April 24, 2004–Relationships, Not Transactions Redefining Transactions – Successful companies like Starbucks, Microsoft, Amex and Netflix have a common theme when it comes to customer interaction: They strive to make their customers addicted to their products and services. These companies persuade customers to satisfy their strong urge with secure monthly deductions from a preferred credit card. These companies have changed the rules of the customer-retention game by shifting their business models from one-time, high-ticket transactions to a more predictable, steady customer revenue stream — even though this results in significantly lower dollar amounts per transaction.

The goal of the approach is to persuade customers to use company products and services as often as possible ” in the best case, daily ” and have them pay with a subscription. Similar approaches can be found across multiple industries. Relationship Vehicles – At Starbucks, customers no longer have to pay for their daily cappuccino with cash. Instead, they can pay with a Starbucks stored value card that is linked to their primary credit card. This credit card automatically reloads the Starbucks card when the balance dips under a predefined limit.

More and more customer-centric companies, including Starbucks, are leveraging customer relationship vehicles, such as loyalty, stored value, offline membership cards or online credit cards.These relationship vehicles allow companies to identify customers, and track their behavior, which leads to opportunities to establish a subscription or subscription-like relationship with the most loyal customers. Companies that secure subscription relationships with loyal customers, become less dependent on disloyal and inconsistent customers, who must be won over for each additional transaction.

By focusing on loyal customers, companies are able to understand and study the intricacies required, pioneer audio receiver, to provide ongoing value to their best customers. The subscription approach ensures companies long-term, secure, predictable and profitable customer relationships. The biggest challenge to securing subscription relationships is the difficulty understanding the key drivers and triggers that create such a strong and addictive relationship between customers and a company’s product and services.

Once a company knows why loyal customers continue to return, it can select, design and implement a relationship vehicle most likely to succeed, like Starbuck’s stored value card. Success Factors – The shift from a transaction-based to a subscription-based business model is not a marketing fad. It is a fundamental change in how companies do business and how they use traditional marketing tools to increase revenue among existing customers.Companies that have succeeded in making this transition have learned three critical lessons that determine success or failure:1.

At the heart of the transition is a deep understanding of customer behavior on a quantitative and qualitative level, along with ongoing customer behavior tracking. At Loyalty Matrix, we call this Customer Intelligence. Customer Intelligence consists of the disciplined combination of marketing strategy, analytics and technology. Only with a high degree of competence in each of these three areas can a company turn the resulting data and insights into practical marketing actions and programs. 2.

The interplay of strategy, analytics and technology (internally or externally available) and resulting data has one goal: to increase the relevance and usage of a company’s product and services. Customer Intelligence determines how companies should best market and communicate to different customer segments. Customer Intelligence also can improve how companies design and direct pricing, develop product and service strategies and create channel contact strategies. This holistic view to leverage all available marketing drivers creates relevance in a very segment-specific manner.

Well-communicated segment-specific relevance drives usage, which is the most important driver of a customer’s long-term loyalty.3. Continuous monitoring of all customer data enables companies to shift to a subscription-based model and transform themselves into a truly customer-focused organization. Most companies do not have the strategic, technological and analytical expertise to make the transition on their own. Most require a partner for this transformation. This partner must bring thorough knowledge of both customers and data management systems if they are to develop effective and insightful Customer Intelligence solutions.

LOYALTY MATRIX as Transformation CoachSince its inception, Loyalty Matrix has focused on the process of successfully connecting a company’s products and services with its customers. We support the transformation from traditional transactions to subscription-based businesses with expertise in marketing strategy, analytics and proprietary technology. About Michael Fassnacht ” President & CEO, Loyalty Matrix Michael has more than 15 years of experience leading and managing marketing, e-commerce and customer loyalty programs for global companies.

Prior to founding Loyalty Matrix, Michael served as VP of International Sales and Client Services for Netcentives, an early pioneer in customer relationships and loyalty programs. He also served as General Manager of Lufthansa’s Miles and More program, managing direct marketing, e-commerce, and loyalty activities for Europe’s largest airline. He also held key executive management positions at KoenigMetall, one of Europe’s fastest growing car supply firms; and SudwestMetall, a business think tank organization in Freiburg, Germany.

Michael holds a degree in Economics and Germanic studies from the University of Goettingen and UC Irvine.