Influence on Retail loyalty program sales outcomes- An analysis from Indian Pharmaceutical Industry.

Abstract:

Customer engagement is one of the today's research issue around the globe. In Indian customer, online engagement

is gaining momentum due to social media networking. Though some of the pharmaceutical organization are using

the SMAC (Social Media, Mobile, Analytics and Cloud Computing) technology to engage their customer and make

their loyalty program successful. Nowadays, it is a sensitive question among the professional of this industry, which

factor is deriving the sales of the loyalty program at chemist level? Is it high brand value? Is it because of the

loyalty gift which could be a triggering factor for the sales? Chemist activation number or something else?

This study has been conducted in 2698 chemists in 3 states of India in a 12 months’ time frame. All chemist ware

registered with a loyalty program. They got the chance to purchase the high value branded generic products (Brand

value - more than 70 Cr INR). Every purchased box of the product has a loyalty code and chemist will get the

loyalty points based on PTS (Price to the Stockiest) value of the box. In future, this points can be redeem by a

chemist to get a gift from a gift catalogue.

The model has been empirically tested by collecting data from the chemist level on sales, redemption, and

activation. The research finding indicates that there is no statistical significant relation between Loyalty program

sales outcome with loyalty gift, activation of chemists and number of the chemist on board. But there is a significant

influence of branded generic value on sales outcome of pharmaceutical loyalty program in India.

Keywords: Brand value; Brand Equity; Loyalty; Branded Generics; Professional executive.

1. Introduction

Recent past, application of GST (Goods and Services Tax), National list of essential medicine (NLEM) and Jana

Oushadhi (Indian Government initiative for Generic Medicine Retail Outlet) center has created a shock wave for

Indian branded generic market. Pharmaceutical organizations in India are facing tremendous pressure from various

stakeholders. Now prescribed medicine are available with less MRP in Government Jana Oushadhi. Options of

medicine are more in a molecule. Prescribed medicines are getting substituted by generics brand. Stockiest are not

willing to keep more medicine at the stock point. They are not even willing to keep the new product for a long time.

Sales executive are focusing on P1 or P2 products promotion, also in pre-call and post-call analysis and devoting

more valuable time with scientific literature discussion with doctors.

Indian Pharmaceutical organizations are focusing on Retail Chemist Prescription Analysis (RCPA), managers of the

organization are focusing on per call outcome analysis and per capita per month (PCPM) analysis.

In this above context, there is always a disbalance of pull and push strategic movement to gain a momentum in the

sales. As the pharmaceutical industry sales are mainly driven Doctors - who write a prescription for the patients and

patient purchase this product from a chemist. Chemist - who pushes some products (OTC, Over the counter) to the

floating customer based on profit margin. Patient - some patients who have a knowledge about the medicine, they

purchase the medicine from the retail outlet by asking the brand name or by the symptom. In the above process,

chemist got chance to push the product to the patient. This push component and repurchase intention of the chemist

improve an organization’s profitability and help the concern organization many ways.

In a study by Simona Vinerean and Alian Opreana et al. (2014) have acknowledged that Organization is exploring

new and innovative consumer programs and actions that will ensure many ways of capturing consumer complaints

and suggestions. Future forward Organization are using technology to create a touch point for the customer and

consumer that can be utilized to engage the customer.

Customers don’t want a new relationship, they want a better version of the successful relationships brands have built

in the past (Scott Logie, 2016).

Brakus (2009) has developed a brand experience scale to measures the four aspects of the customer brand

experience, they are sensory, effective, intellectual, and behavioral. They also have identified relationships between

brand experience and brand personality, satisfaction, and loyalty.

A scholar like Maklan and Klaus (2011) proposed an alternative approach to measuring customer experience

quality; they identified four facets of customer experience which are peace of mind, moments of truth, outcome

focus, and product experience. Marketing practitioners have also proposed measures typically focusing on assessing

the voice of the customer across the entire experience (Schmidt- Subramanian 2014; Temkin and Bliss 2011).

According to Simona Vinerean and Alian Opreana (2014) have acknowledged that managers also should have a

meaningful relationship with their customer in order to gain valuable insights of business. Also, by involving them

in consumer feedback process and respecting them with their value-adding experience, consumer engagement can

lead to a positive attitude, loyalty, advocating the brand or offering to their acquaintances, reviews and comments,

improvement, etc.

Managing the customer experience also affects the organization. Homburg et al. (2015) specifically mention the

need for an organization to develop a customer experience response orientation. In marketing literature, there has

been extensive attention given to customer-centric orientations within the organization (e.g., Shah et al. 2006). In a

customer relationship management context, Kumar and Ramani (2008) develop a scale for the measurement of a

firm’s interactive customer orientation and showed that this has a positively related to business performance.

Anderson (1994) and Henning-Thurau & Klee (1997), have acknowledged that the good experience of customers

leads to re-consumption in the future. In addition, continuous repurchase behavior by consumers results higher profit

of business, competitive advantage and faster business growth (Chinomona & Dubihlela 2014, Singh & Khan, 2012;

Farquahar,2003). According to a study by Nagendra Sastry, Head of Analytics, IQR Consulting, has found that

membership in loyalty programs is growing at a rate of 26.7 % with 2.65 billion loyalty memberships in the U.S. 84

% of consumers say they want to visit the website of a retailer with a loyalty program and 70 % of members feel

loyalty programs are part of their relationship with an organization.

In a research study by Nguyen Minh Tuan in Procter & Gamble (P&G) results show that there is the only indirect

impact of ethical sales behavior on customer loyalty through customer trust and customer commitment as mediating

variables. Customer commitment has a direct effect on customer loyalty, but customer trust only influences

customer loyalty through customer commitment. It is also been found that there is no difference in purchasing

power of gender or purchasing power is found regarding the impact of ethical sales behavior on customer loyalty.

In that study shows that ethics from salespersons can indirectly stimulate customer loyalty through the establishment

of customer trust and commitment in relationship quality. This is consistent with results of other studies (e.g.

Leonidou, Kvasova, Leonidou, & Chari, 2013; M’Sallem, Bouhlel, & Mzoughi, 2011; Chen & Mau, 2009).

