Empirical study of customer retention strategies of small retail shoppers

Indian retailing is one of the largest fragmented and the least organized industries. The knocks of the organized retailers have posed threats to the existence of unorganized small retail shoppers. A study with its objective to explore the adopted promotional strategies, customer retention measures and patronizing shop strategies has been carried out. The results of the study have been analyzed using a survey data of 200 small retail shoppers they have been selected through convenient sampling and reveal that sales of small shoppers are declining. 78 and 67 percent of grocery and apparel shoppers respectively offer credit facility to their customers. 98 and 67 percent of grocery and apparel shoppers respectively offer credit facility to their customers. 98 percent small shoppers have attracted customers by offering better quality goods. Information obtained from a sample of 200 customer visitors of the sampled retail shop reveals that 78 percent customers have patronized the grocery shops because of credit facility and 82 percent due to better quality and home delivery. In case of Bakery, some 90 percent customers patronize the shop because of quality products. The study also reveals that the personal behaviour of small retail shoppers play a vital role to retain customers. Retailers use flexibility in terms of Customer Retention Strategies and modify them with changing circumstances and conditions of organized retailers so as to meet the challenges of the competitive environment. Introduction The Retail industry is one of the largest industries in India but it is highly fragmented and one of the least organized sector. In other words, it is well dominated by an unorganized market in India. There are millions of such retail outlets they represent not only the highest number in the world but also the highest per capita . Next to agriculture the retail sector is the highest source of employment in India. According to an estimate, it is increasing at the rate of 30% annually. An Indian Council of Research on International Economic Relations (ICRIER) study reflects that retailing contributes some 10% to GDP and employs 7 percent of total manpower. However, organized retailing is increasing in such a way that it has changed the whole concept of shopping in terms of format and consumer buying behaviour. Organized retailers have attracted customers being fascinated by Comfort, Luxury and Status (CLS) under Journal of Business and Retail Management Research (JBRMR) Vol. 4 Issue 2 April 2010 A Journal of the Academy of Business and Retail management (ABRM) 100 one roof. In other words, the modern retail format has not only changed the format of shopping by offering shopping, entertainment and eating at one place but also has changed the customers’ preferences and tastes. Reliance, Bharti, ITC and Rahejas are big Indian giants who are making heavy investment in this sector to maximize profit because organized retailing is one of the emerging fields in the Indian market. Good infrastructure efficient delivery of goods and maximum range and choice of product will not only attract the customers but also give momentum to economic growth of the country. The foreign investors are looking at Indian market because it has lots of potential to expand their business and maximize their profits. Internationally, the Chinese market is saturating fast. Wal Mart (USA), Tesco (UK) and other retail giants are, therefore, looking forward to enter the Indian market. There are government restrictions though, on foreign direct investment (FDI) for international players. Right now government has permitted only 51 percent FDI to one brand shops like Nike and Reebok. But in the mean time, these players are trying to opt for other channels for getting entry in the Indian market. They want to enter through Franchisee, Licensing agreement etc. CRM It is a tool and a strategy used to know more about customers needs and behaviour in order to develop relationship with them. The objective of CRM is to attract, develop, maintain and enhance customer relationship with the existing and potential customers. Relationship marketing is the process of creating maintaining and enhancing strong value added relationship with the customers. CRM has become an important tool due to globalization, cut throat competitive market and being more knowledgeable and prospective customers. The knocks of the organized retailers have posed lots of threats from multiple corners to the small retail shoppers of unorganized sector regarding their existence. Objectives Main objectives of this paper is to know 1. the profile of the small retail shoppers. 2. the adopted strategies to promote their sales. 3. measures adopted to retain the customers and patronize the shops. 4. the effectiveness of promotional and customer retention strategies by interrogating customers. 