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WHY ARE CAF COFFEE DAY CUSTOMERS NOT OPTING FOR

CAF MOMENTS

Prepared for
Mr. V. G. Siddhartha
CEO, Caf Coffee Day

Prepared by
Group AO1
Section 7
MNCN 2
T. A. Pai Management Institute - 576104

February 23, 2014

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Letter of Transmittal

Saty Consultants
T. A. Pai Management Institute
Manipal - 576104 , Karnataka, India
Tel: 8151928868 Fax: 91 820 2570699 http//:satya.15@tapmi.edu.in
23 Feb 2014
Mr. V. G. Siddhartha, CEO
Cafe coffee day
#23/2, Vittal Mallya road,
Bangalore - 560001,

Dear Mr. V. G. Siddhartha:

In response to your request of 12 Nov 2012 , my colleagues and I have analysed the
problems faced by customers while using the loyalty card issued by CCD and how to
overcome them. We are pleased to present the enclosed report, which summarizes core
issues.
Based on our research, we recommend offers should be given on the basis of usage without
affront payment. Our reasons are described in the report.
I would like to thank the staff at the two outlets namely Manipal and Mangalore for providing
additional information about the company. Also there co-operation for customer interaction at
the outlets helped us get all necessary information for research.

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Feel free to call if you want to discuss the report or need additional information.

Sincerely,
Satya
Chief Technical Analyst
AO1 Group

Enc. Report

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ACKNOWLEDGEMENTS

We hereby take this opportunity to thank all those people including our friends and
colleagues who have helped us for the successful completion of this project.
We would also like to thank Prof. Shalini Verma (faculty) for her continuous support and
guidance

she

has

rendered

for

the

successful

completion

of

this

project.

In the ends a special thanks to all employees of caf coffee day and all the members who
are directly or indirectly associated with the project.

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EXECUTIVE SUMMARY
WHY ARE CAF COFFEE DAY CUSTOMERS NOT OPTING FOR CAF
MOMENTS
Group AO1
February 23, 2014

The purpose of our project is to understand the problems faced by customers while using the
loyalty card issued by CCD and how to overcome them. For data collection, we conducted a
combination of exploratory & co-relational research. In the first phase exploratory research
was carried out for identifying the factors. In the second phase of the research, this data was
used to prepare questionnaire. This helped in identifying factors which are not being realized
through the loyalty card and henceforth in addressing the issues which prevent customers
from choosing to purchase and use a loyalty card.
From the findings, we inferred that the customers were not satisfied with the existing benefits
provided by the Caf Moments (the loyalty card used by CCD). Along with other
expectations not being met by usage of card, the main contention for the customers is the
upfront payment of the cash before using the card.
It is recommended that CCD should reconnect with the customers to find about the
expectations that they have from the loyalty card and try to implement the suggested
changes. Instead of the upfront cash payment, the company should try the system of
awarding the bonus points after every purchase, which can then be added up to avail further
discounts. Once the changes have been made in the existing model, the customers should
be made aware about the improved offers through various promotional campaigns.

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In conclusion, the Caf Moments card is a brilliant idea which capitalizes on the loyalty of the
customers .It can be used successfully if the customer requirements are appropriately
mapped to the offers provided with the card.

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CONTENTS

LETTER OF TRANSMITTAL

ACKNOWLEDGEMENTS

EXECUTIVE SUMMARY

INTRODUCTION

Background
Problem Statement
Limitations
Procedures

METHODOLOGY

11

Research Objectives
Research Techniques

Variables
Sampling Design

FINDINGS

15

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Factor analysis of loyalty general

Factor analysis of loyalty for ccd
Discriminant analysis of caf moments

CONCLUSIONS, AND RECOMMENDATIONS

26

APPENDIX

27

A. Cover Letter
B. Questionnaire

REFERENCES

INTRODUCTION

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Background

A special person requires a special gift. Caf Coffee Day lets you be the reason for the smile
on someone's face! Be it Friendship Day, Mother's Day, Valentine's Day, Women's Day or
your birthday, share the simple joys of Coffee with the ones you love with the pre-paid Caf
Moments Gift Card! When a Caf Moments card is purchased/re-loaded and activated, CCD
will credit an additional amount (a minimum of 5%) based on the loaded value. The easiest
way to get extra rewards while making payments. This card can be used as a mode of
payment, whenever the card-holder visits the cafe. Just swipe the card to record every
transaction and get special offers, cool gifts and fun rewards based on all the Caf Moments
payments made using the card.

