One strategy is almost any industry is to provide really superior customer service. There’s almost always some segment of the available market that isn’t terribly price-sensitive and values excellent service. This strategy doesn’t need to preclude other, low-cost strategies, although the two thrusts should probably be differently branded. The beauty of a high customer service strategy is that you get very loyal customers, and usually very good customers (they pay on time, etc.)
AMEX has taken this approach with their business cards. My wife and I are involved in two non-profits; we had AMEX cards for the professionals in the first, and were delighted with them as a provider. When the second started we thought it prudent to have another vendor for it (that way, if we got cross-ways with AMEX both non-profits wouldn’t be affected). We chose one of the MasterCard providers for the second one, and got a rude surprise when I was on the road for the non-profit one day. My card had been shut off! Hours later, talking to a couple not-very-nice people (strike 1) on the 800 line, we discovered that the non-profit had failed to pay it’s last bill on time, and–and this is what really rubbed salt into the wound–it owed something ridiculous like $30 (strike 2). Turns out that the bill got lost in the mail and the book keeper never noticed that it hadn’t arrived (she does have more important things to do). MasterCard never called to ask where the payment was or if there was a problem (strike 3). Remember – this is a business card, one that the professionals in the business and the business itself needs up and running in order to function.
AMEX is completely different. They notice things like missed payments, unusual uses, etc., and when you call to arrange…well, almost anything, the person that answered your call is the person empowered to make it happen…and they always have.
As a result, they have some very loyal customers in now two organizations, and we recommend them to other businesses every chance we get. And I do believe that they make a profit on us. Who’d have guessed?