Customer Portfolio Research Articles

Ziskovost zákazníka a platební podmínky obchodního vztahu

Článek se zabývá možnostmi praktické aplikace tradičního modelu Customer Profitability Analysis a možnostmi jeho rozšíření o náklady kapitálu, spojené s kratším či delším intervalem úhrady pohledávek nebo s dodatečně vázanými zdroji v zásobách, které vyvolává konkrétní zákaznická potřeba. Konkrétně zkoumá těsnost závislosti mezi třemi skupinami proměnných - mezi splatností pohledávek a ziskovostí, mezi jednotkovou cenou a kategorií produktu a mezi výší obratu a průměrnou dobou splatnosti faktur jednotlivých zákazníků. V empirické části dochází k závěru, že zkoumaná společnost při jednání se zákazníkem firma zohledňuje přínos konkrétního zákazníka jak k zisku, tak i k její finanční pozici. V závěrečném celkovém zhodnocení výsledků projektu pak dochází k závěru, že, že jakkoli významný je informační přínos metody Customer Profitability Analysis, ani její výstupy nelze chápat jednoznačně např. tím způsobem, že by se firma měla zbavovat zákazníků, jejichž přínos k zisku či finanční pozici je nízký nebo dokonce záporný; i v těchto případech platí, že přínos zákazníků k rozvoji firmy je třeba posuzovat zejména v kontextu strategického rozvoje, který může být lépe patrný v navazujícím modelu Customer Life Time Value.

Analýza modelu hodnoty životního cyklu zákazníků: přehled literatury

Hodnocením finanční výkonnosti podniku se v marketingové a prodejní fázi podnikatelského cyklu zabývají především dva modely: takticky orientovaný model ziskovosti zákazníků (Customer Profitability Analysis - CPA) a strategicky orientovaný model hodnoty životního cyklu zákazníků (Customer Life Time Value - CLTV). Článek mapuje současné literární zdroje, věnované oběma marketingovým a prodejním modelům s důrazem na strategický model životního cyklu. Článek dále zkoumá přednosti a omezení různých modelů, využitelných k determinaci modelu životního cyklu, a to s hlavním zřetelem na jejich aplikaci na reálných datech. Příspěvek dochází k závěru, že existuje velké množství limitů fundamentálního modelu CLTV, které vedou k ovlivnění výpočtu CLTV zákazníka. Jejich opomenutí může vést ke špatným strategickým rozhodnutím managementu o alokaci zdrojů v rámci portfolia zákazníků.

Effectiveness of SLA Project with Spare Parts Management: The case of a telecom equipment industry

Managing a portfolio of customers of telecommunications equipment has several challenges, including the sales of the equipment itself, winning the contract for maintenance, but it is also to maintain the agreed level of service for this contract and give the customer required value to post-sale management. The primary objective of this paper is twofold: 1. Characterize the structure of the logistic cycle of spare parts for telecommunication equipment, underlining the importance of each process and the reasons, which require discipline in the control of every item in stock; 2. Verify the alignment between the decision makers concerning the choice of relevant criteria to assist the decision making on whether or not to acquire certain inventory items.

Customer engagement: Innovation in non-technical marketing processes

Economic globalization and growing competitive pressure require companies to invest more and more time and resources in innovation. Innovation may be technical in nature or linked to non-technical processes such as new approaches to channel linking, relationship building and customer portfolio management.This article takes a closer look at customer engagement as non-technical innovation linked to marketing capabilities and commercial processes. We analyzed a sample of 176 people in the Spanish mobile telecommunications sector. Our findings suggest that this new approach to client portfolio management boosts customer satisfaction and loyalty, leading to a commitment to spreading positive word-of-mouth. Such manifestations of engagement appear to significantly enhance performance for companies which foster non-transactional behaviors among their customers. Implications for management are discussed in the final section of the study.

Portfolio optimization and performance evaluation: An application to a customer portfolio

On the basis of an exclusive business-to-business database comprising 5000 customers, efficient and optimal customer portfolios are determined, and it is shown how marketing decision-makers can use this information in their marketing strategies to optimize the revenue growth of the company. The applicability of portfolio analysis is documented, and it is examined how such an optimization analysis can be used to explore the growth potential of a company. Finally, methods to measure customer performance are developed and it is shown how these performance measures complement the optimization analysis.

Customer-Centric Leadership: How to Manage Strategic Customers as Assets in B2B Markets

In this age of tough, global competition, companies in business-to-business markets need to rethink the way they manage their customer portfolio and interact with their customers. Customer managers with mainly sales-or relationship-oriented roles cannot leverage their business relationships with customers who seek co-creation. For such co-creation relationships, companies need to install network-oriented managers who systematically create value and reduce risk together with the customer. This article distinguishes three customer asset management perspectives (i.e., sales, relationship, and network) that may be employed by customer managers at the supplier-customer interface. Following an explication of the evolving network perspective, it describes how firms can nurture the network perspective and the corresponding customer manager role in terms of mindset, context, and competence.

