Riding the waves or rocking the boat? Benefits and unintended consequences of customer growth strategies

Abstract

Suppliers can grow sales by offering expanded solutions to specific, promising customer accounts via relationship expansion proposals. Extant perspectives offer conflicting advice on which accounts to target and how to price such proposals. The authors investigate how expansion proposals can be strategically targeted and designed to enhance supplier financial outcomes. A novel conceptual framework provides direction for targeted account growth based on three relationship metrics: sales potential, prior profitability, and service level. Two studies with a major industrial supplier assess the effects of relationship expansion proposals contingent on these three metrics. A quasi-experiment in Study 1 reveals that higher sales potential and higher service provision make accounts an ideal target for expansion efforts. However, when a relationship exhibits higher past profitability, expansion proposals can backfire. Study 2 focuses on discounting expansion proposals to incentivize customer response. Results show that the depth of discounting in a proposal can negatively affect sales. The findings contribute to industrial marketing literature by (i) demonstrating positive and negative financial outcomes of customer growth strategies, (ii) showing how these outcomes depend on multiple relationship metrics in ways that align with value capture theory, and (iii) illustrating and explaining ambivalent effects of discounts in expansion proposals.