CUSTOMER ACQUISITION AND RETENTION MANAGEMENT IN RETAIL INDUSTRY-WITH SPECIAL REFERENCE TO VILLUPURAM DISTRICT

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1 CUSTOMER ACQUISITION AND RETENTION MANAGEMENT IN RETAIL INDUSTRY-WITH SPECIAL REFERENCE TO VILLUPURAM DISTRICT Dr. K. VIJAYARANI Professor and Head, Commerce Wing, DDE, Annamalai University, Annamalainagar , Tamilnadu Mrs. R. BRINDHA Ph.D., Research Scholar, Manonmaniam Sundaranar University, Abhizhegapatti, Tirunelveli ABSTRACT Customer retention is beyond satisfying and maintaining existing customers. Hence, attention on this area is greatly needed in order to further improve the firm s performance. It is believed that customer retention strategy will be a great management tool for retailers to survive and grow in the very competitive retailing industry. The findings of this study in addition to the implications given are expected to enlighten the practices of customer retention within retailing sector. This article paper highlights customer acquisition and retention management in retail industry-with special reference to Villupuram district. KEY WORDS: Customer Acquisition, Customer Retention Management, Retail Industry, Customer Preferences, Organised Sectors INTRODUCTION Consumers play a vital role in business. They are the backbone of a business. Sale of any product or service comes from two ways. One is through existing customers (repeat sales) and another is through new customer (fresh sales). Nothing may seen more obvious than the need to keep customers coming back as cultivating loyal customers can lead to increased sales and customer share and lower cost. But here the challenge is to retain the existing customers. Retaining existing customers needs a totally different set of strategies than attracting new customers every time. Now - a - days, it is very difficult to retain customers owing to reasons like competition in the market place, customer education and awareness about the products and brands, deficiencies in Page 41

2 customer care, ever changing customer preferences for products, accessibility of products in the market, etc., Hence marketers are equally focusing on attracting new customers into their fold, which is relatively easier one. As a result, sales are mostly through first time purchases also. Now the question before the marketers is how to drive customers towards their products. Advertising, sales promotion, personal selling are some of the important strategies being used for this purpose. In some cases, they bring desired sales to the firm. Now, the crux of the problem with business houses is how to acquire new customers on one hand and on the other, how to retain existing customers. Retail Retail is the process of selling consumer goods and/or services to customers through multiple channels of distribution to earn a profit. Demand is created through diverse target markets and promotional tactics, satisfying consumers' wants and needs through a lean supply chain. Retail is defined as relating to the sale of goods directly to consumers. An example of retail is selling shirts to customers in a clothing store. Acquisition of Customers A customer acquisition strategy defines the best mix of media and engagement tools (lead generation and product offers) to gain new customers through targeting them and reaching them through online and offline customer journeys. Customer acquisition refers to gaining new consumers. Acquiring new customers involves persuading consumers to purchase a company s products and/or services. Companies and organizations consider the cost of customer acquisition as an important measure in evaluating how much value customers bring to their businesses. Customer acquisition management refers to the set of methodologies and systems for managing customer prospects and inquiries that are generated by a variety of marketing techniques. Customer Retention Customer retention is the strategic objective of striving to maintain long-term relationships with customers. Customer retention is the mirror image of customer defection. A high retention rate is equivalent to a low defection rate. The number of customers doing business with a firm at the end of a financial year expressed as percentage of those who were active customers at the beginning of the year. REVIEW OF LITERATURE Wang and Lo (2002) identified the Service Quality, Customer satisfaction and behaviour intentions, relationship between the Service Quality Factors, Overall Service Quality, Customer Value, Customers Satisfaction and Behaviour Intentions. The significant impact is identified between the tangibles, reliability on overall service quality; assurance and empathy on overall service quality, tangibles, empathy, network quality and customer sacrifice on customer value, reliability, assurance and Network quality on customer satisfaction and customer value and satisfaction on behaviour intentions. Lather and Kaur (2006) in their study on Malls in India analysed the influence of selected attributes on store patronage for doing shopping. The authors highlighted that shopper decision on retail format depends upon store characteristics. Keeping these facts, the researchers had studied the nine characteristics of Malls to elaborate the enthralling shopping experiences. The study provided academics, Mall developers and retailers a richer understanding of various components that contribute to malls experiences. Angana Borah and A.P.Singh (2008) Emerging Issues in the Organised Retail Sector: A study of Guwahati city opined that a retail image that appeals to part of retailers. The retail image is strengthened through the shopping experiences that a customer. Page 42