E-Commerce in a Web 2.0 World

This paper details the usage of online communities to influence consumer price sensitivity for expensive, medium, and low cost products by formulating a research instrument, which is accomplished through an extensive literature review of price effects prevalent in the online domain. The research study further examines the impact of reference price effect, difficult comparison effect, price quality effect, and switching cost effect on consumer price sensitivity and proceeds to segment consumers into groups which demonstrate similar characteristics. Organisations benefit by identifying the strategically significant consumers in each category and target them appropriately rather than investing in a blanket promotion program. The objective is to enable organisations to identify consumers demonstrating future profit or relationship potential and devise strategies to impact price sensitivity by responding to price search intentions, improving product perceptions, improving consumer experiences, informing consumers about new schemes, and improving product perceived value. Most valuable consumers are those who depict consistent behaviour across all three product typologies. Valuable consumers identified through a customer portfolio analysis can be leveraged by hosting appropriate content in an online business community and subsequently using customers engaged through business online communities as important sources of competitive advantage. Due to these benefits, online business communities may generate more profitable sales than transactional marketing methods.

Dynamic Capacity Allocation to Customers Who Remember Past Service

We study the problem faced by a supplier deciding how to dynamically allocate limited capacity among a portfolio of customers who remember the fill rates provided to them in the past. A customer's order quantity is positively correlated with past fill rates. Customers differ from one another in their contribution margins, their sensitivities to the past, and in their demand volatilities. By analyzing and comparing policies that ignore goodwill with ones that account for it, we investigate when and how customer memory effects impact supplier profits. We develop an approximate dynamic programming policy that dynamically rationalizes the fill rates the firm provides to each customer. This policy achieves higher rewards than margin-greedy and Lagrangian policies and yields insights into how a supplier can effectively manage customer memories to its advantage. This paper was accepted by Martin Lariviere, operations management.

Managing portfolios of interconnected customers: evidence from Russian B2B market

PurposeThe purpose of this paper is to broaden the current view of customer portfolio management by including the notion of customer interconnectedness.Design/methodology/approachThe previous research in customer portfolio theory is reviewed, with special attention to customer interconnectedness. Customer interconnectedness as a criterion to build customer portfolios is studied in the example of large Russian b2b company. First, the results of participative inquiry research within the company are presented and then the insights from five in‐depth interviews are described.FindingsFindings suggest that the assumption of customer independence in a portfolio, on which most of customer portfolio models are based, may not fit certain markets and industries. This paper sheds light on to the specifics of customer portfolio building, in the Russian context and results in the customer interconnectedness assumption.Research limitations/implicationsAdditional research beyond the provided exploratory study is needed to quantitatively test the assumption and generalize the results. The main research implications relate to the new perspective on customer portfolio theory based on customer interconnectedness.Practical implicationsThe paper provides researchers and practitioners with insights into customer portfolio models specifics existing in Russia. This knowledge can be helpful, also, for foreign companies entering the Russian market.Originality/valueThe process of customer portfolio building in the Russian b2b markets has been addressed for the first time in b2b marketing research. The analysis of customer portfolio building in Russian b2b context shows that customer independence assumption is challenged and should be replaced with customer interconnectedness approach.

Antecedents and consequences of sales representatives' relationship termination competence

Purpose – Most firms have a number of unprofitable customer relationships that drain the firms' resources. However, firms in general and sales representatives in particular hesitate to address this problem and, ultimately, to terminate business relationships. This paper therefore aims to investigate the antecedents and consequences of sales representatives' relationship termination competence. Design/methodology/approach – A model of antecedents of sales representatives' relationship termination competence is developed and tested using a cross-sectional survey of more than 800 sales representatives. The impact of the constructs “termination acceptance”, “definition of non-customer”, “termination routines” and “termination incentives” on termination competence are analyzed using PLS. Findings – A sales representative's termination competence is positively influenced by greater clarity and wider dissemination of the definition of a “non-customer”, higher prevalence of termination routines, and increasing degrees of termination incentives. Acceptance of relationship termination at the firm level does not appear to have a significant impact on sales representatives' relationship termination competence. In addition, termination competence significantly affects the value of customer portfolios. Practical implications – The findings suggest that managers should more actively consider relationship termination as a legitimate option in customer relationship management. In order to increase the value of a firm's customer portfolio, managers must not only provide a clear definition of the types of customers the organization does not want to serve, but must also implement termination routines within the organization. Managers also need to establish incentives for sales representatives to terminate relationships with unprofitable customers. Originality/value – This paper contributes to the currently scarce research on relationship termination by documenting results from a large-scale analysis of relationship termination.

