Reportdd the report for share

What is an author doing?

An author is doing a research paper title “Deriving and exploring behavior segments within a retail loyalty card program” to identify the customer cluster that deriving by the royalty card program, so the management can use the information to implement the right strategy to the right customer.

Why is the author doing what he/she does?

• The author notice that even though the rapidly increasing number of retail loyalty programs. Most of the company still not notice or pay attention to the difference in the behavior patterns of the customers within the loyalty programs.
• The author wants to know that is there ability to create customer segments within a retail loyalty program. If it can, what are the drivers of difference among them that make each of them unique and whether it need difference managerial implications (strategy) to manage in order to yield higher customer satisfaction and company profitability.

How does the author do the project?

The author use data of the one-year test of retail loyalty card program provided by one major US retailer. The author formed the segment by numerical taxonomy process. First, the author using cluster analysis to generate a range of potential market structures (grouping 57,650 loyalty card program members in to 2 through 11 group) for classifying each of the loyalty card patrons on a set of managerially relevant variables. Each group was ranking their segment by least patrons to highest patrons.

Second, select the most appropriate market structure by using scree testing (test important) and discriminant analysis. The result was either five or six segments might yield the best market structure, stable and reliably predict group membership. However the author choose six segments because it create the unique characteristics of the best group and allow more definition within the three most interesting groups.

Third, the author names six segments (clusters) by its characteristic;

Cluster 6: ideal, highly loyal shoppers – most loyal group of card holder spent over twice as much per person as members of the cluster 5. The smallest group only 1% of total cardholder population.

Cluster 5: half loyal shopper – Around 9% of total cardholder population. Spent three times higher than cluster 3.

Cluster 4: late but enthusiastic followers – This group is the most impacted by the loyalty card program. Since they increased participation of the program (their purchasing 600 percent during the second half of the year).

Cluster 3: shopper who lost their enthusiasm – This group unsatisfied with the program because their rate of use continue to drop.

Cluster 2: very infrequent card shoppers – Infrequent use of card, this group did not reach the spending threshold required for the rewards by the loyalty program

Cluster 1: shopper who wanted to like it but not – Around 39% of total cardholder population. This group tried the program, stayed with it for some period of time, but did not like it enough to continue and this group did not reach the spending threshold required for the rewards by the loyalty program.

Finally after the author name six clusters and it characteristic, the author regress a set of patronage-related variables onto the clusters using multinomial logistic regression. To find what are the drivers of difference among clusters. The author able to find out that the distance to the store, distance to the nearest competitor and the number of very early adopters in the cardholder’s neighborhood interaction field were the most importance driver accounting for overall difference between the most loyal cluster and other clusters. The author also makes the suggestion on which strategy should use to approach each clusters and the limitation of this research in order to make a better research next time.

In conclusion, it appear that the ability to create segments within loyalty card program and understand the drivers of differences among them can be great benefit to the company by using difference strategy that match the difference customer need in each segment to increase the customer satisfaction, to know which customer the company choose focusing on and to increase the profit to the company.

ZEN department store Benchmark with Top and AIS

Benchmark with TOPS

Point to compare = spot rewards card

TOPS supermarket had provided their customer with genius member card that provide members with plenty of benefit. For example special discounts only for member, customize discount promotion that generate from each member shopping list, Money back program that customer will receive gift voucher when they purchase up to set up standard. So, customers can get plenty benefits when apply to be member and creates customers’ satisfaction

Benchmark with AIS serenade

Point to compare – special privileges for exclusive customer

AIS had customer relation management program that capture the 20/80 rule of customers by create program that provide plenty of special privileges to the 20% of customer that generate 80% revenue to the company in order increase customer satisfaction and customer retention of the high profitable customer.

The AIS serenade program is for the customers that have the phone usage up to 1,500 per month in 6 month in a row. The serenade program provide customer with plenty of special privileges. For the usage of the phone, the member can correct 1 point from every 25 bath of usage and when reach 200 point they can choose special gift such as 100 minute of free call, 75 free SMS, 35 free MMS or 25 hours free GPRS. For other benefit, the member can get the special discount rate from many product and services such as restaurant, hotel, gas station, phone shop, coffee shop and car washing.

How ZEN can adapt?

ZEN only has ‘the 1 card’ for customer which provide for all type of customer because any one can apply to the one card even when they are not purchasing anything. Furthermore, the 1 card did not provide the special privilege to the high profitable customer.

ZEN can apply the special privileges program which should set up for the customers that generate high profit to the ZEN such as the customer that purchase up to 50,000 baht/month for 10 month in a row. These customers will receive the incentive care and many special privileges such as personal shopping bag carrier, reserve car park, special payment counter and etc.

Benefit from improvement

If ZEN apply the special privileges program, it will create more satisfaction to the 20% of customer which are the group that ZEN should focus on because they generate 80% of total revenue. Since these customer satisfy shopping with ZEN because all the special privilege they will not switch to other department store (increase switching cost). Then ZEN will have longer customer tenure .Finally the more profit ZEN will earn from the longer time of profitable customer stay.