Therefore, the management strategies may be more fruitful with aiming to the internal process to enhance the degree

of trust and commitment from customers, which give rise to loyalty in future. By this way, businesses should have

appropriate policies to recruit the salespersons as well as strengthen the ethics in sales for their representatives to

encourage customer’s confidence. Accordingly to Huang, You, & Tsai (2013); Shin, (2012); Verbeke, Ouwerkerk,

& Peelen,(1996); Wimbush & Shepard, (1994), an organization should set ethical rules or guidelines for sales

executives and give them appropriate training or reward mechanisms. Schwartz (2013), Roman and Munuera

(2005), Verbeke et al. (1996) argued that in order to create an organization trustworthy culture, businesses should

begin to shape confidence in internal processes first by creating, implementing, educating, training, and monitoring

new codes of ethics for employees. Moreover, businesses should build up a good communication channel with

customers to receive earlier feedbacks about salespersons’ unethical behaviors. In other words, customers can play

the role of supervisors in following and preventing salespersons from behaving unethically.

According to Peyman Jesri, a result of testing Pearson correlation show that there is a relation between components

of relationship marketing (trust, commitment, communication, competence, conflict handling) and customer loyalty.

A result of regression test shows that all of the components of relationship marketing in a study have an impact on

customer loyalty and 93.1 percent of the independent variables can predict the dependent variable changes.

According to Habibollah Doaei (2011) discovered that manager is supposed to consider having an electronic

customer relationship management (E-CRM) in representatives. In E-CRM, the manager will be able to organize

his/her relation with the customer; consequently, it will provide electronic membership (as a CRM tactic) in an

organization.

After discussion, the two different views, as previous research studies have left a gap on the reason for sales

outcome of an organization with a loyalty program and where the organization should be more focus to generate the

sales, should organization gives focus on redemptions or different kind gifts for the chemist? Or they should be more

focus on activation part of the chemist? The current study seeks to investigate the reason for loyalty sales of an

organization when brand value, redemption, and activation is a concern. Above and marketing and sales literature,

the current study is expected to make an academic and practical contribution in a retail loyalty program in Indian

Pharmaceutical Industry.

2. Literature review:

Churu, Chinomona, and Pamacheche (2016), describe that literature review serve the purposes of finding and

sharing other related studies of the same area of discussion at hand, relating the study to a larger ongoing

conversation in literature as well as filling gaps and extending the prior studies in the same field. The literature

review will comprise of the theoretical framework and empirical review.

Year Author's Name Finding1978 Jacoby and Chestnut Loyalty is a conscious customer behavior and/or attitude

1991 Aaker

Brand loyalty as a reflection of how likely a consumer is to switch to another brand, especially when that brand makes a change in price, product features, communication, or distribution programs.

1993 Eagly & ChaikenLoyalty is attitude and behavior towards one or several brands for a product by a customer in a particular period.

1994 Dick and Basu, increased global competition made customer loyalty a managerial struggle1999 Oliver Loyalty arises through phases; cognitive, affective, canotive and action.2003 Reichheld Brand loyalty is linked to business performance

2004 Shohham and Brencic

There is a positive relation between price and value consciousness and frugality and frugality that represents the opposite of impulsive and compulsive purchase is a superior human trait.

2005 Salegna and Goodwin An important predictor of long-term profitability

2006 Kukar-KinneyRefund scope positively affected store loyalty, with effects being the strongest for price conscious and skeptical consumers.

2006 MascarenhasDefine loyalty trough three dimensions: brand loyalty, behavioral loyalty and situational loyalty

2007 Blut et alDemographic characteristics, such as age, gender and education also play a great role in loyalty

2009 Wong and Deanprice consciousness is one of the probable factors that determine customer loyalty

2010 Jansson-BoydConsumers can also become brand loyal by being given incentives to repeatedly use the same product or service

2011Boohene and

AgyapongThe higher service quality and customer satisfaction is the more loyalty increases.

2012 AkinLoyalty depends upon some other factors: (i) brand characteristics, (ii) customers’ preferences, (iii) existence of alternative product / services.

2013 HartleyDealing with doctors' loyalty does not intend to secure short-term success but to create strategies that guide to enduring loyalty

2014 Klopotan et alThere is significant statistical difference in customers’ loyalty regarding demographic factors.

2015 Fujiwara & NagasawaIn order to stay ahead of competitors it is important to attach a positive feeling to brands

Source: Author’s own compilation

2.1 Theoretical framework:

This study is anchored in the framework of the theory of planned behavior (TPB). The theory of planned behavior

aids this research by providing a theoretical mechanism through which the link between brand loyalty, redemption,

repeat purchase, and brand value can be established. According to Ajzen(1985), the theory of planned behavior is

one of the most important, influential and well supported social psychological theories for predicting the human

behavior. Individual behavior is influence by behavior beliefs, normative believe and control beliefs. After all, the

theory of planned activity (TPB), gives us a guidance that planned behavior of a customer is determined by the

behavior intentions which is influence by the attitude and perception of the customer towards that perticular

objective. Moreover, TPB can provide a understanding of the process that convert positive attitudes or parameter

into purchase intentions and purchase behavior (Smith, wolfs, Manstead, 2007).

TPB is an expansion modified theory proposed by Ajzen in light of Fishbein and Ajzen's Theory of Reasoned

Action (TRA), which has better clarification limit on the real actual behavior of customer. TRA predicts and

clarifies the connection between a person's demeanor and conduct in light of the speculation that a behavior happens

because of the volitional control of every person. As per TRA, one's will chooses his genuine behavior, and actual

behavior is represent by behavior intention, which is influenced by disposition toward conduct and subjective

standard. However every individual's will control is influenced by a few inner and outside variables, most practices

have the vulnerability of certain degree. Subsequently, when exploring non-will factors influencing practices, (for

example, opportunity, ecological assets, collaboration from others, et cetera), the clarification limit of TRA will

diminish, and can't offer sensible clarifications.

Ajzen in this way extended TRA to TPB, which has one more build included - saw behavioral control, control

capacity toward the opportunity and asset when a man receives his conduct. This develop can implement the

forecast capacity of conduct, while the other three builds are influenced by the outside factors

Conduct Intention is the deliberate level of certain conduct a man demonstrations, which can mirror his own will.