Problem Statement
Why are the customers not interested in purchasing the loyalty card issued by CCD? Even if
the customers are purchasing the loyalty card, what is preventing them from making
optimum use of it?

Limitations

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The target audience is a young crowd of 25-35 years may not willing to be a part of
marketing research, for whom convenience is one of the most important factors influencing
their decision to visit CCD.

Procedures

In-depth Interviews
Survey with the help of questionnaire

METHODOLOGY

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Research objective

Identifying the factors defining loyalty as per customers

Identifying the factors defining loyalty for coffee shops especially CCD
Mapping the features of loyalty cards with the customers perception of loyalty
Identify factors which prevent the purchase and use of Loyalty cards

Research Techniques
The research methodology used for this research is a mixture of exploratory & co-relational
research. Initially we used the exploratory research for identifying the factors that define
loyalty & what customer understanding of loyalty card is.
In the second phase of the research we will use this data to map the features of loyalty card
to the customers perception of loyalty and loyalty cards. This would lead us to factors which
are not being realized through the loyalty card and henceforth to factors which prevent them
from choosing to purchase and use a loyalty card. This could be achieved through a corelational study since it would be difficult to zero in on a specific reason for the behaviour.

Variables
For studying the general perception of loyalty and the factors affecting repeat purchases, the
following variables were used:

The Brand Characteristics

Quality of the Product

Service Levels / Experience

Convenience

Status associated with the brand

Price

Choices of family and friends

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In order to identify any variation in the factors affecting loyalty in the case of Cafs, the
following variables were used:
The CCD Brand

Quality and Taste of Coffee

Experience

Convenience

Price

Peer Reviews (choice of friends)

During the final stage of the study, we used the following variables to see if the features of
the loyalty card of CCD are in fact able to augment the loyalty and repeat purchases of the
customers.

The status associated with owning a premium membership card

Aesthetic aspects of the card
Convenience Including faster check out
Sharing of Personal Data
Upfront payment for future purchases
Wallet Space

Sampling Design
We used convenience sampling for our study. Since the scope of our study was limited to
the loyalty card of Caf Coffee Day, we focused on young adults. Young adults are the main
targeted consumer segment of CCD. Young adults comprises of people between the age
group of 18 to 35.
We used convenience sampling for In-depth interviews. We interviewed people who prefer
coffee and regularly visit coffee shops and specially CCD. Based on the findings of the
interviews, we rectified some various which play an important role in general loyalty of a
customer towards a particular brand and also some variables which affect the loyalty
towards CCD.
For survey we used snowball sampling and targeted young adults from cities like Mumbai,
Pune, and Bangalore. As these cities have a good number of CCDs shop available and the
target audience has a good disposable income.

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No. of People interviewed: 5

No. of respondents of questionnaire: 60

Gender

30%

Male

Age

20
- 24
42%

Female

70%

FINDINGS

25 - 30

58%

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Factor analysis of loyalty general

KMO and Bartlett's Test
Kaiser-Meyer-Olkin Measure of Sampling Adequacy.
Bartlett's Test of Sphericity
Approx. Chi-Square
Df
Sig.

.651
75.606
21
.000

The KMO statistic of this data set is 0.651 and the significance level is 0.000. Hence the data
is sufficient to do the factor analysis.

Communalities
Initial
The_Brand_Characteristics
1.000
Quality
1.000
Service_Experience
1.000
Convenience
1.000
Status
1.000
Price
1.000
Family_Friends_Choice
1.000

Extraction
.799
.573
.652
.648
.755
.647
.684

Total Variance Explained

Extraction Sums of Squared
Initial Eigenvalues
% of
Cumulativ

1
2
3
4
5
6
7

Total Variance
2.473 35.325
1.207 17.240
1.079 15.421
.848 12.121
.589
8.416
.434
6.197
.370
5.281

e%
35.325
52.565
67.985
80.107
88.523
94.719
100.000

Loadings
% of
Cumulativ
Total Variance
2.473
35.325
1.207
17.240
1.079
15.421

e%
35.325
52.565
67.985

Rotation Sums of Squared

Loadings
% of
Cumulative
Total Variance
2.322 33.173
1.248 17.825
1.189 16.987

%
33.173
50.998
67.985

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The above table shows that the seven factors that were used to study the general loyalty of
the customers can be divided into three different factors, which cumulatively explain 67.9%
of the variance.

