Own Stock? Buy Products!

SAN FRANCISCO (03/03/2000) - If you owned a particular stock, would you be more likely to buy the company's products? A new report says yes.

"Investomers," or people who both hold stock in a particular company and buy products from that company, are generally more loyal and more profitable than their nonequity-owning counterparts, according to a new report by consultants Bain & Company and Web-based direct investment firm StockPower.

Fully 83 percent of investomers said their purchasing decisions are affected by the stock they own. The Bain & Company study found that this impact makes stock-owning customers twice as valuable to a company than other customers. On average, investomers frequent businesses 1.7 times more often than the typical shopper and spend 1.5 times as much money. Moreover, they remain customers 1.1 times longer and generate 2.1 times the number of business referrals.

Bain & Company researchers surveyed 1,212 participants, of whom 641 were investomers, across nine businesses in distinct consumer sectors. The report measured the value of a customer based on profitability, frequency of customer patronage, wallet share, and tendency to recruit new customers. Three of the companies surveyed were unnamed Web firms: an online bookseller, an Internet portal and an Internet service provider.

The ISP's investomers were the biggest proponents of their firm's business.

These investomers logged more than three times as many new customer referrals compared with the ISP's customers who did not own company stock. Online bookseller and portal investomers generated strong referrals as well, some 1.9 times and 1.6 times the general consumer, respectively.

Consumers with company stock spent more than twice as much money as general shoppers at the online bookseller, the highest ratio of the nine firms. These customers also devoted 1.4 times as much of their wallet share of book purchases to the company. Moreover, the online bookseller's investomers represented the most valuable consumers overall, ranking 4.5 times more valuable than general book buyers.

Although researchers did not attempt to quantify what portion of these firms' customer bases investomers account for, the study seems to show that marketing to one's shareholders might pay off.

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