved through increased spending in promotional activities like advertisement, in store promotions, sponsoring some events etc.

People are not yet aware of the Tata Empower card, so Payback must make use of this time to gain maximum market share and to leverage the first mover advantage. Brand equity of Tata cannot be currently matched by Payback, so focussed attention much given in creating trust among the customers, so that in the long term when Tata card spreads to other avenues payback won't lose consumers. So the focus should be in connecting with Indian consumers and creating a brand equity based on trust, innovation and customer satisfaction.

Analysis of In-depth interviews of Payback Partners

This particular survey was targeted at the partners of Payback. The questionnaire was prepared with two essential dimensions in mind:

Penetration of Payback

Effectiveness of Payback

From the responses recorded (Refer to Exhibit E) from the three subjects interviewed, the following salient points come into view:

The retail segment is witnessing increasing penetration and awareness of Payback cards.

There is not enough information to decide on the level of success of Payback in retaining customer loyalty.

The stores have seen a positive increase of returning customers redeeming gift vouchers and redemption coupons.

The stores are predominantly using word of mouth publicity to impart more Payback cards.

It is heavily used in petrol pumps but there seems to be no way or requirement to distribute Payback cards from these outlets.

The age group of 30+ seems to be the main users of Payback Cards.

Segmentation

The segmentation for Payback target users was done using two separate media. The primary research was done through an online survey with a sample questionnaire (Exhibit A). The data recorded through the survey pointed out to the following segments of users:

Amit

Amit, a 22 year old college student is outgoing in nature. Busy with his academic work he also participates in different activities. Like all other students of his age, he loves to party. He also like to go for shopping to get things of his choice, but is constrained by the fix supply of pocket money which he receives from his parents. He keeps himself updated with recent technological advances and likes to purchase new sophisticated gadgets. Whenever he gets some time for leisure he finds a nice book to read, go to movies and also goes on a bike tour with his friends. He is also interested in trying out branded clothing. Due to perpetual shortage of money, which students generally face, he always looks for deals which are value for money. Mostly he buys books, music and movie tickets through online websites. He visits multiple websites to find the best deal. From last one year he has been carrying a loyalty card which he got after shopping with one of the branded franchise. He utilizes the points accumulated through the card, but he complains that he can't use this card in other branded store or any other online platforms. He has seen some of the fuel stations are taking loyalty cards but feels disappointed that his card is not eligible for fuel stations.

Ritika

29 year old Ritika is working in a multinational firm. She is image conscious and she takes her own decisions. To break the monotony of work, she goes for a long drive in her car with her friends. Every weekend she goes with her colleagues for brunch in restaurants. She is a shopaholic, who wants to buy everything which is new and trendy. She has taken subscription of different fashion magazines through which she keeps herself updated with new and upcoming trends of fashion. She has taken membership of different branded stores and different supermarkets. When she got her first membership card, she found it very interesting due to exciting offers. But after accumulating multiples cards she finds it very complicated. She has cards for different brands, a card for fuel station and membership of different online websites. Now she is looking for something simple, which can remove the complication of this multitude of cards.

Rakesh

Rakesh, a 45 year old vice president of a private bank, is head of four member family including him. He always feels time crunch due to his tight schedule. Due to this he always looks for less time consuming options and goes to supermarkets for shopping where he gets variety in choice of options and has to invest less time. His choices are also influenced by his family members. Being from the upper middle class segment, he is considerably affluent in his financials and does not mind shelling out the extra buck for convenience. He is aware of the current developments of the business world and has consciously attempted to cash in on the growing brand promotional activities. He is brand conscious and generally purchases for his entire family. He is not too eager on saving extra by consciously focussing on loyalty schemes and in general carries 2-3 different loyalty cards but utilises them rarely. He does have the perception that a single card to replace all others will be a good idea.