Through understanding the expectation of a man's conduct, the likelihood of this conduct being really performed can

be watched. Since the conduct aim and the genuine conduct have a to a great degree cozy relationship, the

purposeful degree will decide the likelihood of such conduct. In this way, by estimating such an inert segment like

conduct goal, the reason of embracing the genuine conduct can be determined. It is theorized in TPB that the

demeanor toward conduct, subjective standard, and saw behavioral control are autonomous to each other, and can

influence the genuine conduct straightforwardly through conduct intention. Attitude toward Behavior is the decency

or disagreeableness a man feels about a conduct or the positive or negative judgment subsequent to performing such

conduct. The mentality isn't simply the conduct, yet both have high consistency with each other. On the off chance

that a man can act following his own particular through and through freedom, his mentality might be very

predictable with his conduct. Subjective Norm remains for the effect and worry from the social gatherings around a

man when he chooses to act certain conduct. The worry from these encompassing social gatherings, (for example,

guardians and companions) is for the most part caused by the imagined that this individual considers them as his

vital others and thinks about their assention of his conduct. Ajzen also, Fishbein believed that if the impact of the

state of mind toward conduct is bigger than the social pressure, the state of mind will choose the expectation of

conduct, and the other way around. Seen Behavioral Control is characterized as effortlessness degree that a man tries

to play out certain conduct. The control might be ruled by the past preparing, background what's more, the present

impediments. On the off chance that a man has more shots, assets and performing abilities, and accepts there are less

hindrances, at that point the level of Perceived Behavioral Control is higher, and the control perception is more

grounded. Henceforth, the impact of this apparent behavioral control has a tendency to be more self-evident. TPB

depends on the speculation that the conduct expectation will turn out to be more evident when the state of mind at

the conduct has a tendency to be more positive, the pressure from the encompassing social gatherings is more

grounded, and the level of the assumed control capacities is bigger. Mathieson received TPB to clarify the practices

of understudies utilizing the trial adjust and discovered that the three noteworthy parts of this hypothesis (the

Attitude toward Behavior, the Subjective Norm and the Perceived Behavioral Control) could clarify the Behavior

Intention appropriately.

3. Empirical review:

3.1. Branded Generic

In India, currently all medicines are sold under a generic name like Ciprofloxacin or by branded generic

like Cifran-oz. The Indian pharmaceutical market is dominated by Branded generic drugs which

contribute 70 percent of market share in terms of revenue. The drug market of patented products in India

contribute overall 21 percent whereas, 9 percent by OTC of total USD 20 billion revenue of the

pharmaceutical market (Please see in figure 1).

Figure: 1, Revenue share of Indian Pharmaceutical sub-segment in 2015.

9%

21%

70%

OTC Patented Generic

Source: Business Monitor International, FCCI Indian Pharma Summit 2014-15, TechSci Research.

Providing essential drugs and medicines at cost-effective prices is the main focus area of Department of

Pharmaceuticals, Ministry of Chemicals and Fertilizers, India. Under the National Pharmaceutical Pricing Policy

(NPPP), the National Pharma Pricing Authority regulates the prices of essential drugs. The Authority also monitors

the availability and shortage of any drugs. As on December 15, 2016, ceiling price of 853 formulations is under

price control. The fixation of ceiling prices on medicines has resulted in a total saving of USD 392 million since

May 2014. Various noticeable steps have been taken by the government in a bid to boost pharmaceutical sector

growth. Pharma Jan Samadhan, a customer grievances redressal system was launched to address consumer

complaints, Pharma Sahi Daam- a mobile application that provides real-time information to consumers on prices of

Non-Scheduled and scheduled medicines has also been introduced and the Pharma Data Bank, an integrated

pharmaceutical database management system was launched to facilitate online filing of mandatory returns as

prescribed for Drugs In India.

During the past decades both practitioners and marketing academics have been intrigued by the relationship between

satisfaction and loyalty (Oliver, 1996, Dick and Basu, 1994; Fornell, 1996; Hallowell, 1996; Kasper, 1988;

LaBarbera and Mazursky, 1983; Newman and Werbel, 1973). Most of those research however concentrated on

products (brands) and to a somewhat lesser extent on services or channel intermediaries.

According to Steven A. Taylor   (2004), industrial equipment marketers may consider moving beyond a focus

on satisfaction in relationship marketing strategies toward integrated strategies that foster brand equity and

trust in their customer base as well.

According to Monroe (1990), the customers benefits include desired value, e.g., quality (Monroe, 1990). Sacrifices,

on the other hand, include monetary and non-monetary considerations (Cronin, et al., 2000; Dodds, Monroe, &

Grewal, 1991; Monroe, 1990). Monroe studied that “Buyers perceptions of value proposition represent a tradeoff

between the quality or benefits they perceive in the product relative to the sacrifice they perceived by paying the

price" (1990, p. 46). Furthermore, non-monetary sacrifice includes customers' time and effort in acquiring products

(Cronin et al., 2000). Therefore, to maximize customers' perceived value, a firm must either increase the customers'

perceived value, e.g., quality, and/or decrease their sacrifice, e.g., time and effort to purchase, the price paid.

The main objective of offering value to customers is to create loyal customers who can increase purchase quantity in

future, purchase frequency, and to avoid switching behavior (Rust, Lemon, & Zeithaml, 2004). Thus, delivering

value to the customer is a primary method to build a organization’s competitive advantage (Kanagal, 2009; Lee &

Overby, 2004). Though customer perceived value is the result of marketing strategy (Moliner, Sanchez, Rodriguez,

& Callarisa, 2007; Sangkaworn & Mujtaba, 2010). That is, an organization’s marketing strategy should be

developed based on value creation for customers (Bilington & Nie, 2009). A study done by Yoo (2000) confirm that

marketing strategy positively influences customer perceived value (perceived quality), and leads to customer's

(brand) equity.

Dodds (1991), in an empirical study observed the effects of price, brand and store information with perceived value

(quality and sacrifice) as a mediating influence on willingness to purchase behavior. The results show that while

price had a positive influence on perceived quality, the price also had a negative effect on perceived value and

willingness to buy. Furthermore, store information favorable brand and did have a positive influence on perceived

quality and willingness to purchase. However, as with many perceived value studies, measurements focus on price.

All perceived value items were price (monetary sacrifices) related, and no indicators for nonmonetary sacrifices.

