CNV1-I1-10-CRM

INDIAN CEMENT INDUSTRY

The Indian cement industry traces its history back to 1914, at that time the market was dominated by imports. However, today, India is ranked as the second-largest producer of cement in the world, only behind China. Apart from fulfilling domestic cement requirements, the industry also exports cement and clinker to around 30 countries across the globe. The cyclical nature of the industry, type of the commodity and transportation cost involved, requires cement plant to be located in the market it serves. The country’s cement production was 285 million tonnes in 2016; the figure is expected to reach almost 550 million tonnes by 2020, as per estimates by the Cement Manufacturers Association (CMA). Currently, a total of 188 large cement plants together account for 97 per cent of the total installed capacity in the country, while 365 small plants make up the rest. The top 20 companies account for around 70 per cent of the total cement production in the country.

Customer loyalty is the aspiration of every business and the cement industry is not exception to it. The hyper competition in the business world has prompted cement companies to implement the loyalty programs, whose sole purpose is to build long term relationship with customers.

CEMENT MARKETING

In India, cement demand emanates from four key segments Housing, Infrastructure, Commercial & Industrial. Since cement is a bulky commodity and expensive to transport, the market is regional in nature. The market is divided into five main regions; northern, eastern, western, southern and central. The southern region has the highest installed capacity. The eastern region faces a demand supply gap, which will lead to capacity additions.

MARKET SEGMENTATION

Segmentation is categorization of buyers into suitable classes so that the strategic options are customized and made appropriate to each specific class of buyers. On basis of cement distribution, the customers are categorized as trade customers, non-trade customers and individual ones.

• Trade customers: Dealer/retailer/sub dealer/whole seller who sell cement to the retail customer and they are the direct customer of cement company as they lift cement through authorized CFAs of company. Trade customer sells cement to retail outlets generally called as Hardware Shops. People who build their own houses or mason/ contractors/Engineer/Architect who build housing infrastructure and opt to buy cement through distribution channel are the retail customers.
• Non-trade customers: A customer who has a registered company and buys large quantities directly from sales points. Government is an industrial customer. Big builders and promoters fall into this segment.
• Individual home builders (IHB): These are retail customer, who purchases cement from cement retail store and build private houses for own accommodation.

Key influencers in cement purchase decision process are contractors, engineers, architects and masons/labour who, usually act as a major influencer in buying behaviour of customers.

• Engineers/Architects/Experts, who conducts the technical tests and CRM Cement Industry Loyalty Programs: How Good is the Strategy? Prem Sherin1 1 Prem Sherin, Ph.D., is General Manager (Marketing and Commercial) with Ambuja Cements Ltd, views expressed above are his own. give recommendations on the cement to use. They have the power to short-list the brands, and are totally trusted.
• Masons/labour also give feedback on the process qualities of the building materials, but sometimes are not considered as direct influencers.
• Contractors with good experience in construction are also influencers to certain extent.
• Local Dealer/ Retailer, who deal with cement business with good experience and locally available are also influencers to certain extent with price sensitivity customer.
• Friend/ relatives, with good experience are also influencers to certain extent
• End users are the people who will eventually judge the construction. They are generally customers (individual home builder, households, government board, corporate companies…).

CHALLENGES: CEMENT INDUSTRY Like every other industry sector, cement too has its own set of challenges internal as well as external:

• Commoditization: Cement is a bulk commodity and a low value product, sold in 50 kg packs. Cement companies produce cement as per BIS standards; hence there is hardly any scope for product differentiation.
• Competition: There are large number of medium to small players in Indian cement industry.
• Customer retention: Due to large number of player into the same industry, customer retention is becoming a challenge to cement manufacturers.
• Channel partners: In companies like Ambuja where retail/trade sale contributes 80% to the total turnover, channel management becomes very critical to the business. The channel partners have their own priorities.

LOYALTY PROGRAMS IN CEMENT INDUSTRY

Customer loyalty is the aspiration of every business and the cement is not exception to it. The hyper competition in the business world has prompted cement companies to implement the loyalty programs, whose sole purpose is to build long term relationship with customers. There is paradigm shift from product centric strategies to consumer centric strategies which lead to tailor made CRM & Loyalty Marketing Solutions for the cement companies. Players in the cement industry are now trying to understand the consumer first and then design & develop the products, which meet these needs. Traditionally, the customer was not involved in business processes, however all this has changed in the last decade.

Figure 1: Major Touch Points of Loyalty Program in Cement Industry

In general Loyalty Programs are Proven Sales Growth Boosters. Different type of loyalty program may provide wildly different results and have proven to be successful in numerous industries. Business owners, whose sole aim is the growth of the company, began using loyalty programs as their traditional model to expand a company. These programs are not as expensive as considered. Pursuing new customers is the true cost burden; a February 2013 article in Forbes asserts that keeping an existing customer is 7 times less expensive than acquiring a new one.

Customers appreciate loyalty programs, because they often provide added incentives for making a purchase, with the rewards increasing linearly (or even exponentially) with more purchases. Because of this, using a loyalty rewards program in marketing strategy helps in carving a bigger portion of your customers’ wallets. Finally, it Makes Customers Happy. Other Advantages are on Fidelity of Communication, Fidelity of Payments and Price Control fronts. In other words, Loyalty Programs are ‘Reputation Enhancers’.

CASE IN POINT

One of the largest and respectable cement manufacturing company in India sought loyalty programs to solidify its bottom line and build long lasting relations with its dealers. The broad objectives of the program were; business target achievement, strengthen channel network and long term retention and engagement in retail market; retain customer loyalty & positive behaviour.

This program was targeted to Dealers & Retailers. This cement company developed a comprehensive strategic and tactical tool to reach out, communicate and engage the dealers. Dealers were given an opportunity to earn attractive rewards on the basis of their cement purchase performance. As the performance became consistent the dealer moved up the next tier level, thus becoming eligible for much bigger and attractive rewards. Company deployed its resources in a planned manner to deliver measurable results of the program through territorywise data base management (through mapping), developing target based rewarding mechanism and online interactive platform for members base, performance overview, reward redemption and knowledge sharing.

As a result, loyalty program enabled the company to reach out & engage with 88% of its registered member having a base of more than 15K +, points earned 36 Cr and redeemed 31 Cr, company’s market share gone up by keeping the dealers motivated & positive, and company’s brand image received a manifold increase amongst the top dealers. The member base grew by 12% and points earned gone up by 66%.

CONCLUSION

In conclusion, loyalty programs are implemented to target behavioural change of the members towards the cement brand. A loyalty program is not only transactional in nature but also helps in ego boosting and driving the desired transformation in the behaviour. It helps in making the communication in customized manner to the targeted group of members, which allow this cement company to build a better interpersonal relation with members. Customer retention becomes a lot simpler due to constant engagements between the brand and member. A loyalty program will help brand manager to understand its customers better at the right touch points and serving the customer becomes a flawless process. However, a note of caution - any loyalty program will yield desired results provided, the loyalty/rewards programs that are executed carefully with meticulous planning and timely scheduling. Rewards program could enrich customers to purchase more at a given time, only if the incentives given are worth it