Shopping Centers Are Not Lacking in Love

The spectre of rapid market saturation has forced proprietors of Russian shopping centers to rethink methods for holding onto tenants. Experts habitually appeal to Western experience, – giants of the American trade have always had an arsenal of programs for forming customer loyalty. Although the idea that customer loyalty raises a shopping center’s capital seems a lot like an invention of marketing experts to us, in the future, with the saturation of trading projects, centers that have managed to attract customer loyalty will clearly be the ones keeping their tenants as well.

Time for Gift Giving

Nobody doubts that very soon shopping centers will have to fight to keep their customers. Proprietors and operating companies are trying to stay up-to-date and willingly talk about their experience with customer loyalty. “In developed markets preparing for primary saturation of the market, loyalty programs are included in management tools for shopping centers not because it is fashionable or ‘how they do it in the West,’ but for objective reasons,” says Andrey Vasyutkin, head of the commercial-entertainment real estate department of GVA Sawyer. Meanwhile, the overwhelming majority of campaigns follow the principle of a gift with your purchase. Experts may recall constant programs from the Mega Mall chain of shopping centers (for example, in February, the held its “Shopping Compliment” action, which offered special prices with purchases of a certain sum). In St. Petersburg, this method works to attract buyers for the Adamant company. In the Warsaw Express shopping and recreation center, “Shopping Championships” were held, an exciting a raffle. In the Nevsky shopping center, it was “Time for Gift Giving” (small purchases in the center’s shops provided free entrance to some of the other facilities.)

Such activities jack up the average purchase by approximately 10%, but they don’t influence buyer attitudes in any way. “All of these programs have an essential disadvantage: the activity ends as soon as the person has received a gift. The appreciation of the consumer is not loyalty, only a deposit. Loyalty is not formed so easily. It takes years to develop, just as respect for a person does not develop out of one single good act,” declares Alexey Vanchugov, general director of the Mall Marketing company.

To keep customers, it is necessary to surround them selflessly with care. A loyalty program should offer problem-solving, instead of simply tying them to a circle of tenants advantageous to the owner. Selective discounts are becoming an irritating factor, which is why the operating company is presented with a practically impossible task – including all the competitors under one roof in the same general program. “Very often, basically out of laziness, the consumer is compelled to use those companies with programs that seem the most important. The person ceases to feel free. The one who can unite competitors and provide customers with freedom of choice will ultimately win,” says Dmitry Ryzhakov, director on development for Step by Step. Discounts, in this case, should be in force constantly. “When bonuses can be used only within a week, it’s not loyalty, it’s only a joy ride,” explains Alexey Vanchugov.

Everlasting Paper

An elementary way to win a person’s heart is to offer them money. Customer loyalty is secured very well by providing generous discounts. One method that is still used today is a complex system of coupons, which will probably outlast plastic cards. In a country where electronics are triumphant – the USA – the largest shopping centers provide weighty discounts from tenants. To some, the coupon method may seem old-fashioned, but it is more a viable method than a simple trend. The Internet could not drive out paper newspapers, and the universal introduction of plastic cards has not gotten rid of cash. Tactile impressions and traditional technologies mean quite a bit. “The average person is very conservative and not ready to give up habits immediately. It’s necessary to note that, for the majority of buyers, it is already complex enough to master new technologies. It is much easier simply to pull a coupon out of a booklet,” argues Alexey Vanchugov. If coupons exemplify the traditional values of the American trade, for Russia they are still a fashionable novelty. Meanwhile, Trade Quarter and Park House have decided to introduce coupons.

The next level is global discount cards operating in all shopping centers. As they make purchases, buyers save money by acquiring points for large discounts. The main advantage is that the discounts extend to all shopping centers, and the points saved up in one shop can be spent in other shops as well. Russian players have only just begun to consider the introduction of such programs, but experts see such programs taking the place of the traditional coupons so popular in the last century.