These included (1) This product is a: (very good/very poor value for the money), (2) At the price shown the product

is: (very economical/very uneconomical), (3) The product is considered to be a very good buy: (strongly

agree/strongly disagree), (4) The price shown for the product is: (very acceptable/very unacceptable), and (5) The

product appears to be a bargain (strongly agree/strongly disagree) (Dodds et al., 1991, p. 318). Dodds et al. state that

“as price increases beyond the acceptable range, the perceptions of value (will) decline (and) thus, the relationship

between price and perceived value should also be curvilinear” (1991, p. 308).

A study conducted by Cronin (2000) to examine the effects of service quality, perceived value, and customer

satisfaction on consumer behavioral intention in service environments. The service value is received primarily from

perceptions of quality. That is, consumers view service quality of greater importance than the sacrifices they made.

Perceived value is a main cause of customer loyalty (Cengiz & Yayla, 2007; Dodds et al., 1991), and perceived

value has a critical mediating role and a direct (positive) relationship with customer loyalty (Lemon et al., 2001;

Yoo et al., 2000). However, perceived value has not been sufficient, and completely measured in the empirical

studies. This value is the "perceptions of what is received and what is given" (Zeithaml, 1988, p. 14). These

components do not have a significant linear relationship, but rather curvilinear (Dodds et al., 1991), e.g., quality and

price (Lemon et al., 2001). As a result, I argue that these constructs should be included (together) to measure and

determine perceived value.

3.2 Sales

It has been observed by Nagar (2009) that only consumers with repeat purchases are profitable to the organization. It

is not every repeat purchase that is connected to consumer's commitment to a brand. However, consumer's

commitment is very important for a repeat purchase of a product. Therefore, organization needs to prepare the

marketing programs such a way so that it will reinforce customer’s commitment and encourage repeat purchases.

Effects of sales promotion on consumer behavior have been widely studied in the literature (Nagar,

2009).Relationship marketing and sales promotion have effects on various aspects of purchase decisions of

customer, such as time of purchase, brand of choice, quantity and switching of brands (Nijs, Dekimpe, Steenkamps

and Hanssens, 2001); consumers ’ sensitivity to price (Bridges, Briesch and Yim, 2006). However, whether the

effect of retail loyalty and purchasing behavior could be moderated by sales promotions has not yet been examined

extensively. Only a few scholars has investigated the long term effect of sales promotions effect on brand

preference and the resultant buying behavior once the promotion campaign is stopped.

The ultimate goal of any corporate initiative is profitability. Customer loyalty is one of the means to achieve that

objective (Reinartz & Kumar, 2002). Any resources invested in building loyalty without focusing on profitability

may tantamount to failure over time. Lessons from the past reinforce our conviction. For example, Safeway’s ABC

Card (PR Newswire, 2001), introduced in 1995, and was touted as the most innovative loyalty scheme in the U.K.

grocery industry. However, the program was not linked to customer profitability. As a result, as more members were

added, the communication and operation cost to run the program outweighed the program benefits. Consequently,

the ABC Card was abandoned by Safeway, the UK in April 2000. Similarly, Latin Pass (PR Newswire, 2001), a

frequent flyer consortium of 10 Latin American airlines, ran a promotion in 1994 promising one million miles to any

customer who could visit 10 Latin American countries and utilize hotel and rental car partners within a certain

timeframe. 50 people qualified in three months, forcing Latin Pass to terminate the promotion earlier than planned

and generating negative costs of up to US$ 10,000 per customer.

We discussed the importance of profitability in conjunction with behavioral loyalty earlier. However, our definition

of profitability for that discussion implied past or present customer profitability. A more sophisticated approach is to

compute the future customer profitability by applying the concept of customer lifetime value (Reinartz & Kumar,

2000). Customer Lifetime Value (CLV) may be defined as the "measure of the expected value of profit to a business

derived from customer relationships from the current time to some future point in time" (usually three years in the

case of most business). In recent years, CLV and its applications have received increasing attention (e.g. Berger &

Nasr, 1998; Mulhern, 1999; Reinartz & Kumar, 2000, 2003; Rust, Lemon, & Zeithaml, 2004). The popularity of

CLV comes from the fact that it is the only forward-looking metric that incorporates into one, all the elements of

revenue, expense and customer behavior that drive profitability. Also, it is consistent with the customer-centric

paradigm of marketing. CLV is a more superior metric as compared to other traditional measures discussed earlier

such as RFM, Share of Purchase (or Wallet), and Past Customer Value (PCV) (Reinartz & Kumar, 2000). None of

these measures is forward-looking and do not focus on the profitability of the customer (with the exception of PCV

that focuses on past profits). Therefore, in our framework, we propose to use CLV as a decision support tool to set

the maximum dollar value limit for marketing investment on a loyal customer without running the risk of over-

spending. CLV can ensure profitability without compromising loyalty.

3.3 Redemption

As per Alliance Pharmacy “Healthy Points" loyalty program, Cardholder will earn for every $1 spent at a

participating Pharmacy on eligible purchases. The % earned will be determined by the participating pharmacy

for the value (including GST) that will be credited into Healthy Points, of which will be converted into Healthy

Dollars for the cardholder to redeem. The allocated percentage resources to Alliance Pharmacy healthy Points

may be changed at the sole discretion of Alliance Pharmacy at any time. Any change shall not affect Alliance

Pharmacy Healthy Points issued prior to the date of the change. Healthy Points are earned, calculated and

awarded based on each Eligible Products or items in the basket, not the full purchase amount. Eligible Products

will exclude prescriptions and other promotional/non-qualifying items. This means the Healthy Points and

Healthy Dollars may vary depending on rounding of each of these item calculations. For example, if a

transaction has qualifying items of $24.99 & $13.49 and a prescription of $15.00, this will make the total

purchase of $53.48 and when paying cash, the total purchase price will be rounded to $53.50 of which $38.50

will be the purchase value of Eligible Products. However, "Healthy Points" will be calculated and rounded on

each of the two qualifying purchase products separately, ($24.99 and $13.49) not $38.50 which is the cash

payment. Healthy Dollars will be rounded down to two decimal points after conversion.