Following this online survey, we decided to carry out a more in-depth research and survey on the topic. This was facilitated by a targeted survey of consumers at a retail store. This location was chosen to find a more diverse sample of consumers for survey. This survey also enabled us to find a more diverse sample according to age of consumers. After completion of the survey and consolidation we came up with a new segment of consumer which was absent from our previous survey:

Neha

Neha is a 35 year old, established and successful lawyer, who has come up the corporate ladder through the years. Being a lawyer, she is very critical and scrutinizing in nature. She is married and has a child. She is consolidating her family and is very aware of her family's financials. They are planning meticulously for her child's future and don't mind finding good deals and offers during her shopping. She and her spouse both own a car each and love spending family together in the evenings in the malls, theatres and restaurants. She was introduced to the concept of membership cards early on in her career and carries quite a few of them in her purse. She is aware of the benefits of these cards and regularly updates them with her purchase. Having carried them for quite a few years now, she has been able to earn sufficient points and redeem rewards. She mainly shops for clothes and accessories apart from frequent visit to restaurants with friends and family. She found the idea of a single membership card from ICICI bank interesting and thinks it will help reduce the clutter in her purse.

From the above data, we carried out the segmentation according to various parameters as detailed below. The target consumer(s) was selected by a combination of these parameters.

Geographic Segmentation

The target group of Payback Card users will be primarily driven by the spending capability of the consumers. This encompasses two aspects, disposable income and availability of Payback partner stores to spend it on. Payback should target Class 1 & 2 cities and metros. This will give them a broad and diverse base of consumers to target. This step will also provide Payback with the following fringe benefits:

Consumers with the ability and means of purchase.

A consumption pattern enabling higher penetration and usage of Payback cards.

Exposure to mass media and increased awareness levels.

High marketing support infrastructure.

Apart from the above mentioned target geographies, one more possible target could be cities with high internet penetration, disposable income but low retail infrastructure. Modern industrial towns like Jamshedpur, Rourkela are such probable targets.

Demographic Segmentation

The basic requirement of loyalty cards is high disposable income combined with an ability & desire of spending. This primarily boils down to an age group of 30-50. This conclusion is derived from our in-depth market survey on the following parameters,

Disposable income

Shopping pattern

Awareness level of benefits of loyalty cards

Availability of internet

Family pattern

After analysis of these parameters, came up with the following results for the target consumers of loyalty cards:

Age : 30-50 years

Family Size : Nuclear household, married with upto two kids or young unmarried professional.

Income : Upper Middle class and above with an annual income of INR 1.5 lacs or above. The socio economic class corresponding to the target group would be A1, A2, B1 & B2.

Occupation : The target group will include both employed and self employed consumers. The group will encompass businessmen, entrepreneurs, medium & senior level executives from various professional backgrounds.

Education : The target group will consist of graduate/post graduates from a general as well as professional background.

Psychographic Segmentation

The psychographic segmentation was done using the VALS framework. We identified the primary motivating factors that will inspire loyalty card users :

Achievement : People looking for products and services demonstrating their success to peers will be more prone to spend a higher fraction of their disposable income

Self-expression : People in this category express desire to for social & physical activity. They seek variety and risk. These characteristics attribute high expenditure towards fulfilling their desires.

So the groups to be considered for primary target should have higher resources. They can be earmarked as

Innovators : They are successful, sophisticated, active, upscale people. Their tastes are reflected through their purchase and lifestyle. Their taste is relatively upscale, niche products and services.

Achievers : This is the second largest target group for loyalty card market. They are successful, goal oriented people with focus on career and family. They are partial towards premium products and are beneficial for loyalty cards due to their partnership with such product houses. The level of disposable income and expenditure is perfect for loyalty cards.

Experiencers : They are young, enthusiastic and impulsive people seeking variety and excitement. They spend a comparatively high proportion of income on fashion, entertainment & socializing. This behavioural pattern makes them the primary target group for loyalty cards.

Additionally to understand the potential of product in a better way we have taken some data points from Germany, where Payback is running this product very successfully. We have made a profile for that as well to understand the difference in market of Germany and India.

In synchronization with our learning from literature review, we decided to correlate our segmentation decisions with similar segments outside India. This was a conscious decision taken because of the absence of any benchmark research about the Indian loyalty market. Thus, with the target of creating a foundation for validating our research, we decided to explore the German market and identify similar segments. With the help of our acquaintances in the country, we conducted a similar survey and came up with the following results:

The first segment is of young male of 23-28 years of age, who is a student. He generally shops from shopping centres and online. He is a loyal user of loyalty cards and his purchase decisions are frequently governed by possible savings using these cards.

