Customer Experience / Loyalty Management in Retailing in India

Topic: Adding value through Customer Relationship management in

organized retail formats

INTRODUCTION:
Transformation is the one word, which can best describe the state of the retail industry at
a global and the Indian level. Retailing by nature is a dynamic industry. Entire industry segments
emerged only to make way for new ones once again. The changing consumer demand, opening
up of markets, technological developments and ever increasing competition, all affect the retail
business. New retail formats are constantly evolving. The customer, who needed to go to a bank
to withdraw cash, may just find an ATM of the bank at the nearest locality. In India, the vast
middle class and its almost untapped retail industry are the key attractive forces for global retail
giants wanting to enter into newer markets, which in turn will help the India Retail Industry to
grow faster.

Many of the business models have been in existence since time immemorial and they had
a presence across the country. There is no doubt that the Indian retail scene is booming. A
number of large corporate houses like Tata, Raheja, Piramals, Goenkas have already made their
foray into this arena, with beauty and health stores, supermarkets, self-service music stores, new
age book stores, every-day-low-price stores, computers and peripherals stores, office equipment
stores and home/building construction stores.

Today the organized players have attacked every retail category. The Indian retail scene
has witnessed too many players in too short a time, crowding several categories without looking
at their core competencies, or having a well thought out branding strategy. Thus, in a country
dominated by local and traditional stores, business models specific to the Indian context are
bound to emerge. Customer loyalty is the key criteria for organized retail formats to drive the
consumers towards it.

CUSTOMER SERVICE IN RETAIL:

Retailers exist to provide service to customers at a profit. All the functions of retailing
like location, assortment, breaking bulk, providing inventory, marketing and so on – add value to
the products purchased by the customers. Each function is adding value, provides a service to
customers. It is retailer’s role in adding value, which creates profit for retail organizations.
Efficiencies in supply chain management which can be generated by logistical streamlining
through systems such as just in time (JIT) and electronic data interchange (EDI) can be passed on
to customers in terms of better service at lower prices. However, few retailers would argue that
investment in such systems is aimed at increasing profit margins.
 Generally, the higher the level of customer service provided, the higher the price
customers are willing to pay, and the greater the profit margin is made by the retail organisation.
There is an enormous range of services and facilities offered by retailers today. They include:

 Accepting credit cards Offering credit Cashing cheques

 Altering Assembling Delivering
merchandise merchandise merchandise
 Trolleys Bag packing Bag carrying
 Child care Changing rooms Restaurants
 Demonstrating goods Merchandising display Sampling of goods
 Information services Financial services Associated services

UNORGANIZED RETAIL SECTOR:

Unorganized retail formats enjoy more customer loyalty and deliver much
satisfied customer experience. Without any technology oriented formal practices an
individual owner of an unorganized retail can build customer loyalty. Unorganized retail
formats say for kirana shops are low cost structures, mostly owner-operated, has
negligible real estate and labour costs and little or no taxes to pay. Consumer familiarity
that runs from generation to generation is one big advantage for these unorganized
players. Shopping at these unorganized forms has a positive effect on the customer with
joy and a reassurance for best deal. These advantages need to be compensated by
organized retail formats to capture the potential markets.

SERVICE CHARACTERISTICS:

Retailing is itself a service - retailers make a variety of goods available for the
customer in a single location, offer information, display merchandise, provide finance
and an array of additional services. The characteristics of services include:

 Intangibility
 Heterogeneity
 Perishability
 Ownership
 Inseparability

Intangibility:

Intangibility means not being able to feel by touch. Store customers buy tangible
(touchable) goods but the service of providing them, selling them, giving information about them
and delivering them cannot be touched. Customer satisfaction requires a tangible experience
even for intangible activities. For e.g. If you can hold, have and flavor the shiny apple you have
bought, you can estimate its quality and value for money and also you can experience the effort
of the service the retailer has provided in sourcing, displaying and selling the product through
insight, observation and communication.
 Thus, a pleasant environment of buying the product and the staff attitude and
communication are so important in conveying the quality of service the retailer intends his
customers to experience.