According to Smith A & Sparks L (2009), reward redemption can stimulate any customer for repeat purchase

behavior and can increases emotional involvement with the organization. For others (the non-redeemers) redemption

is not important, though it is not clear why this is the case (e.g. scheme design, motivation, effort etc). Customer also

believed that the loyalty scheme or card itself does not generate loyalty to the targeted customer, but rather loyalty is

generated by the retailers’ behaviors in operational and other terms.

In Retail loyalty, the redemption of retail loyalty behavior is very important from a different perspective. First,

retailers expend considerable effort and money on developing and operating loyalty schemes and systems for

consumers. The data from such schemes are valuable, but rewards are seen as important in encouraging attitudinal

loyalty towards the retailer and in building long-term relationships or customer value (e.g. Gomez, Arranz and

Cillan, 2006; Meyer-Waarden, 2007). Second, from an organization point of view, redemption activity measure both

success and failure of the loyalty program and consumers' engagement with the retailer. Successful retail loyalty

Service provider may claim that redemption activity may directly related to additional revenue through better

knowledge and information of consumers and enhanced spending by satisfied consumers ( Humby, Hunt, Phillips,

2003; Taylor and Neslin,2005). Third, redemption of gift is the most tangible component of the loyalty program

membership and it is considerable importance to consumer.

As Nunes and Dre`ze (2006, p. 129) note: ‘to be attractive a program must lead to redemption; that’s when the

benefits really become most salient to the consumer’. Similarly, Meyer-Waarden and Benavent (2006, pp. 83–84)

claim ‘it is not the presence of a programme that is crucial, but the associated integrated actions in terms of less or

more individualized flow of rewards, communications and offers’.

Retail loyalty schemes are operationalized through the use of a unique consumer identification registration number,

often Supported by a ‘loyalty’ card. However, consumer card usage itself is highly variable. Wright and Sparks

(1999) note that 23% of the cards held by their respondents were not used every time a purchase was made and 13%

of the cards held were not used at all in a three-month period. In Bolton, Kannan and Bramlett’s (2000) sample of

cardholders, 43% had no transactions at all in a one-year period. Mauri (2003) shows for a single Italian

supermarket that, of the 8357 cards issued initially, some 24.6% were never activated and only 39.1% were in use a

year later. In Allaway et al.'s (2006) study, 25.8% of cardholders never used their loyalty card a second time.

Redemption may be affected by scheme design. Design questions (O'Brien and Jones, 1995), including issues of

apparent fairness, understanding, a speed of accumulation and the possibilities of attainment of rewards, have an

impact on participation in loyalty schemes (Nunes and Dre`ze, 2006).

Taylor and Neslin (2005) consider a Turkey Reward Program which shows that the importance of both ‘points

pressure’ and ‘rewarded behavior’. Shoppers chased points and spent more after redemption than they did pre-

program. Store sales increased by 6.1% and 6.4% in two years and those who redeemed showed a 1.8% increase in

sales in the weeks post-redemption.

3.4 Chemist Activation

Various study on customer-organization relationships has suggested that different types of commitment towards the

customer such as effective, calculative and moral commitment of the organization (Allen and Meyer, 1990; Kumar,

1994). The implication of above mentioned factors would be to investigate whether the type of commitment to a

store can further differentiate the satisfaction-loyalty relationship.

Lena-Marie Rehnen(2017), In a loyalty program, the participants could gather loyalty points through their

social media engagement. Their attitudinal loyalty to the loyalty program and the company was significantly

higher than that of the loyalty members who collected points solely through transactions. This effect is

especially prevalent with respect to engagements rewarded with monetary incentives and is underlined by

behavioral data. The results of the laboratory experiment show that rewarded engagement positively

moderates the impact of intrinsic motivation on loyalty intentions. In a loyalty program , products from retail

outlet are likely to receive more push from experienced retail salespeople.

3.5 Repeat Purchase.

Loyalty of customer can be divided into two possible ways: customer’s behavior, which can be calculated by

repetitive purchases of the same brand, a preference of a brand and the recommendation of the brand to others;

another aspect is the attitude of customers, which is the internal effect and perception components of customer

loyalty. Customers may exhibit repurchase behavior due to the limited choice available or inertia (Bloemer and

Kasper, 1995). Customers have exhibited, over a recent period, much repeat purchases of Belle company products

and significant spending for Belle shoes in terms of the customer’s total outlay. Sławomir Czarniewski (2014),

points out that it is not enough to produce goods and deliver them to the place of sale. The client must receive

information about the product that convinces them of the advantageous qualities of the purchase for them. Without

such action, the company’s products “disappear” among the masses of advertised products by the competition.

Generally, customer loyalty has been recognized on the behavioral measure. According various researcher, this

measures include purchase of proportion (Cunningham, 1966), purchase profitability (Farley, 1964; Massey,

Morrison & Montgomery,1970), product purchase probability (Lipstein, 1959;Kuehn,1962), frequency of purchase

(Kahn, Kalwani, & Morrison, 1986), and multiple product purchase behavior ( Ehrenberg, 1988; DuWors & Haines,

1990).

In a retail loyalty Program, share of purchase (SOP), Share of wallet (SOW), share of visits (SOV), per customer

value (PCV); Recency, Frequency and Monetary Value (RFM)- measure of how recently, how frequently and the

amount to spending exhibited by a customer (Hughes, 1996) - measurement are used to evaluate the customer

behavior. Mostly loyalty program is based on behavior loyalty, here customers sometimes end up with the loyalty

program rather than the brand for weak relationship and profitability ( Reinartz & Kumar, 2002).

On the other hand attitudinal loyalty, represent a long-term commitment and association of a customer with the

organization. This loyalty cannot be measured by a repeat purchase behavior of a customer ( Shankar, Smith, &

Rangaswamy, 2000). Attitudinal loyalty is very important for an organization to consider because of a likelihood of

future uses of the product by the customers (Liddy, 2000) and how any customer would like to recommend the

organization to other colleagues by word of mouth ( Reichheld, 2003). Researchers in the past have given the

importance to both behavior and an attitudinal component of loyalty customer ( Pritchard, Howard, & Havitz, 1992).

Some of the other researchers like, Day (1969) and Lutz and Winn (1974) have identified the psychological meaning

of loyalty. Oliver (1999) has analyzed the psychological approaches including a cognitive, affective and conative

element of customer loyalty.