3 Sengupta and Noopur Agarwal, (2008) In-Store Promotion - A relevant Promotional tool in Organised Retailing, estimated the organised retail pie to comprise clothing, textiles and fashion accessories 40 per cent, food and grocery 19 per cent, durable 13 per cent, footwear 9 per cent, Jewelry and watches, home doctor 7 per cent, books, music and gifts 3 per cent, beauty products 2 per cent and others 7 per cent. Jai Awatramani, and et.al (2009) Customer Shopping Behavior - Organised & Unorganised Retail in Mumbai, India, They concluded that items which are purchased on daily basis will be preferred on basis of closeness to the stores- organised or unorganised, for items which customers prefer to purchase once in a week have a higher probability in going in for organised retail. Mahesh, D and et. al, ( 2011) A Study on Intention and Attitude of Consumer Behaviour towards Retail Stores in Chennai District, The study found out that there was significant difference among the gender, age of the respondents and factors of shopping intention. The study concluded that an understanding and knowledge of various factors that led to shopping intention and attitude of the consumer would help the retailers to climb the high ladder in the market. NEED FOR THE STUDY In order to sharpen the marketing mix companies have been moving from marketing at the aggregate level, called Mass Marketing, to Mass customization to the level of 1-to-1 marketing where each customer is treated as a separate segment. The factors that have weighed heavily on this decision are the need to fine-tune the marketing strategies and the realization that the cost of retaining customer (read servicing) an existing customer is much lower than acquiring a new customer. SCOPE OF THE STUDY The Indian market has seen vast changes in political, economical and social environment, which has a great impact on consumption. With the Indian as well as international corporate entering into the Indian retail scenario the market has been divided between the traditional and the organized sector. The Indian retail scenario is presently facing the similar situations as the mom and pop stores in the developing nations faced at the emergence big box retailers. There are various issues that need to be addressed, like what would be future patterns of consumption, which formats of retail would be preferred by customers and will the rise of organized retail affect the traditional retailers. STATEMENT OF THE PROBLEM In the present scenario, customer motivation and satisfaction is under the control of business people and especially retailers. The situation of market and trends in price of commodities, mainly, under the control of these departments. They can raise the prices and they can down the prices according to the market situation. The growth and development of any retailers are depending on their marketing skills and business performance. The marketing skills depend on two factors, i.e. nature of commodity and attitude of customer towards the commodity and the business performance depends on marketing situation and schemes introduced to attract the customers. These two factors are depending on role and performance of neighborhood shops. It is necessary for a retailer to measure the sort and long term activities performed to attract and motivate customers. This is very much needed in retailing especially neighborhoods shops to develop significant sales of food and grocery to the customers. The researcher identifies the following problems are as under: changing economic environment, heavy initial investments, Malls to elaborate the enthralling shopping experiences, expectations and store atmosphere evaluations, financial and mobility restrictions, Influence patronage intentions, affects consumer format choice decisions, modern technology is another problem the retail industry faces, Despite security measures, theft, shoplifting, and fraud are ongoing problems for retailers, Consumer tastes and preferences can change rapidly and greatly affect demand for retail items. Fashion fads and product life cycles can be unpredictable and companies Page 43