The second segment is of users in the age bracket of 50+, who understand the utility of savings. They use loyalty schemes very frequently in shopping centres, hotels, post office and online. He/she owns more than one loyalty card but is circumspect of how such companies uses their personal data.

We also found a contrasting segment in the market with very different dynamics and ideologies. They are again of the same age bracket of 23-30, who find loyalty cards not worth the effort. Their primary concern is that it takes too long to earn anything substantial using these cards and their shopping choices is not dependent on loyalty schemes. They are critical of their privacy and are not eager to utilise any loyalty schemes even if dished under a single card.

Targeting

In order to finalise our target group, we decided to evaluate the different segments identified through survey on the following parameters :

Size

Income level

Accessibility

Action ability

Perceived Loyalty

Willingness to spend

These groups were rated on a scale of 1 to 5 (1: lowest ; 5: Highest) and the cumulative score was used for finalising our target segment(s).

ATTRIBUTES

Neha

Rakesh

Ritika

Amit

Size

4

3

5

4

Income Level

4

5

3

1

Accessibility

4

3

4

4

Action Ability

5

3

5

4

Perceived Loyalty

5

4

4

3

Willingness to spend

4

3

5

1

TOTAL

26

21

26

17

From this analysis we find that "Ritika" & "Neha" are our premium target segments followed closely by "Rakesh". "Amit" is an opportunity at best, since he has very low levels of disposable income at this moment. But he could be an important target group keeping in view the fact that he would soon graduate from college and move into a corporate life. At this point of time in future, this segment will become an important target for Payback.

After the primary target segment has been identified, we decided to evaluate the long term attractiveness of the market/market segments using Porter's five forces framework :

Threat of Intense Segment Rivalry : This particular service caters to a market that is currently highly fragmented with not many major, organized players offering multi brand loyalty card program. Instead the market is cluttered with several retail stores, restaurant chains, travel operators and e-commerce sites offering their individual loyalty schemes targeted at preserving their consumer base. This phenomenon can be attributed to absence of multi brand retails and absence of market penetration by big corporate houses in the consumer retail sector. This provides Payback with a lucrative opportunity to assume the early starter advantage of consolidating this fragmented market and creating a loyal user base. There is a perceivable threat from Tata eMpower which is trying to consolidate the market using its own vast business chain.

Threat of New Entrants : The segment, being fragmented and unorganized at the moment, provides lot of opportunity for new entrants. Nig corporate houses like TATA, Reliance etc will be the biggest threat to Payback because they will be targeting the exact same segments. Building a long term relationship with this segment will help Payback have a competitive advantage over new entrants. Another advantage that can be leveraged by Payback would be its brand success in international market if it can be translated to the Indian consumers.

Threat of Substitute Products : Multi Brand loyalty card can face threat from similar products from debit and credit cards issued by banks. But due to the diverse scenario of the banking industry in India, threat from substitute products is not perceived to be major

Threat of Buyer's Growing Bargaining Power: As the economy of India grows, so will the buying power of individuals. It will be imminent in the near future that several other companies will try to enter the loyalty card market and provide superior offers and deals. This will increase the bargaining power of users and the threat of substitution will come into picture. Payback needs to keep on top of this by continuously upgrading its reward offerings and points structure with a birds eye view of the market.

Threat of Supplier's growing bargaining power: As the retail industry in India grows along with penetration of e-commerce, the bargaining power of partners will surely increase. This will enable Payback partners to demand lower licensing fees and greater consumer retention. This will inevitably put pressure on the cost-revenue structure of Payback. This can be countered by creating a huge user base, high brand equity and superior service quality. This will put Payback in a position to leverage its strengths while bargaining with its partners.

Positioning

The point of differentiation (POD) for our product will be the cornerstone of our marketing research. Looking at the consumer segments and insights about their requirements from our initial survey we have decided to follow a particular string of value propositions in order to potion our product uniquely.

We are focusing on positioning our product as:

One card solution

One loyalty brand spanning different industry

Hassle free transaction.