Heterogeneity:

Heterogeneity is defined as ‘different in kind’ or ‘composed of parts of different kinds’.

The same consumer experiences services in different ways on different occasions. Similarly,
different consumers will have dissimilar experiences of the same service at the same time. When
a customer you go into a store on different occasions, the experience will differ in terms of
display, staff, goods, communication and so on. Retailers who want their customers to
experience quality customer service must reduce the amount of heterogeneity by making every
experience of their store a positive one. Standardization of processes wherever possible can
reduce the heterogeneity and enhance the corporate image to reinforce the retail brand.

Perishability:

Perishability can be defined as the ability to waste away or the ability to be lost. The
opportunity to experience or to provide a service, once passed, is lost forever. Retailers deal with
the characteristic of perishability through trying to maximize customer service opportunities.
Their time for providing service is finite. Hence, longer opening hours provide more service
opportunities, as do reducing prices at the end of the day and providing extra services such as
delivery for customers who could not otherwise shop with them.

Ownership:

Ownership is the ability to possess. When a customer buys a food item he can take it
away with him, and do what he want with it. The goods that the customers take home, the sundry
associated and other items such as bags, receipts, guarantee documents represent the quality of
service experienced. These items are named as peripheral evidence of purchase, which is used to
reinforce brand image. Reliability of goods and service quality is a key means of developing trust
between customers and retailer. If the quality of either over time reduces, customers will be
dissatisfied and shop elsewhere.

Inseparability:

Inseparability is defined as the inability to be separated and in terms of service, it means

that the service the customer experience is inseparable from the service being provided by the
retailer. When a customer makes a purchase, the service he experience is intrinsically related to
the people providing it, most notably the personnel who communicate with the customer in the
store. For retailers, this is why their staffs are so important. Thus, Shop floor staff’s attitude and
training improve the customer service experience. The characteristic of inseparability is the
reason why customer service training is a key requirement for staff and management in retailing
today.
 IMPROVING THE QUALITY OF SERVICE:

Customer’s perception of the quality of service provided by retailers depends upon the
level of satisfaction they experience in the process of shopping.
Their satisfaction is affected by both their expectations of the shopping experience and the
actuality of the experience.
Improving customer service means delivering service quality improvements, which are
customer, defined. The SERVQUAL model can be used as a basis for considering how to do
this. In this model, the ‘service gap’ (the difference between the level of service quality, which
customers expect, and the level they experience) is pointed out with relevance to four main
criteria.

Word of mouth Personal Needs Past Experience

communications

Expected Service

Gap 5

Customer Perceived Service

Provider Service Delivery External Communication to

customers

Gap 3 Gap 4
Service quality specifications

Gap 1
Gap 2

Management perception of customer

expectations

Figure 1: Service Quality gaps. Source: Parasuraman et al. (1985).

Gap 1: The gap between what customers expect and what mangers think they expect is termed
as Knowledge gap.

Gap 2: The gap between standards of service managers specify and what managers think
customers expect is termed as the standard gap.

Gap 3: Delivery gap is the gap between standards of services set by mangers and standards of
service delivered

Gap 4: The gap between standards of service delivered and those communications to the
customer, which create the customer’s initial expectations of the level of service that they will
experience, is termed as the communication gap.

Gap 5: The gap between perceived and experienced quality of service is the service gap. It
affects the level of satisfaction experienced by customers of a retail organization. The retailers
can improve their service quality by closing or reducing these gaps.

Closing the Knowledge gap:

 Retailers need to learn more about customer’s expectations and perception of service
levels through market research, including analysis of customer service data.
 They can spend time on a daily basis in direct contact with customers and shop floor
staff.
 They can facilitate communication routes for shop floor upwards through the
organisation.
 They also need to act rapidly to implement improvements suggested as the result of
research and communication.