4 may struggle to make merchandising decisions, correct assortment is a major concern for retailers, checking pricing with competitors whilst both shopping on and offline, accurate gauge of demand is critical for retail planners, lack of retail space, Trained manpower shortage, Thinking outside the box to improve productivity, innovation and competitive advantage, Improving efficiency, time and speed of delivery, engaging retaining and growing talent. Hence, in the present study on customer acquisition and retention management in retail industrywith special reference to Villupuram district. OBJECTIVES OF THE STUDY Hence, the present study attempts customer acquisition and retention management in retail industry with special reference to Villupuram district. 1. To study the shopping intention, location, store loyalty, retail sales service to analyse the shopping attitude, and to identify the determinants of shopping habits of customers acquisition and retention towards organised retail store in Villupuram district. 2. To analyse the factors influencing customers opinion towards prefer organised retailing in Villupuram district. 3. To ascertain customer satisfaction and service quality regarding organised retail stores in Villupuram district. TESTING OFHYPOTHESIS Null Hypothesis for customer acquisition and retention management in retail industry, keeping in mind the above objectives following Null Hypotheses are framed and tested. H 0 1: There is no significant difference between type of retail industry and customer acquisition practices. H 0 2: There is no significant difference between type of retail industry and customer retention practices. H 0 3: There is no significant difference between demographic profiles of the respondents with respect to (a) growth of retail industries, (b) strategies for growth of retail industries, (c) customer acquisition (d) strategies for customer acquisition (e) customer retention and (f) strategies for customer retention. H 0 4: There is no significant difference between quality of services important in the retail store and store location of the respondents. RESEARCH METHODOLOGY The study is based on both primary and secondary data. The primary data are those which are collected a fresh and for the first time and thus happens to be original in character. The questionnaire is too designed and supplied to the respondents for collecting primary data. In this method, a questionnaire is sent to the persons concerned with a request to answer the questions and return the interview schedule. Research Methodology is a way to systematically solve the research problem. It may be understood as a science of studying how research is done scientifically. To do my study I have adopted exploratory research design. The primary data is collected through interview schedule from customers and questionnaire from retail stores. DATA COLLECTION Data will be collected using both primary as well as secondary method. Primary Data The primary instrument for data collection in this research was questionnaire and well-structured interview schedule. A detailed interview schedule was prepared to know the buying pattern and to seek the opinion of the customers who responded to the same and questionnaire was prepared to collected data from owner, managers and employees of various retail outlets. Initially, before asking questions, a good rapport was established and good cooperation of the customers Page 44

5 was solicited. Then the questions were asked in a structured order. All kind of doubts of the customers was clarified to get the most truthful answer from the customers. Secondary Data Secondary data were collected from owner, managers and employees of various retail outlets, previous studies, retailer s records, Research papers, Marketing Journals, Magazines, Text books and websites. Sampling Design Primary data will be collected using structured interview schedule and questionnaire. The population of the study comprises of customer visiting retail stores. For the selection of respondents simple random sampling method is adopted. The respondent under study belongs to different demographic groups like sex, gender, marital status, geographic location, occupation, educational level, income level, size of the family members and so on. A total sample size of 720 out of which 400 customers and 320 employees from retail stores will be approached to participate in the study. A pilot study will be conducted on 20 customer and 10 employees from retail stores to finalize the interview schedule and questionnaire items. STATISTICAL TOOLS AND ANALYSIS To analyze the level of satisfaction, retaining and acquisition among the retail store brands, the data were collected from the different types of respondents based on their educational qualifications, occupation, family size, monthly income, amount spent on retail store per month, type of retail store, quantity of retail store purchase, place of purchase and mode of payment which were studied by means of percentage analysis, descriptive analysis (mean, standard deviation and coefficient of variation), ANOVA, t-test, chi-square test, correlation analysis, factor analysis. The reliability and validity analysis of the data in this study was analysed using Statistical Package for Social Sciences (SPSS v 20.0). The different tools of analysis and the variables studied are as follows: ANALYSIS AND INTERPRETATION The demographic profile of the respondents is analyzed on the basis of their gender, age, marital status, geographic location, education, occupation, monthly income, size of the family members and nature of family. Table 1: Demographic Profile of the Respondents Demographic Profile No. of Respondents Percentage Male Gender Female Up to 30 years Years Age (in years) Years Above 50 Years Married Marital Status unmarried Rural Geographic Location Suburban Urban Page 45