1. Product
Since the target market of ZEN are the people who love fashionable, latest designer trends and top-notch creativity product. ZEN had provided customers with trendy product from cloth to home decoration. Products at ZEN are rather difference from other Department Store such as unique furniture design and novel gift section. Furthermore ZEN had provided Trend-Fitters Tailoring Specialists to customers, which is the customization product for the customer that wants to choose their own style of clothing.
2. Service
The Young @ Hearts, trendy lifestyles are the main customers at ZEN, these groups of people want the Department Store to provide service that match with their way of life. Because of these reason ZEN had provided:
Doggie Spa Hotel
Since the trend today is raising small species of dog such as chiwawa or Pomeranian and take them anywhere you go (like many Hollywood stars did). ZEN notice that this trendy lifestyle tend to increase more and more so it provide the dog cleaning and dog deposit service for customers that don’t want their dog to stay at home or don’t want to leave the dog alone. In case customers that want to shop with their dog, ZEN had provided ‘dog wheel car’ for customers to take the dog anywhere they go in the Department Store.
This value added service will provide convenience to customers since he/she don’t have to manage the gift list and ZEN will create more revenue from the wedding present that guess come and buy at ZEN.
ZEN Gift Registry
The American way of giving the wedding gift had influence on many modern couples. ZEN spots this trend and provided the gift registry service to customers to response to the need of bride and groom for choosing their own presents. Then ZEN will send the gift list to all the guests and manage those lists and making sure no one picking the same gift. This value added service will provide convenience to customers since he/she don’t have to manage the gift list and ZEN will create more revenue from the wedding present that guess come and buy at ZEN.
Further more they want a convenience way of shopping. So ZEN had provided:
Valet parking service
To the customer in order to give the convenience choice to the one who don’t want to waste time on finding parking space
3. Process
The high spending customer want convenience way of shopping at ZEN, they don’t want to wait for the transaction process in each section they buy. They shopping a lot in the Department Store and the overall time they wait for each transaction are long. When they have to wait so many times, it creates boredom.
For the elite customers (high profitable customer), ZEN will provide elite program which shorten the buying procedure process from waiting the employee to find the new product, bring the product to the cashier counter, waiting for cashier to scan barcode and generate receipt, pack the product and finally receive the product to one stop payment for all product from 1-7 floors and pick up at the elite lounge for elite customers.
This value added service will make shopping at ZEN more convenience and pressure since they don’t have to wait for every payment in each floor when they buy something. The switching cost is high for the elite customers to switch to other department such as Paragon since this service is new and first in Thailand and it provide special privilege with best way of shopping. The benefits that ZEN will receive come from the high profitable customer’s tenure and customer spending more since they don’t have to wait for long time payment.
4. People
For the elite customers (high profitable customer), ZEN will provide personal shopping assistant to guide customer with the ‘compatible wireless scanning barcode’ to prevent them from getting confuse with the new service.
This value added service will make the customer satisfy with the new buying process and feel prioritize by the service. Which create switching cost and longer customer tenure.

Sources of information that we collect information into system from customer come from:
The 1 Card Register Application Form
At first time, customers require to fill the application form about their information to become member of The 1 Card and staff will add information into system and give The 1 Card to customer for use when next purchase the products to keep the information into system.
The 1 Card
The 1 Card contains all customer information. When customer buys products from ZEN, the cashier will scan barcode of the 1 Card ID of customer and system will collect all purchasing information of that customer and keep in the database.
Credit Card
The Credit Card that customer used when they purchased the products at ZEN Department Store, all information about purchasing transaction will transfer to our system and it will keep the record in the database.
Recommendation Paper
When customer has some recommendation or complaint about our service, they can write down in the recommendation paper. Our Staff will key in this record in the system and management can view all recommendation and complaint from customer to improve our services.
Register Application Form

We requires the customer information as above, we requires personal information of customer to identify who is our customer and contact point of those customer to provide promotion information to them via E-Mail, Mail or Phone. The reason for keeping customer behavior information (Purchasing History) is for identify the potential customers who have match with the criteria of new initiative customer relationship program and set the promotion to serve their needs and their preference that make us can up-sell and cross-sell the product to customers. For Credit Card information and The 1 Card information, we required for identify the customer when customer purchased at ZEN Department Store. For the contact history, we can receive customer’s recommendation or complaint from customer and we can use this information to improve our services to reach to high customer satisfaction.

Personal Information

- ID

- Name

- Lastname

- Birth Date

- Age

Contact Point

- Address

- E- Mail

ZEN Department Store uses the customer information from the system to improve both functions:
Operational Process
ZEN Department Store will use the information from the system to improve their service and relationship with the customer by asking the customer to buy the same products that they ever used it before; the product may be off in a few weeks.
For example, customer bought the eye serum from the cosmetic counter two month ago, the personal assistant can view the record and asking customer to buy the eye serum for replenish the old one which will empty in a few weeks.

Analytical Process
ZEN Department Store would like to know the customer behavior (what did they purchase at ZEN Department Store, how much that they spent, etc.) in order to:
Rearrange the shelf space of the products at ZEN Department Store for increase sales volume.
Improve our Service for customer to increase customer satisfaction.