All Customers are Equal, but Some are More Equal Should Firms Prioritize their Customers ?

Abstract

Focusing marketing efforts on the most valuable customers so as to increase company profits is not as straightforward as it seems. There is a downside to customer prioritization such as negative reaction from low priority customers. Taking this into account we still show that prioritizing customers does lead to higher profitability and more return on sales. There are two reasons for this. Firstly, it has a positive effect on the key characteristics of a firm’s relationship with its elite customers while not affecting the lower level. Secondly, it reduces sales and marketing costs. Customer prioritization is more effective and efficient than equal treatment. We also show that firms can rely on six key levers relating to a company’s organizational structure and processes, enabling proper implementation of customer prioritization.

Customer Retention Through Prioritization: Integrating Time-Dependent Context of Relationship Dynamics

“…According to marketing literature, customer prioritization refers to the extent to which a firm provides different and preferential treatment to selected customers regarding a firm's products, price, sales, communication, and processes (Homburg et al 2008(Homburg et al , 2010. A firm may treat chosen customers preferentially by offering additional services, individualized goods or services, flexibility in payment targets, or lowered prices.…”