Capital One Financial case study
- A customer loyalty strategy is one that is used to cater to those clients that are deemed most loyal. For instance, most banking institutions in the 1980’s did not have the technology or the resources available to them to determine which of their customers were most profitable, and hence tried utilizing tactics such as the decrease of overall prices to retain and maintain as much of their customer base as possible. This, is turn, is thought to keep the company profitable. A customer profitability strategy, in contrast, lends itself to a much more targeted approach- it is used identify and acquire customers that are most profitable. The retention of such customers also is thought to increase company profits. The latter, as proven by Capital One, appears to be a much more effective strategy.
- The customer profitability gradient can be described as the differential in the profitability of customers- and is essential to profitability-based strategies. Different customers produce different profits- this knowledge is used to effectively formulate strategies that are utilized to target different customers for different products and services based on their profitability- hence the term “profitability-based strategy”.