Component Matrixa
1
The_Brand_Characteristics
Quality
Service_Experience
Convenience
Status
Price
Family_Friends_Choice

.583
.755
.793
.738
.224
.541
.215

Component
2
.195
-.038
-.151
-.322
.819
-.075
.604

Rotated Component Matrixa

Component
1
2
The_Brand_Characteristics
.440
.747
Quality
.723
.174
Service_Experience
.794
.143
Convenience
.801
.009
Status
-.079
.732
Price
.572
-.307
Family_Friends_Choice
.032
.094
Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.

a. Rotation converged in 12 iterations.

3
-.649
.024
-.023
-.016
-.187
.591
.523

3
-.220
.138
.035
-.086
.461
.476
.821

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The rotated component matrix gives us the constituent variables of the three factors that
have been identified. The variables affecting the general perception of loyalty are factored as
below:

Factor 1: Service
Quality
Experience
Convenience
Factor 2: Brand value
The Brand Characteristics
Status associated with the Brand
Factor 3: Peer Influence
Choices of Family and Friends

FACTOR ANALYSIS OF LOYALTY FOR CCD

KMO and Bartlett's Test
Kaiser-Meyer-Olkin Measure of Sampling Adequacy.
Bartlett's Test of Sphericity
Approx. Chi-Square
df
Sig.

.692
67.924
15
.000

The KMO Statistic of the data set used in 0.69 and the significance level is 0.000. Hence we
can say that the data is good enough to conduct a factor analysis on it.

Communalities
Initial
The_Brand
1.000
Quality_Taste
1.000
Service_Experience
1.000

Extraction
.722
.601
.715

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Convenience
1.000
Price
1.000
Peer_Reviews_Choices
1.000
Extraction Method: Principal Component Analysis.

.368
.706
.523

Total Variance Explained

Extraction Sums of
Initial Eigenvalues
% of
Varianc

Cumulativ

e%

Rotation Sums of Squared

Squared Loadings
% of

Total
2.44

Varianc

Cumulativ

e%

Loadings
% of
Varianc
Total
1.99

Cumulativ

Total
2.44

e%

6
1.18

40.77

40.77

6
1.18

40.77

40.77

7
1.63

33.279

33.279

9
0.92

19.819

60.589

19.819

60.589

27.31

60.589

1
0.59

15.352

75.941

5
0.49

9.922

85.863

6
0.35

8.264

94.127

2
5.873
100
Extraction Method: Principal

Component Analysis.
From the Variance table, we can see that the six variables that were studied can be divided
into 2 factors which cumulatively account for 60.5% of the variance.

Component Matrixa
Component
1
2
The_Brand
.513
-.677
Quality_Taste
.752
-.188
Service_Experience
.838
-.112
Convenience
.530
.295
Price
.762
.353
Peer_Reviews_Choices
.229
.686

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Rotated Component Matrixa

Component
1
2
The_Brand
.816
-.236
Quality_Taste
.716
.299
Service_Experience
.739
.411
Convenience
.249
.554
Price
.400
.739
Peer_Reviews_Choices
-.227
.687
Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.
a. Rotation converged in 3 iterations.

Factor analysis of the variables affecting general perception of loyalty was done for
the data collected for CCD to check whether the same factors play a major role in
influencing the loyalty of customers towards CCD. Below are the factors:
Factor 1: Service & Branding
The Brand
Quality
Experience
Factor 2: Value
Price
Choice of Peers

Price becomes an important factor defining Value

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DISCRIMINANT ANALYSIS OF CAF MOMENTS

Group Statistics
Buyer_NonBuyer
0
Status
Aesthetics
Convenience
Data_Security
Upfront_Payment
Wallet_space
1
Status
Aesthetics
Convenience
Data_Security
Upfront_Payment
Wallet_space
Total
Status
Aesthetics
Convenience
Data_Security
Upfront_Payment
Wallet_space

Mean
2.26
1.91
3.61
2.22
2.78
2.91
2.91
2.63
4.00
2.63
3.54
3.29
2.66
2.34
3.84
2.47
3.24
3.14

Std. Deviation
1.251
1.041
.941
1.347
1.204
1.505
1.095
1.114
.728
1.114
1.010
1.152
1.193
1.132
.834
1.217
1.144
1.304

Valid N (listwise)
Unweighted
Weighted
23
23.000
23
23.000
23
23.000
23
23.000
23
23.000
23
23.000
35
35.000
35
35.000
35
35.000
35
35.000
35
35.000
35
35.000
58
58.000
58
58.000
58
58.000
58
58.000
58
58.000
58
58.000

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As the final stage of the study, we conducted a discriminant analysis to see if the expected
benefits (features) of the card are able to distinguish a buyer from a non-buyer. From the
above table we can see that there isnt much difference between the various factors for a
buyer and a non-buyer.

