Figure 2. Share of customer example
is probably outside of the realm of marketing and more fundamentally tied
to your product and its value proposition.
Is the opportunity with customers you have a great deal of business with –
85 percent to 90 percent of the customer’s business in your category? Once
again, I do not think so. How much more can you get? The challenge with
this kind of customer is retention.
The best opportunity for
The opportunity for growing share of customer is in the middle. Customers
from whom you get 20 percent to 80 percent share represent the best
opportunity for growth. These customers already have some affinity for your
brand. You know they find your product and its value proposition reasonable.
The effort required to boost share of customer in the middle is considerably
less than at the low end and high end of the share-of-customer scale.
Table I shows a summary of the ranges of customer share and the strategic
implications on your marketing efforts:
Background on loyalty programs
It started in the airline business. Congress passed the Airline Deregulation
Act of 1978, phasing out federal control of domestic air service and marking
the beginning of the era in which market forces determine fares and levels of
service (GAO Report, 1996).
Airlines struggled for a point of differentiation. In many cases fares,
selection and service were, for the most part, equal. In 1981, American
Airlines introduced its frequent flyer program – AAdvantage, offering free
travel in exchange for some level of loyalty. United Airlines followed
shortly afterward with its Mileage Plus program and soon every company in
the travel industry created or participated in one or more loyalty programs.
Share of customer
Under 20 percent
20 percent to 80 percent
Over 80 percent
Product, value proposition
Acquisition, branding efforts
Share of customer building
Opportunity for growth
Opportunity cost of defection
Table I. Share of customer implications
JOURNAL OF CONSUMER MARKETING, VOL. 15 NO. 5 1998