Mark D. Uncles and Grahame R. Dowling, Kathy Hammond (2003) are of opinion that customer loyalty is an

attitude based activity that can be influenced significantly by customer relationships management initiatives

such as the increasingly popular loyalty and affinity of loyalty programs .

3.6 Loyalty Program

Almost every potential retailer, Airline, and hotel are a part of loyalty program nowadays. Because of

technological advancement, there is value addition in loyalty program too. As per acando’s review report on a

Loyalty program, individual customer information is very much important as per organization is concern. In

order to create a loyalty program, loyalty program should support the organization’s vision and member’s

expectations and needs.

According to Tzetzis George and Tachis Stavros (2013), psychological commitment and attitudinal loyalty

intervene in the relationship between sports fans' involvement and their behavioral loyalty to the soccer

teams. According to Loyalty Program study by Acando (2017), suggested that loyalty strategies may be

developed to strengthen psychological commitment and attitudinal loyalty in order to maximize behavioral

loyalty. Various study also suggests 3 success factors play a crucial for any organization as loyalty program is

concern.. Three most successful characteristic of a loyalty program department for any organization will be,

clear strategically aligned goals, Separate business function, and sufficient resources to run the show. Loyalty

members lifecycle process is cyclic in nature which is given below (please see in figure 2).

Figure: 2, Loyalty member lifecycle

Source: Author’s own finding

According to Subir Bandyopadhyay (2007), in toothpaste category, behavioral loyalty is influenced by attitudinal

loyalty across many brands.

One of the most famous loyalty gurus, Frederick Reichheld, studied the relationship between loyalty and profit.

According to his research, a 5% increase in customer retention was translated into a 25-100% increase in profits.

Technology is an essential piece of the puzzle in achieving a true member-centric loyalty program.

Registration

Onbording atcivity

Activation Phase

Active Phase

Dip Phase

Re activation Phase

According to Almquist (2016) in an article entitled “The Elements of Value” conclude that there are four major

types of benefits provided by products or services loyalty program: Functional Benefit, Emotional Benefit, Life-

changing Benefit and Social Impact Benefit. The provision of more elements often leads to higher profits and

increased loyalty. A service providing a customer with great quality (functional benefit), reducing anxiety

(emotional benefit) and motivating (life changing benefit), will most likely result in more loyal customers than if the

service were to provide only functional benefits.

4. Conceptual model and hypothesis development:

Based on the covering literature and synthesis related to this research constructs, a conceptual model is proposed to

guide the empirical study. The conceptual model suggests that Branded Generics (Brand Value), loyalty activation,

redemption is a predictor variable and Loyalty Sales (Repeat Purchase) is an outcome variable (please see in figure

3). The hypothesized relationships between the research constructs will be discussed hereafter.

Figure: 3, Hypothesis

Source: Author’s own formulation

Loyalty Sales (Repeat Purchase).

H1

H2

H3

H4

Branded Generic (Brand Value)

Chemist

Activation

Chemist Redemption

Chemist Numbers

4.1 Branded Generic (Brand Value) and Loyalty Sales.

Brand equity refers to a value premium that an organization generates from a product or from a service with a

recognizable name when compared to a generic equivalent. Organization can create brand equity for their products

or service by making them easily recognizable, memorable and superior in quality and reliability. Steve Jobs once

said: “To him, marketing is about values. In this complicated noisy world, we’re not going to get the chance to get

people to remember much about us. No organization is. So we have to be really clear on what we want them to

know about us.”

The net present value (NPV) or the future value of the cash flows that are attributable to the brand name or brand

personality is known as brand value. A brand is an intangible asset of a business and helps in differentiating between

an organization's book value and market value. The difference is mostly attributable to the ‘brand'. Brand value is

also known as brand equity, In the pharmaceutical industry, a number of repeat purchases, customer loyalty

towards paying a premium for their products serve as good measures.

A strong brand has relevancy, consistency, proper positioning, sustainable (a strong brand makes a business

competitive), credibility (a strong brand should do what it promises), Inspirational (a strong brand should transcend/

inspire the category it is famous for), Uniqueness and Appealing (a strong brand should be attractive).

Jing, Pitsaphol, and Shabbir (2014) investigated that brand awareness, brand image and perceived quality have an

influence on brand loyalty.

According to Yoo (2000), Brand equity is added value for named product or service in comparison to the unnamed

product or service. It is the result of three dimensions of the brand equity i.e. brand awareness, perceived quality and

brand loyalty. The positive effect of these three dimensions on the total value of the brand equity is discovered in

America and Korea inter-culture study (Yoo and Donthu, 2002).

Following Keller (1993), Lassar (1995) held the opinion that brand equity came from the customers’ confidence in a

brand. The greater the confidence they place in the brand, the more likely they are willing to pay a high price for it.

According to Jing, Pitsaphol and Shabbir (2014), found a significant statistical relationship in between brand

awareness, brand image and perceived quality of brand loyalty which leads to generating more sales in the loyalty

program. Dhuruo, Mafani, and Dumani (2014) found the impact of packaging, price and brand awareness on brand

loyalty. According to Atilgan, Aksoy and Akinci (2005) have shown that strong brand association leads to higher

brand loyalty and customer's positive association towards a brand would be more loyalty toward a brand and the

other way round.

Product quality also has a significant influence on brand loyalty and sales. According to a study by Khan, Zain-ul-

Aabdean, Nadeem and Rizwan (2016) showed that product quality is highly correlated with brand loyalty and has a

highly positive significance relationship.

Therefore, inferring from the literature and empirical evidence above mentioned, it is hypothesized that

H10: Branded Generic (Brand Value) has no statistical relationship on loyalty sales of a retail chemist.

H1a: Branded Generic (Brand Value) has a statistical relationship on loyalty sales of a retail chemist.

4.2 Chemist activation and Loyalty Sales

Chemist activation is a process when chemist purchases the product from the stockiest and send the loyalty code to

the server. By this way, any pharmaceutical organization will come to know the purchase behavior of any chemist.