Pooled Within-Groups Matrices

Upfront

Correlatio
n

Status

Data_

Wallet

statu

Aesthetic

Convenienc

Securit

Payme

nt

space

0.545

0.214

0.618

0.367

0.206

Aesthetics

1
0.54

0.246

0.429

0.175

0.272

Convenience

5
0.21

0.246

0.234

0.321

0.188

Data_Security

4
0.61

0.429

0.234

0.354

0.307

Upfront_Payme

8
0.36

nt
Wallet_space

7
0.20

0.175

0.321

0.354

0.115

0.188

0.307

0.115

0.272
Eigen values

Canonical
Function
Eigenvalue
% of Variance
Cumulative %
1
.211a
100.0
100.0
a. First 1 canonical discriminant functions were used in the analysis.

Test of Function(s)
1

Wilks' Lambda
Wilks' Lambda
Chi-square
.825
10.164

Correlation
.418

df
6

Sig.
.118

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The significance of this discriminant analysis is 0.118, which is much higher than 0.05.Also
the Wilks Lambda value id also quite high. Hence we can say that the discriminant analysis
is not able to form concrete criterion on which to distinguish between a buyer and a nonbuyer on the basis of the given data.

Functions at Group Centroids

Function
Buyer_NonBuyer
1
0
-.557
1
.366

The structure matrix shows that the upfront payment that is required to be paid is the most
influential factor in the buying decision making. Hence we can say that the upfront payment
that is required from the customers is the main reason for the reluctance of the customers in
buying the card.

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Classification Results
Predicted Group
Membership
Original

Crossvalidated

13

10

Total
23

10

25

35

0
1

56.5
28.6

43.5
71.4

100
100

Count

13

10

23

16

19

35

0
1

56.5
45.7

43.5
54.3

100
100

Count

Buyer_NonBuyer
0

a. Cross validation is done only for those cases in the analysis. In cross validation, each
case is classified by the functions derived from all cases other than that case.
b. 65.5% of original grouped cases correctly classified.
c. 55.2% of cross-validated grouped cases correctly classified.

CONCLUSION

In the light of the analysis results obtained using SPSS, we can conclude that:

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The Features of Caf Moments not able to meet the loyalty criteria of the customers
We found that the discriminant analysis of the features of the loyalty card is
not able to distinguish between a buyer and a non-buyer. This is due to the fact that
the features of the card are not aligned with the factors that influence loyal behaviour
from the customers.
The main reason preventing frequent use is the requirement to pay upfront for usage
Both during our interviews with regular Caf visitors and during the survey,
there seemed to be a great amount of reluctance among people to pay money
upfront in order to enjoy the added benefits of the card. This scheme actually creates
a feeling of insecurity in the minds of the customers as their cash is being tied up.
Data Security not a major factor preventing people from opting for the loyalty cards

Initially data security and the card holding behaviour of customers were
considered as the major factor that was affecting the poor turnover of Cafe
moments. But, in light of the data that have been collected and analysed, we
can say that both these factors do not play a major role in the decision making
phase.

RECOMMENDATION

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In light of the above conclusions, we would like to recommend Caf Coffee Day to revise the
schemes of Caf Coffee Day in accordance with the perception of loyalty of the consumers.
The major factor preventing usage being the upfront payment, a scheme similar to those
followed by airlines could be adopted where offers would be given on the basis of usage.

APPENDIX
QUESTIONNAIRE

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The online platform of Google doc was used to collect relevant information
from the target population.

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REFERENCES
1. http://www.cafecoffeeday.com/cafe-moments-card
2. http://www.cafecoffeeday.com/news/introduces-cafe-moments-prepaid-cards
3. https://www.facebook.com/cafecoffeeday/app_1381892355370905
4. Trochim, W. (1985). Pattern matching, validity, and conceptualization in program
evaluation. Evaluation Review, 9, 5, 575-604.
5. Trochim, W. and Linton, R. (1986). Conceptualization for evaluation and planning.
Evaluation and Program Planning, 9, 289-308.