Customer Portfolio Management: Toward a Dynamic Theory of Exchange Relationships

Abstract

Management of an entire portfolio of customers who are at different relationship stages requires a dynamic theory of exchange relationships that captures the trade-offs between scale economies and lifetime customer value. This article contributes to the understanding of relationship management by developing a typology of exchange relationship mechanisms and a model of relationship dynamics and by simulating the model to provide guidelines for customer portfolio management. An important insight from the research is that a key to the creation of value through closer relationships lies in bringing weaker relationships into a portfolio in the first place. Another insight is that firms that position themselves toward offerings with low economies of scale, such as personal services, must build closer relationships to create value.

Service innovation in product-centric firms: a multidimensional business model perspective

“…Customers do not go straight from being strangers to close partners (Johnson and Selnes, 2004), so an existing customer base, albeit only for product sales, is needed. Firms then can use this resource to shift to more advanced services gradually.…”

The Challenge of Retaining Customers Acquired with Free Trials

“…Drawing on relationship theory, we expect free-trial customers to churn sooner than regular customers. Whereas the anticipated longevity of a regular contract encourages customers to immediately commit to the firm, subscription to a free trial resembles a discrete transaction which merely increases a consumer's awareness of the firm and facilitates relationship exploration (Dwyer, Schurr, and Oh 1987;Johnson and Selnes 2004). According to self-perception theory, free-trial customers may make post-hoc inferences about the reasons for their behavior and hence attribute their adoption decision to the availability of a free trial rather than to a strong commitment to the company (e.g., Dodson, Tybout, and Sternthal 1978;Gedenk and Neslin 1999).…”

Marketing Philosophies: From Customer Abuse to Customer Intimacy, and Again a Little Customer Torment

“…To achieve this goal, trust has to emerge in the relationship. With trust, the customers conclude, while retaining all previous perceptions, that their supplying party provides them with superior value, too (Johnson & Selnes, 2004).…”

“…Owing to these keynotes, a transactional relationship can be defined as a mechanism of value creation through the synchronization of production, consumption as well as the related economic practices between customers and suppliers. In a transactional relationship, the supplier may adopt a strategy to supply a given product and implement its resources to synchronize it with the market needs in order to achieve maximum investment return and sustainable competitive advantage (Johnson & Selnes, 2004).…”