Guaranteed personal data security

The main positioning of our product will be as the multichannel loyalty programme which is customer centric and safe. Currently in India no other firm being positioned so. This will give us an early mover advantage. The closest competition that Payback has is from Tata, whose loyalty programme focusses only on Tata group of companies. In the future our target is to target more online shops also so as to become make payback synonymous with the word shopping in any form. Currently payback has more of a B2B positioning which needs a relook as B2C is also vital for the growth of payback.

Marketing Plan

Background

The Tata group initially had a group-wide customer loyalty program. This program was more of a discount program and did not use the benefit of having a customer database. However, it has now tied up with Aimia, the loyalty management group. With a partner whose strength is customer loyalty management, the Tata group aims to reach out to a larger number of customers. The program, called Tata Empower, covers the Tata brands like Westside, Croma, Taj and Ginger group of hotels. In addition, it has other partners like Jet Airways and plans to tie up with more partners going forward. The program aims to mine the data collected so that special offers can be targeted to customers who value them the most.

The major points of differentiation for the Tata Empower program are:

The Tata brand has been around for decades and the Indian people associate it with trust and social responsibility. It doesn't need to put in any effort to create awareness for the brands.

Since it currently focuses on the Tata group brands, it has a better control over the brands associated with this program and the promotion they give to the loyalty program.

Because of its brand equity and brand value, the Tata group can easily enter into partnerships with other retail brands and gain market share in the loyalty program market quite rapidly.

Points of Parity (POPs) of Payback

Multi-brand loyalty program

Ease of subscription, use of card and redemption of points

Accumulated points are redeemable

To offset the brand value of the Tata group, Payback should take advantage of being the first entrant into this market. From our surveys, 80% of the customers who shop in Central are aware of Payback, where as only 30% of customers were aware of the Tata Empower program. The major differentiation factors are highlighted below.

Points of Differentiation (PODs) of Payback

Payback is associated with more than 65 retail partners while Empower is associated with only about 10 retail partners.

Payback covers a wide variety of retail brands offering different kinds of products and services, where as Empower covers only Tata brands, with the exception of Jet Airways.

Payback is an international brand and has been in the area of customer loyalty since 2000. The international experience that Payback has acquired over the years can be put to use in the Indian market.

The growing e-commerce is given high representation among the Payback partners, with more than 50% of partners being online partners.

Payback provides ease of enrolling. In addition to filling in a simple application at any of the retail stores belonging to a Payback partner, a customer can also signing up for Payback on its website, which is much

Direct marketing, in the form of personalized e-mails, is very effective in reaching out to a wider database of customers and informing them about offers which are most relevant to them.

Payback targets petrol pumps through tie-up with Hindustan Petroleum. Since petrol is a commodity and has to be purchased frequently, a lot of customers find an incentive to use Payback here. Thus, this ensure perennial income for Payback.

5Cs of Marketing

Context

The retail industry in India is expected to grow at more than 15% every year [29] and is currently estimated at $ 450 billion. The growth of the size of the India middle class, growing economy of India, and increasing disposable incomes are contributors to this growth. The e-commerce market is also expected to grow from the current $360 million to about $ 1.25 billion by 2015 [30] . In such a scenario, a multi brand loyalty program like Payback has a high number of opportunities for growth.

India's loyalty program is estimated at $ 4 billion [31] . More than 2/5th of Indians from SEC A, B, and C are a part of at least one loyalty program [32] but a much lesser percentage of them actually use their loyalty cards [33] . From what we found out from our market research, wed identified the complication involved in the process of being a part of such a program to finally redeeming the points earned, and the discomfort in carrying multiple number of loyalty cards as the main reasons for this. Payback, whose value proposition include single card for multiple brands and easy subscription, can thus become an important player in this segment in the future.

Competitors

Payback's main competitors in the current Indian market are First Citizen, the loyalty program of Shoppers' Stop, and Empower program which is the Tata group's loyalty program. While First Citizen is exclusive to Shopper's Stop, Empower program of the Tata group covers multiple brand belonging to the Tata stable and Jet Airways. Tata group has a better brand equity due to the years of trust built about the Tata group. However, till sometime back, this program only focused on giving discounts and did not have any analytics in place. Payback, on the other hand, performs extensive analytics on customer data and does direct marketing according to the consumers' preferences. Payback also has the first mover advantage of being the first company to introduce multi brand loyalty program in India.