Closing the Standard gap:

 To close the standards gap, therefore, there has to be a commitment from the senior
management team towards service quality. Only then will the human, financial and
material resources be made available for the development of a formal quality system.
 Only if there is a visible commitment to quality service at senior level, managers will be
confident in setting and implementing service quality standards within their remit.
 A reward system for service quality achievement will enhance staff and management
commitment for implementing, meeting and exceeding the standards set
 Technological advancements are used for standardization process:
 Hard technology has been used widely in retailing in checking in, display and
checkout procedures
 Soft technology includes refinement of work methods.
Closing the delivery gap:

The gap between standards set and those delivered arises for a variety of reasons – for
example, unrealistic standards, lack of clarity in standards, poor communication of standards and
their purpose, weak staff motivation, poor supervision, lack of human, financial or material
resources. To reduce this gap, retailers can focus on the following:

 Clarification of standards and staff roles so that staff understand the context of their
world
 Involvement of staff in setting standards so that they own and commit to quality
 Communication of standards to staff
 Selection and training of staff so that they are capable of delivering the set standards.
 Encouragement of teamwork to deliver quality
 Motivation of staff
 Regular and spot measurement of performance so that staff become accustomed to
performing and to being assessed to the set standards

Closing the communication gap:

 A separate marketing department or private agency undertakes the promotional activities.

This is the reason for communication gap in many retail formats. Thus, the promotional
activities are done in isolation without knowing the realities of the shop floor. By
reducing this internal communication gap, it is possible to portray the retail offering more
accurately to customers.
 One way of doing this for shop floor staff to be involved in the creation, content
or approval of promotional materials
 Another is to involve marketing staff in operational duties
 A Third is improved internal communication through internal marketing, cross
functional teams or shared training programmes
 Other ways to reduce the communication gap include focusing the content of promotional
programmes on key aspects of the retail offering, standardizing the service levels across
the retail stores, offering and promoting different levels of service for different price
bands.

Closing the Service gap:

The Closure of service gap as a whole is a desirable focus for service quality management.
To compete successfully on the service quality front, exceptional service is required. Exceptional
service includes attention towards process like price, physical & interpersonal factors,
merchandise and non-core retail services.

Further gap needs to be closed between what customers experience in terms of service
quality and what they really want. For achieving this, retailers have to listen closely and respond
rapidly to customer’s desires.
CONCENTRATING ON NON-CORE SERVICES:

Modern retailing formats require more concentration on non-core services for developing
exciting consumer experience. Some of those categories include the following:
 Travel
 Arrival and Entry
 Selection of Items
 Checkout process
 Leaving with goods
 Appraisal

Improvements in store design, together with a proactive focus on service delivery could gain a
retailer a competitive advantage. Some of the suggestions for focusing on non-core services
include the following:

 Since the shopping experience begins outside the store (travel), there needs to be focus on
entry roads, car parking, security and cleanliness.
 On entry to the store, customers like to be greeted or acknowledged in pleasing way. Also
on entry, customers appreciate a ‘decompression’ area where they can relax into the
shopping experience.
 Extra space is needed round areas where customers congregate – e.g. special displays, in-
store bakeries – so that the flow of customers is not impeded.
 Poor product availability is a distinct problem for customers, and one which is recalled
even after a long period of time. Out-of –stocks corrupt sales data in just-in time systems
because replenishment is based on sales rather than demand.
 Extended shopping hours have created problems for high volume replenishment during
closed hours. Customers do not like trolleys and boxes blocking the aisles.
 Switching staff from stocking to checkout activities to meet variable customer demand
causes problems with a stocking accumulation to the end of the day- again made worse
through extended opening hours.
 Customers really like quick, efficient checkout operation. Bag packing and help with
bags is currently a route to ‘customer delight’ although it is prone to be accepted as
standard in the future.
 Whole trolley scanning would be a means of speeding up checkout and replenishment,
and therefore the expense could be justified.

PRINCIPLES FOR ADDING VALUE IN CRM:

Three R’s are essential in adding value to the customer satisfaction in retail organizations.
They are:
1. Reward
2. Recognition
3. Relationship
 Rewarding activities fulfill the physical & monetary needs of the customers. Recognition
deals with esteem and actualization needs. Relationship establishment satisfies the social needs
of the customers. As per “Maslow’s Hierarchy of Needs”, customer needs are triggered and
inspired. Apart from these factors, nine more principles are derived for establishing strong
customer relationship management process.