5. comparative customers opinion regarding offered sales promotion strategies as well as patronizing the shops of study area. The paper is organized as follows: Section 1 deals with introduction section 2 presents review of literature section 3 research methodology & database respectively section 4 provides Empirics of the study, followed by the conclusion and policy implications to section 5 Review of Literature Organized retailing is one of the booming fields in the market in India. Various studies have been conducted regarding it. The customer retention strategy and relationship marketing is new field in the context of unorganized small retail shoppers. Telang et al. (2007) studied organized retailing in semi urban markets. According to them convenience, enjoyment and Journal of Business and Retail Management Research (JBRMR) Vol. 4 Issue 2 April 2010 A Journal of the Academy of Business and Retail management (ABRM) 101 price are three important factors which play vital role in promotion of sales. Berry et al. (2002) has made the study with respect to vendor Bendpudi & Berry (1997) and have undertaken considerable work in the area of customer retention. According to them relationship maintenance depends either on desire (dedication) or on Dependency (Constraint). In desire or say dedication based relationship customers are motivated to keep relationship because they genuinely want to do so, whereas in constrain based relationship individuals maintain relationship because they have no any other option. Joe (2007) and Telang et al. (2007) have reached the conclusion in their studies that the prices in the organized stores have been observed higher than unorganized retail. Similar observation has been made by Thaler (1985), Zenithal (1988) Sweeney and Soutar (2001). Antony (2009) in her study highlighted that among the customer relationship measures practiced, stocking and supplying all the goods required by the customers as well as friendliness even outside the shop were the most prominent. Further she states that profits were stated to be satisfactory. Research Method & Data Base 1. The study has been conducted in Pune, Maharashtra, India. The survey of 200 small retail shoppers have been carried out in two areas i.e. Pimpri and Chinchwad. These 200 shoppers have been selected by convenient sampling method. 2. Two hundred customers who visited selected shops were selected. From each selected area only 100 customers were selected for comprehensive study. 3. The selected customers of both areas were given a set of questionnaire consisting six statements related to sales promotion and customer retention measures. They were asked to respond on the basis of 5 points Likert scale, 5 points for strongly Agree, 4 for agree, 3 for indifferent, 2 points for Disagree and 1 for strongly disagree. The Model Dummy variable regression has been used to ascertain the customers opinions of Pimpri & Chinchawad areas of Pune city regarding the strategy adopted for customers retention measures Yi = β1 + β2 Di + Ui Yi is denoted for customers opinion, Di is dummy variable. Di = 0 is defined for customers of Pimpri and Di = 1 for customers of Chinchawad areas. Ui is error term Mean Score of customers opinion of Pimpri Yi = ( Yi І Di = 0) = β1 Mean score of customers’ opinion of Chinchawad Yi = ( Yi І Di = 1) = β1 + β2 + Means mean score of customers’ opinion of Chinchawad is higher than mean score of Pimpri customers Means mean score of customers of Pimpri is higher than Chinchawad but the magnitude of the distribution is β2. ^ H0 : β2 = 0 ^ β2 t = ------------------is calculated value of statistics. ^ SE (β2) If calculated value of t is greater than the relevant table value then β2 is statistically significant and accordingly the difference in opinion may be concluded as significant. Journal of Business and Retail Management Research (JBRMR) Vol. 4 Issue 2 April 2010 A Journal of the Academy of Business and Retail management (ABRM) 102 EMPIRICAL ANALYSIS PROFILE OF THE SMALL RETAIL SHOPPERS The sample size consists of 200 small retail shoppers. These shoppers’ details are given in the following Table. Items Number Percentage Proprietary Partnership Grocery 130 65.00 130 100.00) Bakery 19 09.50 12 (63.15) 07 (36.85) Apparel 51 25.50 38 (74.5) 13 (25.5) 200 100.00 180 (90.0) 20 (10.0) The three varieties of retail shoppers have been chosen for comprehensive study. Among sample 200 small retail shoppers, 65 per cent and 25.5 per cent belong to grocery and apparel respectively. Only 9.5 percent represents bakery shopper. Important to note is that cent per cent grocery shoppers are run by self under own proprietorship and 36.85 per cent of bakery shoppers run their business in partnership while 25.49 per cent apparel shoppers business are also in partnership. Some main features of customer profile are given below. 1. 60 per cent of the sample shops and their establishments are less than 200 sq. feet in size. The most frequent shops in the sample area is less than 200 sq. feet. 2. 93 percent of the shops have an inventory of Rs. 10 lakhs and m