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.

Start your day with The Independent, sign up for daily news emails
Sport
The Queen and the letter sent to Charlie
football
Arts and Entertainment
Eurovision Song Contest 2015
EurovisionGoogle marks the 2015 show
News
Two lesbians hold hands at a gay pride parade.
peopleIrish journalist shares moving story on day of referendum
Arts and Entertainment
<p>
<b>Kathryn Williams</b>
</p>
<p>
When I was supporting Ray La Montagne I was six months pregnant. He had been touring for a year and he was exhausted and full of the cold. I was feeling motherly, so I would leave presents for him and his band: Tunnock's Tea Cakes, cold remedies and proper tea. Ray seemed painfully shy. He hardly spoke, hardly looked at you in the face. I felt like a dick speaking to him, but said "hi" every day. </p>
<p>
He was being courted by the same record company who had signed me and subsequently let me go, and I wanted him to know that there were people around who didn't want anything from him. At the Shepherds Bush Empire in London, on the last night of the tour, Ray stopped in his set to thank me for doing the support. He said I was a really good songwriter and people should buy my stuff. I was taken aback and felt emotionally overwhelmed. Later that year, just before I had my boy Louis, I was l asleep in bed with Radio 4 on when Louis moved around in my belly and woke me up. Ray was doing a session on the World Service. </p>
<p>
I really believe that Louis recognised the music from the tour, and when I gave birth to him at home I played Ray's record as something that he would recognise to come into the world with. </p>
booksKathryn Williams explores the works and influences of Sylvia Plath
News
Liz Kendall played a key role in the introduction of the smoking ban
newsLiz Kendall: profile
Life and Style
techPatent specifies 'anthropomorphic device' to control media devices
Voices
The PM proposed 'commonsense restrictions' on migrant benefits
voicesAndrew Grice: Prime Minister can talk 'one nation Conservatism' but putting it into action will be tougher
News
ebookA unique anthology of reporting and analysis of a crucial period of history
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

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine
Letterman's final Late Show: Laughter, but no tears, as David takes his bow after 33 years

Laughter, but no tears, as Letterman takes his bow after 33 years

Veteran talkshow host steps down to plaudits from four presidents
Ivor Novello Awards 2015: Hozier wins with anti-Catholic song 'Take Me To Church' as John Whittingdale leads praise for Black Sabbath

Hozier's 'blasphemous' song takes Novello award

Singer joins Ed Sheeran and Clean Bandit in celebration of the best in British and Irish music
Tequila gold rush: The spirit has gone from a cheap shot to a multi-billion pound product

Join the tequila gold rush

The spirit has gone from a cheap shot to a multi-billion pound product
12 best statement wallpapers

12 best statement wallpapers

Make an impact and transform a room with a conversation-starting pattern
Paul Scholes column: Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?

Paul Scholes column

Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?