Establishment of strong customer loyalty in

organized retail formats

Romancing the Energizing the Building the customer

customer employees service culture

Create an inviting place

- in person, online and Hire nice, motivated Celebrate company heroes
on the phone people through recognition and
praise
Empower employees to
Provide the customers
with choices - of take ownership Advocate teamwork
products, services, and through internal customer
Sustain the people on
service channels service
the frontlines through a
culture of support and
Sell the relationship: Commit 100% to customer
mentoring
service your customers service
through the products
and services you offer

Figure 2: Principles for establishing customer loyalty

Three main aspects are dealt for establishing strong relationships with the customers in
organized retail formats. It includes identifying the potential customer, serving the needs to the
specified segment and building a service culture for the organization.
Romancing the Customer:

Romancing the customer suggests the retailer to identify the right customer segment in
the target population. Organization potential is analyzed and suitable target customers are chosen
for delivering unique service to them. This aspect also triggers the retailers to identify their core
competencies. This process includes the following actions:

 Create an inviting place - in person, online and on the phone

 Provide your customers with choices - of products, services, and service channels

 Sell the relationship: service your customers through the products and services you offer

Energizing the employees:

Energizing the employees deals with managing human resources in focus with
establishing customer satisfaction. HR activities like recruitment, training, performance
appraisal, mentoring, teambuilding, change management etc, are carried out for closing all the
service gaps like knowledge gap, delivery gap, communication gap. When the organization
culture is well established over the period, standards will be formulated to close the standard gap.
Following actions are essential for these processes:

 Hire nice, motivated people

 Empower employees to take ownership
 Sustain the people on the frontlines through a culture of support and mentoring

Building the customer service culture:

Building the culture for customer service is not an easy process. It needs lot of
commitment and focus to fulfill the customer needs. Top-level management plays a vital role in
bringing out this culture for an organization. Novel and innovative ideas are required for
differentiating the practices in customer service. Thus, the major actions included in this aspect
are as follows:

 Celebrate company heroes through recognition and praise

 Advocate teamwork through internal customer service

 Commit 100% to customer service

CONCLUSION:

There are four key aspects in managing consumer business. Firstly, retail managers
should renew the service offering to generate customer interest and build customer relationships.
Retailers do this through service extension and service management. Secondly, retailers should
localize the point- of- service system- that is, consider ways and means of intercepting customers
beyond the confines of their traditional outlets, and making it easy for them to shop. Leveraging
the service contract is the third factor. Retailers need to consider how to boost both loyalty and
spend – focusing on delivering exceptional service to their key customers is one way of doing
this. Finally, retailers are well positioned to make use of the information and communication
technology advancements in order to manage customer information to personalize services,
develop service extensions/enhancements and manage service quality. Thus, Customer service
should not be followed as a strategy, Customer service should become the way of life.
SUMMARY:

With huge malls and skyscrapers coming all over the country and with cry for customer
delight and satisfaction getting shriller, it was expected that organized retailing would make a
buyers paradise. Right from selling vegetables to banking services, retailing is believed to be
getting organized to gain customer loyalty and enriched customer experience. Indian consumers
had never dreamt it before, everything available under a roof, with facilities for children care and
a cafe to relax with crunchy snacks and a central air conditioning keeping them cool and a low
music adding up in their high, it was a sheer luxurious purchasing experience.

Though there are several challenges for modern retailing like shortage of quality real
estate and infrastructure, Opposition to FDI, Very high stamp duties, etc, the stiff competition
can be faced through the key criterion, “Customer loyalty“. Local traditional retail formats,
which form the unorganized retail sector gains this customer loyalty with much ease and capture
more potential markets. In the current scenario, All the leading retail giants identify the service
characteristics and they are trying hard to close the service gaps for establishing strong customer
relationship. Approaches to overcome these gaps are discussed in this paper to achieve greater
customer satisfaction & loyalty. Finally, principles are formulated for building customer service
culture in an organization.