6 Education Occupation Monthly income (in Rs.) Size of the family members Nature of Family Source: Primary Data Up to SSLC HSC/ Diploma/ITI Graduate Post graduate/ Professional Agriculture Business men Employed House wife Student and Others Less than Rs.10, Rs.10,001 to Rs.20, Above Rs.20, Small ( 3) Medium (3-5) Large (above 5 ) Joint Nuclear Table 1 reveals the demographic profile of the respondents of the customer acquisition and retention management in Villupuram district. Out of 400 respondents, per cent were male and per cent were female. The predominant age group of the respondents (31 per cent) was distributed in the age group 41 to 50 years. A good majority of the remaining respondents (29 per cent) were distributed in the age group above 55 years % and 15.50% of the respondents were distributed in the age groups up to 30 years and 31 to 40 years respectively. The married category of respondents constitutes per cent and per cent are unmarried category of respondents. The geographic location of the respondents constitutes highest of per cent of the respondents belong to rural, 34 per cent of the respondents belong to urban and per cent of the respondents belong to suburban. The highest literacy rate (27.50 per cent) of the respondents is graduate, per cent of the respondents have got post graduate/professional education, of the respondents have HSC/ Diploma/ITI qualification and 23 per cent of the respondents have up to SSLC qualification. The occupation represents that 48 per cent of the respondents are employee, per cent are house wife, 14 per cent are businessmen, per cent are students and others and 10 per cent are agriculturalist. About 46 per cent of the respondents have monthly income of above Rs.20,000, per cent have Rs.10,001-20,000 as monthly income and per cent of the respondents have the monthly income of Rs. Less than Rs.10,001. Out of total per cent of the respondents family size of less than or equal 3 members, per cent of the respondents family size of 4 to 5 members and per cent of the respondents family size of above 5 members. The nature of family size represents that per cent are nuclear family and per cent of the respondents are joint family towards the respondents in the customer acquisition and retention in the retail industry in Villupuram district. Page 46

7 TESTING OF THE HYPOTHESIS The following null hypothesis has been formulated and one way ANOVA is applied to test the significant difference between qualities of services is important for the shopping preferences of the respondents and retail store location. H 0 1: There is no significant difference between quality of services important in the retail store and store location of the respondents. Table 2: ANOVA for Quality of Services and Store Location Store location 95% Confidence N Mean S.D. Std. Error F value Sig. Lower Bound Upper Bound Agree Agree Convenient nor Location of the * Store Total Agree Agree Ease in nor Identifying the * Store Total Agree Agree Ease of nor Reaching the * Store Location Total Agree Agree Near my nor * Shopping Area Total Page 47

8 Agree Agree Near my Work nor Place Total Agree Agree Ease of Traffic nor Flow Total Agree Agree Ease of nor Communication Total Source: Computed from primary data, *Significant at five per cent level * * The calculated F value of 2.714, , 3.303, , , and to the above respective variables of store location is significant at five per cent level. The value indicates that there is a significant difference between qualities of service is important in the retail store and store location of the respondents. Hence, the stated hypothesis of there is no significant difference between qualities of service is important in the retail store and store location of the respondents is rejected. Page 48

