Magazine article Management Today

Shareholder and Customer Loyalty Go Hand-in-Hand

Magazine article Management Today

Shareholder and Customer Loyalty Go Hand-in-Hand

Article excerpt

A public company's private shareholders are not merely investors, not merely part owners. They are also householders, motorists, passengers, parents, patients, consumers. In short, they constitute a market, one with which the company has a standing relationship and to which it has an existing channel of communication. It's a market that few businesses bother to cultivate, however. So are the majority missing out?

It has to be assumed, of course, that the company operates in the consumer arena. A manufacturing company which deals only with fellow industrials has nothing to offer its shareholders -- beyond dividends and capital growth -- so nothing to gain from them. But a business that already provides goods or services to the public at large should not neglect its share register, asserts Justin Urquhart Stewart, development director at Barclays Stockbrokers. 'Faced with a competitive market place, companies are always looking for points of differentiation,' he argues. 'Proactive methods to encourage [shareholders] to buy their products can be extremely effective.' Above all, they can help to cement shareholder loyalty and customer loyalty so that the two become mutually reinforcing.

'A lot of private shareholders do like to be involved,' points out one of the City's top PR advisers. 'That's why people like retail stocks. It makes them think "It's our company".' And the more involved they feel, the more goods they will buy and the more likely they will be to retain their shares. 'Why not encourage customers to be shareholders, and shareholders to be customers?' agrees Tony Carlisle, chairman of Dewe Rogerson, another of the best known City agencies. 'Shareholder incentives can make a lot of sense, as long as the cost doesn't get disproportionate.'

In terms of cost, many of the existing shareholder incentive schemes are modest indeed. Kwik-Fit Holdings, the tyres and exhausts specialist, sends out vouchers (two per year, along with the annual report and interim statement) entitling shareholders to a 10% discount on expenditures over [pound]5. 'It's merely a token to encourage their custom and loyalty,' says company secretary Robert Huthersall. Last year almost 2,000 of Kwik-Fit's 8,500 shareholders availed themselves of the offer. Sketchley allows 25% off cleaning bills to holders of 1,000 shares. …

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