Collaborators

Collaborators of Payback are the partners with whom Payback has tied up with. These partners come from a wide variety of sectors. Some of them are ICICI bank, HPCL, BIG Bazaar, Make my trip, Megamart, UniverCell, Hometown, Food bazaar, Ezone, Central, Brand factory, bookmyshow.com, Letsbuy.com and flipkart.com. Payback's biggest advantage is the large number of partnerships it has. Having an umbrella of retail partners decreases the risk of switching loyalty of customers. Customers have a better value proposition from a loyalty program like Payback because of the large number of partners.

The benefits obtained by the partners include increase in sales and customer database, among others. Payback in turn gets license fee and other fee from the partners. This will be discussed in details in the subsequent sections of the report.

Company skills

Payback has a partnership with 65+ premier outlets, thus giving a huge choice to consumers. It's online presence through social media help in reaching out to a large number of customers at a lower cost. The most important promotional activity of Payback is direct marketing. Payback customers get regular mails from Payback indicating the recent offers which might be of interest to the targeted consumer. Its huge databases and data analytics skills are highly beneficial for Payback as well as its partners. Payback also announces several interesting offers and events like Payback Fridays to attract customers.

Customers

Customers of Payback are

Partners, who benefit from the services Payback gives in terms of customer database, increased sales and promotions.

Shoppers, typically urban middle class and upper middle class, who reside in cities and spend a considerable amount of money shopping at retails stores and petrol pumps, among others.

4Ps of Marketing Mix

Product

The features of Payback, as explained earlier, include easy subscription, easy use and redemption of points. The points accumulated from purchases made at the various retail partners of Payback can be redeemed either as cash discounts, or on products such as apparel, accessories and electronics. Payback promotes it partners through direct marketing to customers, informing about the various offers and discounts available. In addition to the existing product features, we propose to add the following features.

Payback should have its own mobile application targeting smart phone users. This application would be synced with the user's Payback account. It would thus have information about the customer's buying pattern and also GPRS information about the customer's current location. Based on this, it would give suggestions about the offers available in retail stores located close to the customer. Such customized services add more value to a customer.

We also propose to introduce three levels of cards, as against the single card that exists currently. Based on the amount of usage, customers would be given three different cards, the basic version for beginners, Silver Card for medium level usage and a Gold Card for higher usage. Having a Silver or Gold card adds to the status perception of the users. The number of points that one can accumulate for each purchase would increase with the increasing level of the Payback card held, with a Gold card holder receiving maximum number of points.

Another fringe benefit we plan to add is - additional points for purchases made on the card uses birthday. In this part of the program, any purchase made by the card holder on his/her birthday would accumulate 10 times the number of points compared to a regular purchase

Price

The pricing mechanism through which Payback raises money is based on the benefits which Payback delivers to its partners. Essentially Payback is not charging its customers directly. Payback loyalty model is based on B2B and B2C transactions. Payback provides its services directly to B2B partners who in turn reap the benefits from the program. In return for these benefits, the partners pay an annual license fee to Payback for their subscription. The kinds of benefit which a partner derives from Payback subscription are:

Extensive database of customers

Increased sales

Expertise from European markets in designing promotional activities

Ahead of other Loyalty programs

For these services a partner pays Payback a percentage of increased sales. Apart from this, Payback also engages in promotional activities of partners, for which the partners pay Payback.

The pricing in the case of B2C is based on the behavioural aspects of an individual. The card which a partner offers to its customer is absolutely free. For a person who uses the Payback card the options available are immense. He does not have to stick with one brand but he can go for different stores covered by Payback. The price benefits which a customer gets after using this card are summarized below:

Zero price effect: This effect works more like a psychological factor. A person does not have to pay money for using this card, but once registered he always get the points added to his account whenever he goes for shopping and uses his Payback card. The more points he accumulates the better products he can redeem after utilizing those points. He has nothing to lose but he has an additional incentive for more shopping to maximize his points.