9 PROMOTIONAL OFFER IS IMPORTANT FOR THE SHOPPING PREFERENCES OF THE CUSTOMERS AND STORE LOYALTY The following null hypothesis has been formulated and chi-square is applied to test the significant association between promotional offer is important for the purchases of the respondents and retail store loyalty. H 0 2: "There is no significant association between the promotional offers is important in the purchase and store loyalty Table 3: Promotional Offers and Store Loyalty Count I prefer this shop for my regular shopping Not at all Not Moderately Very Total Important important important important Important Attractive nor promotional offer is important in the Agree purchases Agree Total Source: Primary data Chi-Square Tests Value df Asymp. Sig. (2-sided) Pearson Chi-Square a Likelihood Ratio Linear-by-Linear Association N of Valid Cases 400 a. 8 cells (40.0%) have expected count less than 5. The minimum expected count is.54. Source: Computed from Primary data The calculated chi-square value of is statistically significant. Hence, the stated hypothesis of there is no significant association between the promotional offers is important in the purchase and store loyalty is rejected. Table 4: Promotional Offers and Store Loyalty Count I prefer to shop at this store even if another store Advertises some deal Total Not at all Not Moderately Very Important important important important Important Attractive is important in the promotional offer purchases nor Agree Agree Total Source: Primary data Page 49

10 Chi-Square Tests Value df Asymp. Sig. (2-sided) Pearson Chi-Square a Likelihood Ratio Linear-by-Linear Association N of Valid Cases 400 a. 4 cells (20.0%) have expected count less than 5. The minimum expected count is Source: Computed from Primary data The calculated chi-square value of is statistically significant. Hence, the stated hypothesis of there is no significant association between the promotional offers is important in the purchase and store loyalty is rejected. Table 5: Promotional Offers and Store Loyalty Count I occasionally prefer this store for major shopping Not at all Not Moderately Total important important important Important Very Important Attractive promotional offer is nor important in the purchases Agree Agree Total Source: Primary data Chi-Square Tests Value df Asymp. Sig. (2-sided) Pearson Chi-Square a Likelihood Ratio Linear-by-Linear Association N of Valid Cases 400 a. 9 cells (45.0%) have expected count less than 5. The minimum expected count is.41. Source: Computed from primary data The calculated chi-square value of is statistically significant. Hence, the stated hypothesis of there is no significant association between the promotional offers is important in the purchase and store loyalty is rejected. H 0 3: There is no significant difference between education and service quality of the retail stores. Table 6: ANOVA for Occupation with Customer Preferences and Service Quality of the Retail Stores Occupation N Mean S.D. 95% Confidence Std. Error Lower Upper Bound Bound F value Sig. Agriculture Business men Store loyalty Employed House wife * Student and Others Total Page 50

11 Store location Customer perception Customer satisfaction Service quality Tangibility Reliability Responsiveness Assurance Empathy Agriculture Business men Employed House wife Student and Others Total Agriculture Business men Employed House wife Student and Others Total Agriculture Business men Employed House wife Student and Others Total Agriculture Business men Employed House wife Student and Others Total Agriculture Business men Employed House wife Student and Others Total Agriculture Business men Employed House wife Student and Others Total Agriculture Business men Employed House wife Student and Others Total Agriculture Business men Employed House wife Student and Others Total * * * * * * * * Source: Computed from Primary data, *Significant at five per cent level The calculated F value of store location (F ), store loyalty (F ), customer perceptions (F ), and customer satisfaction (F ) is significant at 5 per cent level. The value indicates that there is a significant difference between the occupation and customer shopping preferences in the retail stores. Hence, the Page 51

