PATTERN RECOGNITION – A TOOL TO DETECT MALICIOUS USAGE OF LOYALTY CARD / CASH / GIFT COUPON

Historical Perspective of Loyalty Cards according to a report

Loyalty programme, as is wildly spread today was first conceived in 1981 by
American Airlines and was known as AAdvantage. It quickly turned into a source
of competitive advantage and other airlines were forced to respond in kind.
Further development is well known: loyalty programmes soon outgrew the confines
of the airline industry. The expansion that started in closely linked industries
(e.g. car rental and hospitality industry) later advanced into retail trade,
banking and insurance, service industry etc.

1. Underlying aim of loyalty programme was to act as exit barrier for existing customers and also to act as bait for new customers. It is widely believed Loyal customers not only shop themselves, but, if they are treated well they land up recommending others as well – mode of most potent - free word of mouth advertisement
2. To roll out an end to end loyalty programme, companies spend a lot not only in terms of visible discounts or addition of monetary value to loyal customers, but, lot of time, money, IT resources, hardware and man hours are devoted to sustain the same. Loyalty programme does not necessarily mean ‘Repeat Business’ only. The data so available to the companies is also used for variety of purposes, like :-
Discern purchasing pattern to streamline supply chain and stocking.

• Design promotions
• Add value to company’s valuation.
• Retention and Advocacy of brand
• Improve customer care and relationship.
  

3. Overall, a company may take major marketing policy decisions based on the data available through its loyalty programme.

GROUND SITUATION
4. So far so good. But the fact is that retailers all over the world have serious problems of having dishonest employees on board. Staff dishonesty is common . To be specific, there have been serious criminal cases of loyalty programmes being misued by dishonest employees causing loss to the company to the tune of $ 80,000/- in one specific case only. Another study shows that multiple redemption of loyalty bonus costs half a billion dollars to the company

5. Since the problem of staff dishonesty is real, lets see how the loyalty programmes are being misused by dishonest employees :-

• Coupon can be reused which have been already used once earlier on
• Company can loose money or merchandise directly.
• Sweet Hearting.
• Fraudulent accumulation of bonus points on loyalty cards by internal staff.

THE CAUSE

6. Putting it simply – loose controls in the business are the primary reason for such dishonesty spreading around and that is contagious as well. Since Dishonest employees have strong code of conduct amongst themselves , it is difficult to detect as well. Most important is the fact that the victim in this case is not ‘visible’ to offender and hence no guilt feeling of offender.
MITIGATION PROCESS – RECOGNIZING THE PATTERN
7. Since most of the loyalty programmes are riding on business internal IT back bone, by default, we have data stored in data warehouse. Such data can be used to discern a fraudulent usage of loyalty card or discount coupon. Suitable data can be generated with the following threshold values indicative of fraudulent transaction:-

• Gift card / coupons have unique bar code or serial numbers. A report could be generated when such gift card / coupon have been encashed for multiple times.
• When a loyalty card has been swiped for multiple times at the same store (say for example 5 times a day), the data could be flagged for ground checks as it is generally not possible for a customer to shop that many times a day. Such situation would come up if few customers have not got themselves enrolled for loyalty programme, but, internal staff having personal loyalty card or loyalty card in the name of his / her relative, is being swiped to get accumulations for themselves or for their relatives and friends against the purchases made by customers without loyalty card.
• Businesses can design other threshold values based on specific processes of their respective businesses.
  

PLANNING A PLANOGRAM – LOSS PREVENTION WAY

Background

1. As Wikipedia has defined, “Planogram is a diagram of fixtures and products that illustrates how and where retail products should be displayed, usually on a store shelf in order to increase customer purchases. They may also be referred to as plano-grams, plan-o-grams or POGs.” It is required for helping customers, optimizing inventory and presenting similar looks of same format stores of retailer across city or geographical area.
2. Planograms can be ‘Demand Driven’ or ‘Supply Driven’ or mix of both of them. But, the underlying purpose of the retailer is how to sell more to earn more. I had queried from peers in our forum as to what is desirable aim for designing a store planogram. They came up with absolutely logical answers. Some logically stated that we should stock what is demanded, but, others had equal force in their comments that we can stock fresh products and create a demand. Both sides had strong reasons to support their thoughts. I was amazed to know that highest in the businesses have their feet on ground and they think of basics. And why not – there is no rocket science involved in selling. It is oldest profession in the world.
3. Whatever is the principle basis of designing a planogram by a retailer, the survey shows that faulty planogram can lead to unanticipated and unacceptable losses. (Question of what planogram should be based on is not debated here as it is exclusive privilege of retailer to decide the same on his own merits).
The Study
4. A dip-stick survey across various organised retail departmental stores was carried out in East Delhi (An area dominated by low income group in Delhi, India. The area is densely populated inviting number of organised retail chain shops. The study showed that most retailers have stocked latest brands of daily use items and most of these products remained unsold till they neared their Expiry or Best Before Date. At this stage, the products were marked down and the stocks got cleared, triggering fresh supplies and the cycle goes on. Under mentioned data is eye opener in itself :-

6. The basic reason for above mentioned losses is NON MOVEMENT OF STOCK FROM DISPLAY SHELVES TO CUSTOMERS. But the fact is that they impact bottomline. First problem is how to identify such stocks. The answer lies in analysis of store sales data over a period of time. For example, if data can indicate what all merchandise have not moved from the store for last 30, probably it is time to take note of this report. In other words, Data Analyst can be tasked to establish a pattern between the planogram and non moving inventory.

