The Use of Customer Portfolio Theory

Abstract

The development of a customer portfolio is a logical process for the development of a business. Conceptual work, using a range of independent variables, has been undertaken in the past decade but few (if any) results of its application have been documented. Shows how a fabric supplier has developed a system for customer portfolio construction based on current profitability and the nature of the current relationships between itself and garment manufacturers. Details the costs, together with more qualitative variables, used in the system. Provides suggestions for future resource allocation.

Classifying relationships across cultures as successful and problematic: Theoretical perspectives and managerial implications

“…The inclusion or omission of certain variables has lead to criticism. Zolkiewski and Turnbull (2002) and also Yorke and Droussiotis (1994) have criticized models for not including an explicit measure of customer profitability. Yorke and Droussiotis (1994) specifically criticized Fiocca (1982) for assuming that each relationship category is associated with a different level of profitability.…”

“…Zolkiewski and Turnbull (2002) and also Yorke and Droussiotis (1994) have criticized models for not including an explicit measure of customer profitability. Yorke and Droussiotis (1994) specifically criticized Fiocca (1982) for assuming that each relationship category is associated with a different level of profitability. Turnbull and Zolkiewski (1997) found that customers were often not as profitable as managers perceived, whilst Shapiro et al (1987) found that managers did not know the real cost involved in serving individual customers, which obviously affected their perception of profitability.…”

Outward-looking and future-oriented customer value potential management: The sales force value appropriation role

“…The models are particularly appropriate to the B-to-B context, where firms have a more limited number of complex and unique customer relationships (see Möller & Halinen, 1999Terho & Halinen, 2012). While the portfolio models are future-oriented, they however mostly address the question of a customer's value potential in parenthesis, largely by employing firm-internal indicators that reflect historical trends, such as customer sales (Canning, 1982;Hartley, 1976;Yorke & Droussiotis, 1994), customer size (LaForge & Cravens, 1982), or customer growth rate (Dubinsky & Ingram, 1984;Fiocca, 1982). Further, while the portfolio models fit the characteristics of B-to-B markets, they pay only scant explicit attention to customer value potential or its management from an operative perspective (see Ritter & Andersen, 2014).…”

Valuing customer relationships: Using the capital asset pricing model (CAPM) to incorporate relationship risk

“…The potential contribution of financial portfolio theory to both marketing planning and relationship management has been recognised [8][9][10][11][12] but remains largely under-developed. A particular concern of financial portfolio theory is risk and this underlies its promise in the arena of relationship planning since risk is largely ignored in extant calculations of relationship value.…”