Justified Force

Of course, the cardboard and plastic cards do not themselves have special value; they simply stimulate purchases. “It’s a novelty with no headache. There is no foloow-up stage. Nobody sends you news or catalogs; nobody calls,” says Alexey Vanchugov. Old discount systems are reasonably tactful, but, as experts observe, an intrustion is necessary if you want to achieve a visitor’s fidelity. There is no loyalty without some degree of persistence in pursuing the client. “The intention is not to force something onto the client, but to help them buy what they really want. In this case, it is voluntary, accepted force,” believes Alexey Vanchugov.

CRM-Systems (Customer Relationship Management System – a control system for interaction with customers) is already used by many cellular operators and airlines, but the software registered for shopping centers in Russia is still not available (though, as Alexey Vanchugov recollects, it was put together in a technical project several years ago). New technologies may offer proprietors opportunities that would have seemed like science fiction in earlier years.

We shall use a visit to a shopping center to search for a gift as an example. First, the system can sned out a reminder in advance of any upcoming birthdays of friends (using an SMS, for example). It is even possible to create a wish list. This option is already offered by giants like the Mall of America and Simon shopping centers. In Russia the wish list phenomenon exists only on the Internet.

Operating loyalty cards is simple enough – unwrap a card, enter the name of the addressee, and choose a design and text for your congratulation. The system can make recommendations for goods that are offered in the specific shopping center, and even offer choices depending on level of income, age, and preferences. It is especially important that the recommended gifts are available at a discount price. And aside from gifts, it is also possible simply to purchase a gift credit card. The fundamental difference between such gift certificates and money is the fact that the gift certificate offers heavy discounts – and this is where the true gift lies.

Aside from that, it is possible with such a system to add additional information or assistance, for example, about the latest fashion trends. The shopping center will remind customers of important events, give gifts, and give advice. It is clear that, with such a system, customer loyalty will run as high as the heavens. And, in exchange for all these services, the proprietor will have an opportunity to make a comprehensive portrait of its audience. According to Dmitry Ryzhakov, any information on where else a buyer goes is worth very high discounts.

With knowledge of customer tastes and preferences, it is possible to generate the proper pool of tenants for the consumer, instead of whatever the broker is offering. “It is a very fast and effective tool, providing full consumer information. If you understand consumer needs within a certain network, you understand the entire trend. And if you understand the trend, you control the market,” says Alexey Vanchugov.

Options for advertising such offers vary. Aside from the customary plastic cards, the Internet and mobile phones are definite ways to spread the word, and are already becoming the main approach for such programs. Advanced phones today can even read bar codes.

Aside from the development of new technologies, the basic method for forming customer loyalty concerns work with personnel. That success depends not only on managers making decisions about how to introduce loyalty programs, but also on those at the very bottom of the trading hierarchy – the clerks and salespeople, in whose hands customer loyalty lies. “It is not enough to have a program on a computer; it is also necessary to have clerks who are able to force a person politely and cheerfully to fill in a questionnaire in exchange for a discount card. It is more than simply a product’s software,” notes Grigory Trusov, president of Kontakt-Expert. Since it depends so much on salesmen and clerks, there are also programs designed to increase the motivation of personnel. Park House was able to raise sales by 20% simply because they provide a gift to the best sales staff (a gift that, by the way, costs approximately 1000 euros).

Retailers Don’t Want to Share

Though modern technologies permit the development of infinite customer loyalty, as yet they are difficult to get accustomed to. Work with customers is limited to stimulating purchases. This is connected to the fact that most tenants are simply not ready to join programs conceived by an operating company. “Within the limits of a shopping center, it is possible to create so-called ‘united discount cards.’ It’s necessary to emphasize that this is a complex and expensive process. Introducing a general discount program demands, for example, installing separate terminals with special software. In addition, network operators with a private discount program are not usually entered into the general system,” points out Angela Chernova, sales manager of Trade Quarter.

