To keep a customer in line, simply use a club

The Business World

IT IS club time in the business world. A few days ago a couple of bottles of wine were delivered to the door. I hadn't ordered them, nor were they some PR exercise because I was a journalist. No, they came with the compliments of a club in which I happen to be an ordinary member as recognition of my supposed loyalty to it. But this was not a club in the normal sense of the word - it was the British Airways Executive Club, hardly an exclusive preserve to judge by the hordes passing through BA's lounges.

But the wine illustrates a point. Companies want to become clubs, or at least to persuade their customers they are not just purchasers of services but involved in some kind of relationship. There are clubs that want to become companies, or rather in the case of the RAC, are prepared to be taken over by them - assuming that the sale to Lex Service Group agreed last week goes through.

What's up? What's wrong with the old-style relationships? If you were a member of a club you did so because you had some form of common interest with the other members. You did not think of yourself as a customer of the club, though you might buy some services from it. If you were a customer of a commercial company you had a purely commercial relationship. You paid for what you wanted, and you did not think of yourself as having some kind of common bond with other purchasers. All I have in common with other members of the BA Executive Club is that we have jobs that require us to spend a lot of time sitting on BA seats.

What has changed is information, or rather the importance of it. Almost every business in the world is trying to find ways of stopping itself being a seller of a commoditised product: if you are selling only on price there is room for only a tiny number of large-scale, very-low-cost producers. If you are one that is fine, but for the majority it is misery. Somehow you have to find a way of preserving margins.

The traditional way of so doing was either to brand or to innovate: to nurture to command a premium or to develop niche products or differentiated ones. But there are limits. If you have a strong brand it's great, but if you don't you are in peril. In any case people have become resistant to excessive product development, aka product churning.

So if you can't differentiate your product, you differentiate your customer. You turn him or her into a member of a club. Exploiting membership by cross-selling requires information but club members seem more willing to provide that information than regular customers - even if the "club" is only your local supermarket.

Don't laugh. Tesco has managed, by creating its pseudo-club, not only to build a successful retail bank but also to run the magazine with the largest circulation in the country, 10 million. It works.

As for established clubs, their members are assets. The RAC is remarkable in that it also happens to have enormous business assets too. But that business would not have been able to grow to its present size without the membership base on which it could build itself. So where might this convergence lead? There seem to me to be several possible lines of development, as information technology and telecommunications improve. Here are five ideas.

First, it becomes possible to run virtual clubs of like-minded people around the globe. Physical and national barriers have become irrelevant.

Second, it becomes possible to slash communications costs. Up to now the cost of communicating with club members has limited the amount of interaction that can take place between the centre and the periphery, while it has been virtually impossible for members to share thoughts with other members. Now Internet-related technology exists that can bind together existing clubs and drop the entry costs for those who wish to create new clubs.

Third, people seeking to create new businesses may start by creating new clubs. Once you have identified the common interest or need and then assembled the potential members, you may find you have created a business without knowing it.

Fourth, all businesses will seek to create some element of the club with their customers in the sense that they will seek to have a continuing relationship with them. When you had to mail your customers, keeping a database of them was expensive and the costs of running after-sales service was prohibitive. Now it has become virtually free. And it is much easier to sell a new product to a previously satisfied customer than to go out and persuade a new one to buy.

Fifth, one important effect of this last point will be to speed up the shift of manufacturing into services, in the sense that manufacturers will move from selling products to selling services. They will still start by selling the customer the product, or maybe leasing it, but that will increasingly be merely the start of what the vendor hopes will be a continuing relationship. The customers and the products will be tracked, as though they were members of the manufacturer's or retailer's club. They will be given new product updates, continuing advice on the use of the product, details of similar products or services which might interest the buyer and so on.

The common theme here is that business is trying to move from dealing with customers on a transaction basis to dealing with them on a relationship basis. The question this raises is whether we, the customers, want this change. Do we really want to become members of what is presented as a company club, but is actually just another way to increase margins?

