As business competition becomes increasingly fierce, firms should not only focus on attracting new customers, they should also use rewards to retain existing clients and get more out of them, which will also attract more clients.

The idea

Many industries are characterized by the fight not only to attract customers but also to retain their continuing support once captured. An example of using information to enhance customer bonding and improve competitiveness is customer loyalty schemes. These schemes have long been a feature of marketing programs, with a recent example being Air Miles. There has been a large growth in the number and type of firms offering loyalty programs. These range from bookstores, such as WH Smith in Britain, which has a sophisticated database of millions of customers, through to credit card companies and telephone operators such as MCI in the USA, which pioneered the friends and family discount. For MCI, this single measure, undertaken with relatively modest advertising expenditure (5 percent of the market leader, AT&T), resulted in its market share growing by 4 percent despite fierce competition.

The inventiveness of loyalty programs is constantly surprising, revealing the brand values of the companies and the threat they pose to competitors. For example, Virgin Atlantic introduced an ingenious loyalty scheme for customer bonding, to reduce the time that it takes to get new customers. Virgin offers privileges to those involved in competitors’ loyalty schemes, offering a free companion ticket to any British Airways frequent fl yer who has accumulated 10,000 miles. This has the added advantage of reinforcing perceptions of the Virgin brand as being dynamic and flexible.

In practice

  • Create customer loyalty schemes to encourage repeat business and build up a positive brand image among your client base.
  • Focus on your competitors when creating a loyalty program. What are they offering, and what can you offer that is better and more enticing for the customer?
  • Be creative with loyalty programs and other methods of customebonding. It is an area with many possibilities for innovation—take advantage of them.
  • Ask customer-facing employees how best to enhance customer loyalty.


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