As Ms. Chernova said, it is necessary for network operators to reconstruct their own work, and to bring corrective amendments to logistics, planning and budgeting. The president of Kontakt-Expert describes such problems less dimplomatically. “Our businessmen really dislike losing control over money. It seems to them that they pay enough, and participation in marketing programs is simply an additional requisition,” says Grigory Trusov. The marketing budget of a shopping center certainly cannot provide large discounts to all buyers. As a result, loyalty development is usually reduced to insignificant bonuses and additional advertising for activities conceived by retailers.

Explaining the low motivation of tenants is quite simple, and, as experts note, one of the main deterrents is the danger of industrial espionage. Certainly, there is always a risk of competitors gaining information about other shops from a simple card. A temporary solution could become personal coupons. For example, in individual shopping centers in America, there are info booths offering steady customers the option to choose the shops they wish to visit. After the choice is made, the visitor then receives coupons for their favorite shops. “It keeps tenants confident but, on the other hand, we force the customer to decide quickly what to buy today, and it is not always as simple as it seems,” says Dmitry Ryzhakov.

 Fashionable Whim or Absolute Must?
In Andrey Vasyutkin’s opinion, the following obstacles remain in the introduction of modern loyalty systems:

• The coordination of the program with all tenants and all persons making decisions – on time – is a very long process.
• There are also financial questions – the accounting department, taxes, etc.
• Similarly, it is necessary to have, in the instance of an emergency, precise technical support for programs (for example, distribution of financial streams) requiring, at times, the introduction of CRM-systems.

Still, the main component is administrative will. Meanwhile, buyer loyalty is only a minor concern for proprietors. “For the overwhelming majority of proprietors, especially when there is no professional operating company, the loyalty program is no more than the latest invention by marketing experts for increasing the marketing budget,” Andrey Vasyutkin points out. Consequently, while programs of loyalty increase a shopping center’s attendance by those ready to make purchases, as well as the growth of tenant proceeds, thy arealso an opportunity for a higher rent rates and increased rent payments. For the majority of proprietors, the advantages are simply not obvious yet.
Today, the main task of marketing experts is to show the real benefits of loyalty systems. “In my opinion, the source of inspiration should be the marketing agency, instead of the shopping center. Because there should be money behind any idea,” reasons Alexey Vanchugov. If it is possible to convince the proprietor, it is possible to take the following step and take pains to break through the sluggishness of retailers. “Everything rests on the quantity of shopping centers. Even the largest chains, like Mega and Park House, cannot now talk to retailers from a position of force or authority. That is possible only in the event that you have a wide enough network,” explains Alexey Vanchugov. Meanwhile, those not possessing sufficient influence with the largest players could unite to advance new marketing technologies. “The strongest players, like Mega, Park House, and Atrium, could be united by writing a polite letter to their tenants and letting themselves be heard,” says the general director of Mall Marketing.
However, the prospects of such a union are viewed skeptically by others. “All retailers, proprietors, and operating companies individually think very positively, but when they gather as a group, biological instinct comes in: people are afraid to lose their influence and want to supervise everything. This is where the main problem lies, not in problems of technology or the difficulty with its introduction,” summarizes Grigory Trusov.
Today, the loyalty program is usually only a fashionable novelty providing good reports to investors. “The main problem boils down to the fact that, in the introduction of loyalty programs, business processes and decisions are prescribed for the benefit of competitors’ trends, rather than trends found in one’s own consumer analysis,” considers Dmitry Ryzhakov.
In the next few years, proprietors will have to change this attitude toward marking problems. “We predict a different situation in 2010: the competitive struggle will pass onto a qualitative plane and those proprietors or operating companies who earlier did not reflect on loyalty programs, will begin to. Applied technologies will be used to develop new forms, and become more and more inventive. Similarly, tenants will be actively involved. Otherwise, shopping centers will lose customers, since visitors usually choose what is more client-oriented,” says Andrey Vasyutkin. It is clear that the competitive advantage will rest with the players who have already started to introduce loyalty systems. Yet there is another, more interesting question: to what extent are marketing specialists ready for market saturation? A spike in proprietor’s interests in loyalty systems will inevitably stifle the growth among companies competing to provide communications between shopping centers and consumers.