12 stated hypothesis of there is no significant difference between occupation and respondents shopping preference of the retail stores is rejected. Similarly, the calculated value of service quality of tangibility (F ) reliability (F ), responsiveness (F ), assurance (F ) and empathy (F ) is also significant at five per cent level. The value indicates that there is a significant difference between the occupation and service quality of the retail stores. Hence, the stated hypothesis of there is no significant difference between occupation and service quality of the retail store is rejected. FINDINGS OF THE STUDY The strategy for acquiring high value customers from competitors has the highest acceptance score of 3.85, follows the differentiation and targeting the valuable new customers with acceptance score of 3.84 and strategic identify and target new customer opportunities with acceptance score of 3.83 towards the strategies of acquisition process in the retail sector. The respondents assign the least score for front line employees performance evaluations depend largely on how well they acquire new valuable customers (mean 2.93) towards the strategies of acquisition process in the retail sector. To retain valuable existing customers is seen by employees as essential for the unit s success, leaders clearly defined mission driven by customer retention and a system to segment existing customers based on their economic value is highest dominant factors followed for the customer retention with respective mean score of 3.59, 3.48 and To maintaining relationships with existing valuable customers is viewed as more, management communicates the importance of retaining the existing valuable customers and across the unit employees agree that being able to retain valuable existing customers is the key to our competitive advantage with respective mean score of 3.06, 2.96 and 2.49 towards the practices to be followed to customer retention process in the retail industry. There is a significant difference between type of retail industry and customer acquisition practices. There is a significant difference between type of retail industry and customer retention practices. SUGGESTIONS AND RECOMMENDATIONS Customer retention strategies are not strictly independent of each other; value is function of not just price, quality and service but can also be enhanced by personalization and offering a memorable experience. Customers generally complain that full knowledge is not provided to them. Thus the retailer should properly disclose the features of the product and services to the customers. The retail sector is concerned they should make a careful study before making investments because the need of the hour and biggest challenge is the retail space and the cost of rentals. A maximum population residing in rural area in the Villupuram district and it is also observed that the consumers are price sensitive. The sales person retail selling is the major role to acquisition and retaining the customers. Retailers must take pain to make sure that sales person are educated, trained, experiences, and helping nature, has a neat and clean outlook and is cheerful knowledgeable. The study reveals that the customer acquisition in the electronic sector is very low. Therefore, the electronic products sellers need more attention on customer acquisition process. The study also reveals that the retaining the customer is in the textiles is difficulty due change life style, fashion etc, Hence, the textile industries is to provide wide range of products options with quality and reasonable price. Page 52

13 CONCLUSION The present article concludes that, the customer acquisition and retention is the vital goal for every business firms that emphasize on the relationships with customers. While the precise meaning and measurement of customer retention can differ by industries and firms there appears to be a general agreement perceiving customer retention is a tool to yield several economic benefits. Retained customers purchases increasingly grow bigger together with the referral they made during their lengthy tenure with the company. This results in a decrease in the cost of maintaining relationships with customers. Customer retention is beyond satisfying and maintaining existing customers. Hence, attention on this area is greatly needed in order to further improve the firm s performance. It is believed that customer retention strategy will be a great management tool for retailers to survive and grow in the very competitive retailing industry. The findings of this study in addition to the implications given are expected to enlighten the practices of customer retention within retailing sector. REFERENCES 1. Alexander, A.A & Muhlebach, R.F.(1992). Shopping Center Management, Institute of Real Estate Management, Chicago Illinois. 2. Connolly A and Firth D (1999), Visual Planning - the Power of Thinking Visually, The Journal of Brand management, Vol.6, No. 5, g, Vol. 21, July, Dutt, D.2004, An outlook for Retailing in India, Vision2005 (Form a presentation by KSA Technopak at MDI Gurgaon in January and February). 4. Kotler, Philip 2000, Marketing Management, 10th Ed., Prentice Hall of India Pvt Ltd, New Delhi. 5. Kuruvilla, S. J. and Ganguli, J. (2008), Mall development and operations: An Indian perspective, Journal of Retail and Leisure Property, 7 (3), Levy, Michel; and Weitz, Barton A. Retailing Management.New Delhi, Tata McGraw-Hill Publishing Company Limited, Majumdar, S.2002, FDI in retailing: India as a supermarket, Business Line, Tuesday, Sep POPAI (2001), In-Store Advertising Becomes a Measured Medium, Survey Report.( 9. Rajagopal (2009), Growing Shopping Malls and Behavior of Urban Consumers, Journal of Retail and Leisure Property, 8 (2), Sinha P K and Uniyal D P (2000) Point of Purchase, Working Paper, Mudra Institute of Communications, Ahmedabad. 11. Smith W R (1956), Product Differentiation and Market Segmentation as Alternative Marketing Strategies, Journal of Marketing. Page 53