The ultimate goal of any organization initiative is profitability. According to Reinartz & Kumar (2002) Customer

loyalty is one of the means to achieve that organization objective. Any organization’s resources invested in building

loyalty without focusing on profitability may tantamount to failure over a time. To be effective and selective in

cultivating attitudinal loyalty, companies need to know their customers well, beyond the customers’ purchase

history. Customer profile information comprising customer heterogeneity in terms of psychographic and

demographic descriptives is important to predict future customer profitability (Reinartz & Kumar, 2003) as well as

for relationship marketing (Sheth & Parvatiyar, 1995). To identify the future profit perspective, customer lifetime

value and its applications have received increasing attention (e.g. Berger& Nasr, 1998; Mulhern, 1999;

Reinartz&Kumar, 2000, 2003; Rust, Lemon, & Zeithaml, 2004).Thus, drawing from the above-mentioned

discussion, it is therefore hypothesized that:

H20: Chemist activation has no statistical relationship on loyalty sales of a retail chemist.

H2a: Chemist activation has a statistical relationship on loyalty sales of retail chemist

4.3 Chemist redemption and Loyalty Sales

Reward redemption behavior of a chemist in the retail loyalty program is an important activity

from a number of perspectives. First, chemist expends considerable effort and money on

developing and operating loyalty schemes. The data from such program are valuable, but

rewards are seen as important in encouraging attitudinal loyalty towards the retailer and in

building long-term relationships or customer value (e.g. Gomez, Arranz and Cillan, 2006;

Meyer-Waarden, 2007). Second, from a management perspective, redemption rates measure both

success and failure of the ‘loyalty' activity and consumers' engagement with the retailer.

According to Humby, Hunt and Phillips (2003), Taylor and Neslin(2005),some of the very

success retail loyalty program claim that redemption activity may directly generates additional

revenue through better knowledge of different consumers and enhanced spending by satisfied

consumers. Third, redemption is the most tangible component of loyalty program membership

and may thus be of considerable importance. As Nunes and Dre`ze (2006, p. 129) describe, ‘to

be attractive a program must lead to redemption; that’s when the benefits really become most

salient to the consumer’. Similarly, Meyer-Waarden and Benavent (2006) claim ‘it is not the

presence of a program that is crucial, but the associated integrated actions in terms of less or

more individualized flow of rewards, communications and offers’.

Therefore, inferring from the literature and empirical evidence above mentioned, the following hypothesis is posited.

H30: Chemist Redemption activity has no statistical relationship on loyalty sales of a retail chemist.

H3a: Chemist Redemption activity has a statistical relationship on loyalty sales of a retail chemist.

4.4 Chemist numbers and Loyalty Sales

In pharmaceutical marketing, every professional sales executive has some chemist in their customer, from whom

they collect some database to an inquiry about their product movement in the territory. When the loyalty program

will be launching in that particular territory, sales executive will connect with some of those chemists in their loyalty

chemist list. The general perception is that if they have number of loyalty chemists on their list they will produce

more loyalty sales.

According to V. Kumar, Denish Shah (2004), most companies max out their resources through rewards programs.

This often results in a poor or a steadily deteriorating ROI as the loyalty program is susceptible to imitation from

competition which reduces the competitive advantage of the loyalty program. Further, such loyalty programs are

designed to award the maximum reward to customers who are the highest spenders. Chances are a good majority of

the top-spenders may comprise of customers that genuinely appreciate the company’s products and/or services and

would have continued to spend irrespective of the rewards. Thus, drawing from the above-mentioned discussion, it

is therefore hypothesized that:

H40: Chemist number on board has no statistical relationship on loyalty sales of a retail chemist.

H4a: Chemist number on board has a statistical relationship on loyalty sales of retail chemist

5. Research Methodology

Here, the researcher has opted for a quantitative research design by collecting the database from the field, because it

enhances the accuracy of results through statistical analysis (Berndt & Petzer 2011). In addition, the design was

suitable to solicit the required information regarding Band value, chemist activation, chemists redemption and

onboard chemist numbers. Moreover, this approach has enabled to examine the causal relationships with the

constructs utilized in this study.

5.1 Sample Frame and procedure

The sample of this study comprised retail outlet of three states of India. This research employed a systematic random

probability sample approaches as it allowed an equal opportunity of being elected from the population. As Lazerwitz

(1968) indicates that the random sampling method provides an appropriate appraisal of the populace, predominantly

limiting sample prejudice compare to non- probability sampling techniques.

5.2 Target Population and data collection

The population targeted for this study is all chemist in sample state of India, 2698 chemists, who has a potential to

purchase the products from stockiest for more than 12 months. Each chemist is an individual customer, who is

connected with the mobile number or loyalty app with the organization and got an opportunity to purchase the

product and redeem the gift from loyalty brochure. For this type of research, it is not viable to collect data from an

entire population group; therefore the researcher adopted a random sampling method. This practical study

incorporates collecting data from a practical cohort that would be sufficient to make accurate business decisions.

5.3 Descriptive Results:

2698 Chemists was selected in 3 states of India, every chemist was connected with 2 mobile number with the main

server. All chemist got the chance to purchase the product from the stockiest of the local area. After purchasing the

product in boxes, chemist sends the code through SMS to the server. A chemist who is able to send at least one SMS

to the server in a month time is considered as an active chemist. With the help of price to stockiest (PTS) sales

value, total month sales outcome is calculated state wise and then accumulated for the final outcome. Average sales

are calculated based on total sales divided by a total active chemist. The growth of Active chemist, Inactive chemist,

Sales volume, and redemption is calculated based on a growth formula. This database is captured for a time period

of 13 months (Aug'15 to Aug'16). Please see table: 1.

Table: 1, Primary data base on Active Chemist, Inactive Chemist, Monthly Sales, Monthly average sales and

growth rate for 12 months periods.

Source: Author’s own data base

6. Data Analysis and Results:

A Microsoft Excel spreadsheet was used to enter all the data, the Statistical Packages for Social Science (SPSS),

Microsoft data analysis and Minitab software was used to run the statistical analysis.

6.1 Analysis of Normal Distribution:

To analyze whether database follows normality or not, redemption, active chemist, inactive chemist and sales

volume database are plotted in scatter diagram, P- value (Probability value) are calculated (P<.05) and found that all

the data follows the normal distribution. Please see figure: 4.

Figure: 4, Probability of normal distribution.

Source: Author’s own analysis.

6.2 State-wise database:

State-wise database on activation, Sales, Average sales, redeem, growth are given below. The data in the column are

showing the moth wise (Aug’15 – Aug’16) performance of the loyalty program of that state. Please see table 2.