Relationship Characteristics and Cash Flow Variability

Service firms seek customers with high revenues, profits, or lifetime value. However, they frequently ignore variations in consumption that lead to cash flow variability and adversely influence service operations and financial performance. This study shows that variation in individual customers' consumption or spending on services can be decreased in ways that are actionable by most managers, without decreasing revenues or profits. First, customer satisfaction has a ``double-whammy'' effect: lower cash flow variability and higher cash flow levels. This finding is important because firms can increase satisfaction in many ways. Second, customers who participate in loyalty programs have more variable cash flows, but not higher average cash flows. Hence, firms should design loyalty programs to improve customer satisfaction or intangible benefits (e.g., membership recognition), rather than offering economic incentives. Third, customers who purchase many different offerings, or allocate a large share of their purchases to the firm, have higher cash flow variability and higher average cash flows. Firms can optimize the customer portfolio by combining customers with high variability with customers who have different, offsetting cash flow patterns. Fourth, personal characteristics, such as age and income, also influence cash flow variability. Empirical findings are robust across two settings: telecommunications and financial services. The study describes sensitivity analyses of how different service and relationship marketing strategies influence a firm's business outcomes. The article concludes with insights into how to integrate service management principles, which emphasize consistency or low variability in processes, with customer relationship management principles that emphasize growing relationships and cash flows.

Is Proprietary Trading Detrimental to Retail Investors?

We study a conflict of interest faced by universal banks that conduct proprietary trading alongside their retail banking services. Our dataset contains the stock holdings of each and every German bank and of their corresponding retail clients. We investigate (i) whether banks deliberately push stocks from their proprietary portfolios into their retail customer portfolios, (ii) whether those stocks subsequently underperform, and (iii) whether retail customers of banks with proprietary trading earn lower long-term portfolio returns than their peers. We present affirmative evidence on all three questions and conclude that proprietary trading can, in fact, be very detrimental to retail investors.

Evaluating the Effect of Affinity Card Programs on Customer Profitability Using Propensity Score Matching

Affinity card programs have become popular in recent times and account for one fifth of all credit card accounts. There is no research that links affinity card programs to customer profitability. Moreover, little is known about what type of affinity card programs would lead to higher profit. Using a large proprietary dataset we answer the above questions. We also apply propensity score matching, a relatively new technique, to control for selection bias in addressing the above issues. Contrary to previous research and common belief, we show that affinity card customers are no more profitable than non-affinity card holders. We also show that sports-based affinity programs are the least profitable and surprisingly, alumni-based affinity programs also do poorly relative to other types of affinity. On the positive side, affinity card customers are lower risk and help to lower the average risk of the portfolio of customers.

Becoming a preferred customer one step at a time

A preferred customer is a buying organization who receives better treatment than other customers from a supplier, in terms of product quality and availability, support in the sourcing process, delivery or/and prices. The decision to become a preferred customer implies a continuous commitment by the purchaser to a complex, expensive and often uncertain process. It is important to use a strategic approach, as well as appropriate tactics. Based on well-known models on the development of buyer-supplier relationship, on customer portfolio analysis and on the emergent literature in customer attractiveness and preferred customer status, we suggest four steps to become – and remain – a preferred customer: initial attraction, performance, engagement and sustainability. The process takes the perspective of a buyer willing to obtain the preferential status and focuses on the strategies and tactics that could influence the supplier's decision of granting this status. The proposed process considers that the supplier is continuously comparing the value offered by the customer to its expectations, and to the value offered by other customer relationships.

The Nature of Customer Portfolios: Towards New Understanding of Firms' Exchange Contexts

Purpose: Customer portfolios represent one of the central contexts for business marketing and thereby an important focus for industrial marketing research. In this article, the authors used the concept of customer portfolio to create new insights into the relational context of exchange where companies operate and manage their business. The study examines the general nature of firms' total customer portfolios in contrast to analytical portfolio studies that focus on value-segmentation of the firm's customer base. The authors contribute to the existing, largely conceptual knowledge on the topic by identifying key dimensions that systematically characterize firms' customer portfolios and building an empirical classification of portfolios. Methodology: The study is based on a nationwide cross-industry survey. The authors use cluster analysis to create the classification and discriminant analysis to investigate the importance of the portfolio dimensions for the identified clusters. Findings: The results show that firms' customer portfolios vary markedly, both in terms of structural and relational complexity. The differences denote a clear emphasis on either focused partnership, dynamic-networked, or broad market-like portfolios, posing significantly different drivers and challenges for customer relationship management. The identified dimensions, their measures, and the empirical classification offer important implications for business marketing research and practice.