The Mitigation Process

7. After having identified non moving stock, then comes the issue of identifying reasons for the same and addressing the root cause. There could be variety of reasons why a particular product is not saleable from a particular store – could be there is no demand for that stock in the store catchment area or the product does not match customer satisfaction or could be pricing is not correct or some other issue. The concerned merchandising team and store team is best equipped to handle particular situation.

8. What ever the reason, some of the the solution lie in one or all of the following:-

(a) Non Selling Stock could be moved inter-store for liquidation and / or placement of fresh orders suspended.

(b) Planogram could be changed for the particular store in which there in Non Moving Inventory and be replaced with the products which will sell in the geographical area (unless business is stocking SKUs to build up a demand)
(c) Article could be replaced with similar product which has a history of good sales. Say for example Old Spice talcum powder is not selling over a period of time, but, Cinthol powder is doing fine, then, probably Old Spice needs to be removed from store planogram or promotion could be designed to help customer go for old spice.

IN THE DEFENCE OF MOHAMMED AJMAL AMIR KASAB

1. After serving in Indian Armed Forces for 22 years (most of it fighting terrorists) and now being in the business, one thing I can safely conclude that for national economy to grow, we must provide safe and secure environment for business to flourish.

2. Under the prevailing circumstances, I am afraid, the situation is changing negatively for the business. 26/11 attack in Mumbai, not only had shaken the general population, but, a grim reality dawned on business community that they will have to share heavy burden of securing their own businesses. By not providing credible defence to the accused of these barbaric attacks, we are not helping the matter. That would amount to playing in the hands of destructive forces.

3. Though the government would be doing its own bit to re assure population, but, we as citizens, must also join hands with government to help ourselves. There is nothing better than to help own self.

4. I was alarmed to read press reports that there were serious protests against the employment of defence lawyer to defend the case of lone accused survivor of these attacks Mohammed Ajmal Amir Kasab, a Pakistani National.

5. As one of the largest democracies of the world, it is our duty to prove to the world that we cherish the dream of being a democratic nation and we enjoy an independent judiciary. That can be proved by providing not only legal aid to Kasab to defend himself, but, the defence has to be very credible, honest and impartial. By protesting against such defence, we are projecting an image that we do not have credible evidence against the accused and in the event of such a situation, we must overcome the deficiency by mob mentality and try accused by extra judicial means.

6. If we are able to prove to the world (world is watching us), that we ARE NO BANANA REPUBLIC, we stand to gain a lot in our fight against terrorism and shall be able to score a major JUDICIAL victory against our adversaries. Independent trial shall force world to join hands with us to root out the menace of terrorism from this continent atleast.

7. In our own self interests and in the interest of India, Let’s promise a fair trial to the accused.

ATTENDANCE RECORDING DEVICES AS CONTROL ON FRAUDULENT EXPENCE AND TRAVEL REIMBURSEMENT CLAIMS

1. In organizations where there is a weak ethical culture - improper or illegal activity is virtually certain to flourish. Where "tone at the top" is especially lacking, frauds by managers and employees can ultimately devastate the organization's financial health and threaten its long-term viability. Among the most easily-exploited procedures in such organizations are those governing travel and expense (T&E). Some of the ways, the employees claim falsified reimbursements are as follows.:-

Putting up claims for the duties which were never performed.
Putting up claims for excessive mileage travelled.

2. Though the businesses are aware that such issues can come up and they have been making efforts to build some business processes to control them, but, most of the controls are human based and can easily be defeated for various reasons. Such issues cause pain, both to the company and to the employee alike

Proposed Preventive Process
3. In today’s world, most of the businesses have attendance recording systems in terms of photo Identity Cards containing embedded electronic chip, Biometric Cards, Code Punching card etc. Aim of each being – to record attendance and to act as access control devices.

4. These devices can be multi tasked to fruitfully detect cases of falsified Expense and Travel claims as well, if they can be integrated with payroll compensation data ware house, as is given below in simple flow chart :-

CARD SWIPE AT ATTENDANCE RECORDING TERMINAL
↓
SWIPE DATA TRAVELS TO DATA STORAGE DEVICE
↓
DATA TRANSFERRED TO MASS DATA STORAGE DEVICE →ATTENDANCE IS RECORDED
↓
DATA LATERALLY TRANSFERRED TO PAYROLL COMPENSATION DATA WARE HOUSE
↓
AS AND WHEN AN EMPLOYEE PUTS UP A CLAIM FOR LOCAL CONVEYANCE – THIS DATA IS MAPPED AGAINST THE ID CARD SWIPE DATA
5. From the above, if it is found that employee was in his routine place of duty at a date and time for which Expense and Travel has been claimed, the system can reject the claim and the employee can be questioned for the reason for such claims

6. Excessive mileage issues can be tackled by getting the correct mileage from originating point to destination point from publically available data base like yahoo map or google map etc.