Customer Prioritization: Does it Pay off, and how Should it be Implemented?

Abstract

It seems to be common sense that to increase profits, firms should prioritize customers (i.e., focus their efforts on the most important customers). However, such a strategy might have substantial negative effects on firms' relationships with customers treated at a low priority level. Prior research does not indicate satisfactorily whether and how customer prioritization pays off. Moreover, although customer prioritization may be strongly present in firms' marketing strategies, firms frequently fail to implement such a strategy. Therefore, it is also important to investigate empirically by which means firms can facilitate implementation. The authors address both issues and conduct a cross-industry study with 310 firms from business-to-consumer and business-to-business contexts together with two independent validation samples. The results show that customer prioritization ultimately leads to higher average customer profitability and a higher return on sales because it (1) affects relationships with top-tier customers positively but does not affect relationships with bottom-tier customers and (2) reduces marketing and sales costs. Furthermore, the ability to assess customer profitability, the quality of customer information, selective organizational alignment, selective senior-level involvement, and selective elaboration of planning and control all positively moderate the link between a firm's prioritization strategy and actual customer prioritization.

Determinantes do desempenho empresarial e das vendas cruzadas no varejo

“…Orientação do vendedor para as necessidades do cliente é definida como o grau em que um vendedor identifica e atinge as necessidades e interesses do cliente nos diferentes estágios das vendas (HOMBURG, STOCK, 2004;HOMBURG, DROLL, TOTZEK, 2008;HOMBURG, WIESEKE, BORNEMANN, 2009 Lidar com o estresse criado por expectativas, exigências, demandas de clientes, reuniões, metas e pressão da chefia é uma tarefa árdua na vida do vendedor. Os vendedores buscam, cada vez mais, recursos para lidar com a pressão do mercado, da empresa, da concorrência, da chefia, entre outros, pois a cobrança tende a influenciar a autorregulação e cria efeitos dis- O direcionamento aparece no campo de vendas como uma variável de duas vertentes.…”

Enhanced customer targeting with multi-stage models: Predicting customer sales and profit in the retail industry

“…6,17 -21 Together, research that defi nes and explores detailed concepts related to profi t components has allowed us to better measure consumer profi t. Research on profi t components has also been vital, as it is a necessary fi rst step before an optimal customer prioritization method can be deployed. 22 However, for those responsible for executing customer-based marketing efforts, there is a need for more predictive targeting tools at the customer level, 17,23 (see Venkatesan and Kumar), 21 especially as marketers typically have purchase data unique to each customer. Simply put, when making customer-level decisions, assuming the same profi t rate for all customers 6,21 is likely to result in less accurate models than those with actual profi t data for each customer.…”

“…Because it delivers the ' right message to the right customer at the right time ' , CRM drives sales and profi ts. 7,14,35 Although this article on multi-stage models does not directly involve the topic of CRM, it does involve the enhancement of predictive models as a major CRM targeting tool (for discussions on the appropriateness, benefi ts and evolution of CRM, see Homburg et al , 22 Venkatesan et al 36 and Berry…”

“…Several studies challenge this view, and explore the more complex relationship between past and future customer behavior. 3,22 For example, Homburg et al analyzed data on 310 business-to-business and business-to-consumer fi rms to explore the complex determinants of customer profi t. Ostensibly, marketers assume that a customer ' s past profi t determines customer satisfaction and loyalty, which then affects his or her share of wallet with the fi rm. Share of wallet, in turn, affects sales and profi ts for the top tier of customers.…”

“…Moreover, this line of research refl ects a more complex view of the way in which customer targeting is driven by prior targeting decisions. 22 However, like research on the defi nitions of profi t, studies on the consequences of sales or profi t tell us less about which customers to target for the highest sales and profi ts. Rather, their purpose is to examine the reasons or causal mechanisms behind the relationship.…”