Perks pay off for shopping outlets in Dubai

May 1, 2009

Dubai: At a Babyshop outlet in Oasis Centre, shopping with the little ones need not be a hassle. Inside its sprawling 25,000 square-feet store, there's a full-fledged mother's room where babies can be fed, have their nappies changed and even be left to sleep.

A dedicated play area, equipped with mini homes, slides and video games, also ensures that children are engaged in play and edutainment. The good thing is, all of these are free.

The retailer of children's toys, fashion clothing and nursery furniture believes that by giving privileges like these to their customers, they are able to win consumer loyalty and attract new clients.

"We work towards finding ways of making [the shopping] experience as comfortable as we can," Rahul Saxena, marketing manager at Babyshop, told Gulf News.

Babyshop's new strategy falls in the category of "perkonomics," a term coined by analysts at trendwatching.com to describe a "new breed of perks and privileges, added to a brand's regular offerings."

According to Colin Beaton, managing director at Watt International, a retail design and strategy consultancy, "perkonomics" is highly relevant to today's retail landscape in the region and could help retailers beat the financial turmoil. In fact, compared to slashing prices, giving perks is seen as a more effective tool to keep shoppers coming back.

He noted that consumers don't just buy on price alone. They rely more on their perception of value when deciding which brands stay loyal to during the recession. In fact, consumer expectations regarding brand value went up 20 per cent, according to the 2009 Brand Keys Customer Loyalty Engagement Index.

"At the moment there are people who have lost their job and are slashing spending. There are people who are fearful of losing their job and are cutting back as a precaution. Then there are the independently wealthy who are largely unaffected, but may cut back as conspicuous consumption becomes unfashionable for a while. Understanding consumer behaviour and how to respond to it is key to success in a downturn," Beaton added.

Beaton said there are a lot of great examples of companies using perks to win consumer loyalty, and they range from simple moves to demonstrate consideration and care, to extravagant ones to demonstrate alignment with the customer.

Some of the good examples, Beaton said, is Nokia's promotional campaign in the Philippines. The brand has installed handset charging stations for all Nokia users throughout Metro Manila to use at no cost.

Babies "R" Us stores also introduced reserved parking spaces for expectant mothers years ago. The program now covers 250 stores across the United States.

"The easiest way to see how perkonomics work is to look at early examples with loyalty programmes, which 80 per cent of UK and US adults participate in to some degree. Research shows that offering savings and having a strong partner network has a significant impact on increasing share of wallet, whereas higher discounts do not produce the same result," he said.

Beaton explained the idea of perks is inspired by incentives employers offer their staff. Studies have shown that employees offered cash rewards for performance don't remember what they did with it almost 20 per cent of the time, while 32 per cent say it does not improve their performance.

"In fact, cash rewards often present the risk of being perceived as not big enough, whereas alternate tangible benefits are viewed as a gift, are more memorable, and have a great impact on performance. There's plenty of evidence that perks work, but the key is to keep them current and relevant," he added.

In order for perks to work, Beaton encouraged shops and stores to understand how consumers behave during a recession and invest in their brand, instead of simply cutting prices to lure customers.

"Research shows that retailers who continue to invest in their brand during downturns reap the benefits in the short and long term. With less money to spend, consumers go for brands that represent values that are important to them and that they have some kind of emotional connection with. Think about what values your brand represents and promote them aggressively," he added.

Saxena agreed that giving perks to customers indeed works for retailers especially in these tough times, when every shopper is on the lookout for value additions.

"We believe in rewarding our patrons with our own services, for which there is no added expense to our dear customers. We also have a system to process customer feedback that has been helping us evolve and improve these services," said Saxena.

Ali Hussain Cheaito, retail sales manager at luxury shoe brand store Valencia, said they also offer perks to their customers - although a bit different from what other retailers are offering - which include sneak previews of their latest collection, invites to special events and functions, among others.

"Any strategy aimed at improving customer service always works and is very effective. Customers these days are looking at getting little more than just a product, but the overall shopping experience," Cheaito said.

 

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