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CURRENT ACCOUNT: Loyalty cards are on the loose, but a better way of winning over customers is to turn them into shareholders

HOW many cards can you get in your wallet or purse? Yet another supermarket - Safeway - is issuing a customer loyalty card. Doesn't it realise the damage that these cards do to a wallet? But apart from that, these cards seem to me to be a rather unimaginative way for retailers to defend their turf. Here is another way.

About 20 per cent of us now own shares in companies. Nearly 100 per cent of us purchase goods as consumers. Why is so little made of the natural loyalty of shareholders as customers?

In these days of cut-throat competition, retailers particularly are trying to entice us to buy their goods, and quite rightly consumers are starting to benefit from the odd gift and discount. But with these loyalty cards they are going that one step further. There is a sinister term now being used, of "locking in" customers. Not with padlocks and chains, of course. What they are trying to do is discourage us from going to competitors at all.

This strikes me as becoming inevitably rather defensive as all the shops will end up issuing such cards. Perhaps I can then ask for a discount if I do not have a card.

If instead you want to find consumers who have already stated both their loyalty and interest in the company then look no further than its small shareholders. In marketing terms this would be described as an "affinity group", the stuff of a marketing manager's dreams.

Affinity groups consist of parties already predisposed to what you are doing who are, therefore, probably potential customers.

Shareholders are in a league apart in this respect. They have already demonstrated their loyalty by putting up capital for this business. They should be pretty soft sells. So why do many companies ignore them? Traditionally small shareholders have been seen by many companies as a burden. You have to pay them dividends each year and provide them with an expensive annual report, and then they have the cheek to ask tiresome questions at annual meetings. Even then it does not end, as you then have to pay the registrars to keep them on the company register.

There is another jargon word nowadays: "stakeholders", people with any connection to, and therefore an interest in, the business, whether customers, employees or suppliers. Turning these groups into shareholders should also create valuable allies.

In the past some companies have introduced perks for small shareholders, varying from free tea and biscuits at the annual meeting to discount vouchers. But they are rarely seen as a marketing method to encourage custom. (Exceptions include P&O, which gives discounts on its ferries and British Airways, both in fiercely competitive markets.) The idea makes sense for retailers but is also applicable to other companies. Business customers as well as employees and suppliers could all be made that much more "loyal" if they had shareholding stakes.

q Justin Urquhart Stewart is business planning director at Barclays Stockbrokers.

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