Silver lining: Any purchase made by a customer is perceived as a loss of money. A higher purchase amount implies a higher loss of money. However, when a customer gets points on a loyalty card proportional to his spending, the silver lining principle comes into play. The customer perceives the points made as gains because they can be redeemed against other products or services. This acts as an incentive for the customer to purchase more.

Different number of points for different partners: Depending on what kind of stores a person visits he can maximize his points by knowing about the kind of offer that Payback is providing for that store. Different stores are having different kind of plans associated with them and Payback notifies its registered members regularly about the offers through email and other promotional activities. For some stores it offers as high as 4 points for every purchase of Rs. 100 and for some it offers 1 point for every purchase of 100. This gives customer an additional reason to visit a store which offers 4 points, hence increasing the sales of that store.

Place

The segments which we have identified as potential target are mostly urban middle and upper class and suburban upper class. To target these customers Payback has selected appropriate partners, so that it can reach to the customer base and in turn can increase the customer base effectively. We have selected different partners to achieve this goal of meeting the target customers. Further we have segmented these partners on the basis of their potential reach. The major segments are:

National Partners like Future group, HPCL, ICICI etc.

Online partners like Flipkart, Myntra, Jabong etc.

Regional partners like Univercell, Local restaurants etc.

Tata has also started a brand known as Tata Empower which also specializes in Loyalty card business model. But given the limited brand offering which majorly consists of Tata group companies it does not possess immediate threat to Payback. They don't have any online partnership which is a very good point-of-differentiation (POD) for payback. But Payback has to build more Brand Equity as being one of the oldest business houses of India; they can use Brand Equity as POD. To counter this Payback has to further consolidate it brand offering so that it can offer excellent and non substitutable value proposition to its end customers. To extend its current portfolio Payback can target some new retail chain, consolidate its partnership with petrol pumps and strike new deals with mobile recharge services.

Promotion

Given the nature of the service which we are offering the promotional activity holds prime importance in the marketing mix. The value proposition which we are offering to our partners is the increased sale which they will experience after engaging with Payback. While doing this we also have to emphasize on our product differentiation, so that we can maintain our position vis-a-vis competitors. The major promotional exercises in which we will indulge ourselves are:

Before shopping promotion: Increase in spending on advertising directly targeting end consumers. Different types of media like radio, television advertisement and magazines can be used to generate more awareness about the product. The selection of magazines, radio programs and television shows for advertisement has to be done very carefully. Blindly going for advertising the product on these medium might not attract desired target segment. If we are selecting a magazine that magazine should be lifestyle magazine, sometimes in the supplements of national newspaper which deals with lifestyle can also generate healthy interest about Payback. Advertisement on FM radio channels and TV channels like TLC, NDTV Good Times can be very helpful in generating the proper interest among the target customers. Small billboards near a big shopping mall and near official hub can also become a major route of before shopping promotion. Tata Empower as a brand is having more brand visibility due to Tata brand name, to outpace them and to communicate Payback value proposition to the end consumer. These promotional activities have to be performed to generate appropriate awareness in the market.

Point of sale promotion: One of the most important ways to promote the Payback card is to point of sale promotion. At the point of sale the salesperson can describe about the features of the card to customer and what kind of benefit he can derive by using the card. They can also apprise the consumer about the different kind of offer which they will be availing after registering for Payback. The multi channel concept which Payback has pioneered can also be emphasized at this point. The ease of shopping which payback will provide can also be communicated at this point. Some of the offers like direct personalized mail, in which a person receives mail on his shopping behaviour and similar of this kind of nuances can be described at the point of sale.

After shopping promotion: Once a person becomes the member of Payback network, he regularly receives mail related to shopping offers. A mobile application can be developed which will be synced with the card number of customer, this application will keep tab of the location of the customer and will notify him about the offers near his location. This will build good brand equity for Payback as it is bring more convenience to the end customer.

Partner with corporate: One of the innovative way through which American Express has improved its customer base is by partnering with corporate. Similar kind of strategy can be implemented by Payback for generating awareness about the brand. This corporate user can work as ambassadors for Payback and they can generate buzz in the market about the product. The employee of these companies will get extra points on each purchase. Hence extra reason for more shopping.