I saw this article recently in the Wall Street Journal. The topic is customer loyalty and building solid customer relationships.

My firm, Paradox Advisors, recently completed a strategy project for a leading global brand on how to cement strong relationships, across multiple products, with their customer base.

Even though the our client's brand is extremely strong, and customers actively seek out their products as part of their lifestyle, there remains significant upside growth potential.

Check out what Capital One is up to. It is similar to the ideas gleaned from the customer research we conducted...

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(I've edited and shortened the original story from the WSJ)

In a novel move to lure bank deposits, Capital One Financial Corp. is introducing a money-market account...that offers rewards points based on customers' average monthly balances.

The Rewards Money Market account -- which the company says is among the first to offer miles based on balances held in savings accounts -- offers an annual yield of 4.65% and hands out one mile for every $20 of average monthly balance, including interest. Miles can be redeemed for airline miles, cash or merchandise. In exchange, customers earn a slightly lower rate than Capital One's standard High Yield Money Market account, which pays 5%.

While many financial institutions have built rewards programs around their credit and debit cards, some banks are looking at ways to build loyalty around their deposit accounts. Citigroup Inc.'s Citibank and National City Corp., for example, have introduced rewards programs in recent years that allow customers to accumulate points based on the number of accounts and services they sign up for and their transaction levels.

Traditionally, most banks have competed for customers' deposits by offering teaser interest rates or cash rewards. Now, some banks are looking at rewards programs to lure more of their customers' business. In July, Citibank expanded its ThankYou Network program to include clients of its Smith Barney business who use cards linked to their brokerage accounts. National City also recently expanded its rewards program to include mortgages and auto loans; customers can also earn points for automatic transfers into a savings account.

For banks, the programs are a way to develop "stickiness" and make it harder for customers to switch to a rival bank. Banks may also be using rewards to get customers to carry larger balances. "If your balance is maintained at higher levels, they're less likely to lose you as a customer," says Kelly Hlavinka, director of Colloquy, a loyalty-marketing firm in Milford, Ohio.

Lesson from this story: Give your customers a reason to do more business with you!

Robert Rudy      Paradox Advisors
 
Strategy, Operations Improvement and Technology Consulting