The answer to that will depend on whether the club provides a real service that people actually want. I don't particularly want a relationship either with British Airways or with my fellow Executive Club members. But it is a sight more useful to be able to drop into club rooms at airports all around the world when you are caught between flights than it is to trek over to one of the traditional clubs in Pall Mall for an indifferent lunch when you could have eaten better at a local restaurant.

News
Kenny Ireland, pictured in 2010.
peopleActor, from House of Cards and Benidorm, was 68
News
A scene from the video shows students mock rioting
newsSchool leaver's pic YouTube video features staging of a playground gun massacre
Travel
travel
Voices
A family sit and enjoy a quiet train journey
voicesForcing us to overhear dull phone conversations is an offensive act, says Simon Kelner
PROMOTED VIDEO
Arts and Entertainment
The cast of The Big Bang Theory in a still from the show
tvBig Bang Theory filming delayed by contract dispute over actors' pay
Sport
England celebrate a wicket for Moeen Ali
sportMoeen Ali stars with five wickets as Cook's men level India series
News
Morrissey pictured in 2013
people
Life and Style
The director of Wall-E Andrew Stanton with Angus MacLane's Lego model
gadgetsDesign made in Pixar animator’s spare time could get retail release
News
peopleGuitarist, who played with Aerosmith, Lou Reed and Alice Cooper among others, was 71
Travel
travel
News
Robyn Lawley
people
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
people
News
i100  ... he was into holy war way before it was on trend
Arts and Entertainment
High-flyer: Chris Pratt in 'Guardians of the Galaxy'
filmThe film is surprisingly witty, but could do with taking itself more seriously, says Geoffrey Macnab
News
people
Life and Style
food + drinkVegetarians enjoy food as much as anyone else, writes Susan Elkin
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

1st Line Support Technician / Application Support

£20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...

Team Secretary - (Client Development/Sales Team) - Wimbledon

£28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...

Accountant / Assistant Management Accountant

Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...

Senior Investment Accounting Change Manager

£600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...

Day In a Page

Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

The day America’s love of backyard tigers led to a horrific bloodbath

With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

How Samuel Beckett became a French Resistance spy

As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
We will remember them: relatives still honour those who fought in the Great War

We will remember them

Relatives still honour those who fought in the Great War
Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

Kodak's last-ditch bid to keep celluloid alive

Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

Acting in video games gets a makeover

David Crookes meets two of the genre's most popular voices
Could our smartphones soon be diagnosing diseases via Health Kit and Google Fit?

Could smartphones soon be diagnosing diseases?

Health Kit and Google Fit have been described as "the beginning of a health revolution"
Ryanair has turned on the 'charm offensive' but can we learn to love the cut-price carrier again?

Can we learn to love Ryanair again?

Four recent travellers give their verdicts on the carrier's improved customer service
Billionaire founder of Spanx launches range of jeans that offers

Spanx launches range of jeans

The jeans come in two styles, multiple cuts and three washes and will go on sale in the UK in October
10 best over-ear headphones

Aural pleasure: 10 best over-ear headphones

Listen to your favourite tracks with this selection, offering everything from lambskin earmuffs to stainless steel
Commonwealth Games 2014: David Millar ready to serve up gold for his beloved Scotland in the end

Commonwealth Games

David Millar ready to serve up gold for his beloved Scotland in the end
UCI Mountain Bike World Cup 2014: Downhill all the way to the top for the Atherton siblings

UCI Mountain Bike World Cup

Downhill all the way to the top for the Atherton siblings
Save the tiger: The animals bred for bones on China’s tiger farms

The animals bred for bones on China’s tiger farms

The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

A former custard factory, a Midlands bog and a Leeds cemetery

Introducing the top 50 hidden spots in Britain
Ebola epidemic: Plagued by fear

Ebola epidemic: Plagued by fear

How a disease that has claimed fewer than 2,000 victims in its history has earned a place in the darkest corner of the public's imagination
Chris Pratt: From 'Parks and Recreation' to 'Guardians of the Galaxy'

From 'Parks and Recreation' to 'Guardians of the Galaxy'

He was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star