Is diversification a Strategic Advantage? The Example of Automotive Components in the Czech Republic

The automotive industry is a key sector of the Czech national economy. Its share of GDP represents more than 8% and the Czech Republic is the 14th biggest producer of personal cars in the world. The goal of this article is to analyze the development of the customer portfolio of automotive suppliers in the Czech Republic from the perspective of their international location. The diversification of the portfolio can be measured in many ways. The approach in this article relies both on the usual statistical tools (concentration ratio, Lorenz curve, Gini coefficient, Herfindahl-Hirschman index) and on specific approaches such as the number of partners, geographical diversification and average distance travelled by exported component. Even though the export volume has been dynamically growing, it has remained focused on a limited number of crucial countries, which are mostly located in the close neighborhood of the Czech Republic.

Customer portfolio composition and customer equity feedback effects: Student diversity and acquisition in educational communities

Researchers in marketing have long recognized that current populations of customers can influence the behavior of prospective customers. This paper draws on existing marketing theories to empirically examine how changes in student body demographic segments influence future demand for MBA programs. Using a longi- tudinal analysis of data spanning 18 years, we find that higher proportion of female students leads to significant increases in future applications. This implies a marketing rationale for business schools in encouraging gender diversity. In contrast, we find evidence of prejudice towards minority and international students among business school applicants. We discuss the results of the analysis in the context of the current affirmative action debate and changes in demographic trends.

Customer portfolio analysis: Crisp classification versus fuzzy classification – Based on the supermarket industry

Acknowledging that traditional matrix-form customer portfolio models that result in crisp clusters are clouded with ambiguity, we propose the use of fuzzy clustering in customer portfolio analysis. This has been done in order to assist managers in better understanding their overall customer portfolio and reducing the effect of descriptive indicators. Our approach is tested on a supermarket data set of 3076 customers and its results are compared with a conventional customer portfolio matrix. A qualitative and quantitative assessment of the categorization generated both by our fuzzy clustering approach and the conventional matrix-based crisp clustering has been carried out along the following parameters: substantiality and balance of portfolio. The results show that the use of fuzzy clustering yields more substantial clusters, as well as a more balanced portfolio of customers. Although a particular portfolio matrix has been chosen for this research, the approach proposed here could be modified for use with other portfolio matrices.

Does Loyalty Make Customers Blind? The Impact of Relationship Quality on Channel Members' Attributions and Behaviors Following Negative Critical Incidents

Purpose: Although the consequences of attributions triggered by negative critical incidents (NCI) are well documented, determinants of the attribution process itself received considerably less attention. The purpose of this article is to yield further insights regarding attribution processes by investigating the potential buffering effect of relationship quality on the attributions made by channel members following NCI and on their subsequent behaviors. Methodology/Approach: Data used to assess the proposed model was collected from 171 independent retailers and analyzed through PLS path modeling procedures. Findings: Results demonstrate that relationship quality bias channel members' appraisals following NCI by motivating attributions, and ultimately behaviors, which promote relationship preservation. Research Implications: Results confirm the validity of the reverse attributional hypothesis holding that the quality of a relationship shape the attributions made by its participants following NCI in a way that is beneficial to relationship preservation. Practical Implications: The present study advocates that suppliers should nurture relationship quality, categorize their customer portfolio based on the nature of exchange relationships, and implement strategies aiming at influencing attribution processes. Originality/Value/Contribution: This article fills a gap in the marketing literature by investigating not only the consequences but also the antecedents of attributions made by channel members following NCI. Its main contribution lies in the examination and validation of a buffering effect of relationship quality on channel members' attributions regarding NCI.

Understanding the Influence of Cues from Other Customers in the Service Experience: A Scale Development and Validation

During most consumer exchanges, particularly in service and retailing settings, customers are “in the factory” and, as a result, the presence of other customers can have a profound impact on customer experiences. Despite studies demonstrating the importance of managing the customer experience and customer portfolios, the marketing literature lacks a comprehensive scale that can be used to assess individuals’ perceptions of other customers during commercial transactions. This study conceptualizes a three-dimension, Other Customer Perception (OCP) scale to address this gap. Using a seven-step scale development process, the multi-dimensional conceptualization is supported and validated and the research demonstrates the impact of the OCP dimensions on consumers’ approach and avoidance intentions. The findings provide a clearer understanding of how other customers can indirectly influence assessments of a customer exchange and can assist in the measurement of other customer perceptions in future research efforts.