Table: 2, State wise – month wise sales, activation, redemption data base for 12 months periods.

State A

State B

State C

Source: Author’s own analysis on Primary data base.

7.1 Hypothesis testing.

Hypothesis: 1

Table: 3, ANOVA: SALES AND BRAND VALUE.

ANOVASource of Variation SS df MS F P-value F crit

Between Groups5.98825E+1

2 22.99413E+1

210.6642686

90.00023

13.25944

6

Within Groups1.01074E+1

3 362.80762E+1

1

Total1.60957E+1

3 38 Source: Author’s own analysis.

It can be observed in the above result as well as significance level of the test which is 0.05, it can be

concluded that the null hypothesis is not accepted by the probability of 95%, So the alternative hypothesis

is accepted here i.e: Branded Generic (Brand Value) has a statistical relationship on loyalty sales of the retail

chemist.

P-Value is 0.000231, so is concluded that there is a statistical relationship between brand value and retail

loyalty sales. Please see table 3.

Figure: 5, Month wise and state wise comparism of Sales outcome, Redemption and Activation analysis

Source: Author’s own analysis.

7.2 Hypothesis: 2

Table: 4 Sales - Active Chemist.

Source: Author’s own analysis.

In both the cases (Sales and average sales), p is more than .05(1.07319E), R² = 0.4113, so we should accept the null

hypothesis, i.e there is no statistical relation in between retail chemist activation and sales. The strength of the

relationship is indicated by the path coefficient of 0.641360435. It can be concluded that active chemist is

not significant for the sales but it has a moderate high relation. Please see fig 6.

7.3 Hypothesis: 3

Table: 5, Redemption

ANOVA Source of Variation SS df MS F P-value F crit

Between Groups2.98428E+1

4 1 2.98428E+14 341.4659855 1.06971E-154.25967

7Within Groups 2.0975E+13 24 8.7396E+11

Total3.19403E+1

4 25 Source: Author’s own analysis

Figure: 6, Relation between Redemption and Sales

50 100 150 200 250 300 350 400 4500

2000000400000060000008000000

1000000012000000

f(x) = 3065.52071097719 x + 6225634.67545513R² = 0.0422182967664638

Redemption Vs Sales

Source: Author’s own analysis.

It can be observed in the above result as well as significance level of the test which is 0.05, it can be

concluded that the null hypothesis is accepted by the probability of 95%, the alternative hypothesis is

rejected here.

P-Value is 1.06971E-15(please see table 6), (R² = 0.0422). The strength of the relationship is indicated by

the path coefficient of 0.205470915. This finding suggest that redemption has no positive effect on

loyalty sales.so it is concluded that Chemist Redemption has no statistical significance relationship (please see

fig: 6) on loyalty sales of a retail chemist.

7.4 Hypothesis: 4

Table: 6, Sales vs. Inactive Chemists

Source: Author’s own analysis.

Figure: 7, Relation between Inactive Chemist and Sales

600 700 800 900 1000 1100 1200 13000

2000000

4000000

6000000

8000000

10000000

12000000

f(x) = − 5350.68611050931 x + 11762029.8202344R² = 0.411343207920501

Inactive Chemist Vs Sales

Source: Author’s own analysis.

It can be observed in the above result as well as significance level of the test which is 0.05(please see

table 7), it can be concluded that the null hypothesis is accepted by the probability of 95%, the alternative

hypothesis is rejected here.

P-Value is 1.07238E-15, more than 0.05 (p>=.05) ,R² = 0.4113, so is concluded that Chemist number on

board has no statistical relationship on loyalty sales of a retail chemist (please see figure 7).

8. Correlation Analysis.

Table -7, Inter- Construct Correlation Matrix

Source: Author’s own analysis

9. Regression Analysis.

Table-8, Regression Matrix

Source: Author’s own analysis.

As the p-value of Redemption is more than .15 (p>.15) in regression analysis (please see table 9), redemption

column has been deleted from the database. After deleting the redemption the p-value of average sales and Active

Chemist p-value are 1.355 and 3.546

10. Research Finding and Discussions

The current study empirically examined one of the important analysis of Indian pharmaceutical loyalty programs

based on Chemists loyalty sale. After testing the above-mentioned hypothesis, it is found that chemist loyalty sales

in India have a significant relationship with the branded generic value of the product. So, high value product can

create more loyal customer because of brand awareness or because of the existing of the product in that market for a

long time. There is no statistical significance of activation, redemption and onboard chemist numbers with

pharmaceutical loyalty sales in the Indian market.

11. Academic, practical and policy implications of the study:

The present study offers various insight for academicians, practicing manager and policy maker of Indian

Pharmaceutical Industry.

As these research findings indicate that chemist loyalty sales have a significant relationship with the

branded generic value of the product, this finding will enhance the understanding of the relationship

between chemist loyalty sales and branded generic value among academicians.

Policymaker should think twice when they are offering some costly gift to the chemist for loyalty sales as

in this study it is shown that there is no significant relationship between gift redemption and chemist loyalty

sale.

Policymaker also should think what type of chemist they will select for on board, as research showing that

inactive chemist numbers have a negative effect on average sales of the territory.

The success of chemist loyalty program depends on the value of branded generic product, high value can

create more loyal customer. So the guideline to the policymaker from this study is they should think

critically which brand they will select for chemist loyalty program from the organization.

12. Research Scope and Future perspective:

As like others research, this research paper also has some limitation, first, the study was restricted to 4 factors only;

namely branded generic sales, redemption status, activation of chemist and onboard chemist numbers. Future

research could also include some other factors that influence the loyalty sales of an organization, such as repetition

of a retail visit by a sales executive and one comparison study of a loyalty program with the high-value brand versus

low-value brand and is there any relationship of Loyalty sales outcome and product life cycle of the product? In

addition, the result is based on a data collected from 3 states of India. This makes it difficult to generalize the result

to other states of India as per Pharmaceutical Loyalty program is a concern. Another researcher could make use of

large sample size and can compare this study at all India level in order to get more empirical views. Though this

research is based on quantitative/qualitative research approach, another researcher could also try to use a qualitative

or mixed approach so that in-depth understanding of the problem we can get to solve the problem.

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