Customer Profitability in a Supply Chain

Niraj, Rakesh; Gupta, Mahendra; Narasimhan, Chakravarthi

doi:10.1509/jmkg.65.3.1.18332

Cited by 235 publications

(165 citation statements)

References 6 publications

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“…Research on activity-based costing (ABC) has sought to remedy this shortcoming. Based on the principles of ABC, customer profitability analysis treats the customer as the object of cost analysis and allocates costs incurred below and above the gross margin line to each individual customer (Niraj, Gupta, and Narasimhan 2001).…”

Section: Conclusion and Future Research Opportunitiesmentioning

confidence: 99%

Customer-Base Concentration: Implications for Firm Performance and Capital Markets

Patatoukas

2011

The Accounting Review

472

407

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In this paper, I examine whether and how customer-base concentration affects supplier firm performance and stock market valuation. To this end, I compile a comprehensive sample of supply chain relationships and introduce a measure, labeled CC, to capture the extent to which a supplier"s customer base is concentrated. In contrast to the conventional view of customer-base concentration as an impediment to firm profitability, I document a positive contemporaneous association between CC and accounting rates of return, which suggests that efficiencies accrue to suppliers with concentrated customer bases. Consistent with a cause-and-effect link between customer-base concentration and firm performance, analysis of intertemporal changes demonstrates that CC increases predict efficiency gains in the form of reduced operating expenses per dollar of sales and enhanced asset utilization. Using stock returns tests, however, Ifind that investors systematically underreact to the implications of changes in customer-base concentration for future firm fundamentals when setting stock prices. Over the thirty-year sample period studied, a zero-investment trading strategy that exploits investors" underreaction yields abnormal returns in the region of 10 percent per year.

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Section: Conclusion and Future Research Opportunitiesmentioning

confidence: 99%

Customer-Base Concentration: Implications for Firm Performance and Capital Markets

Patatoukas

2011

The Accounting Review

472

407

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“…Since not all customers are equal in terms of maintenance value and establishment of a long-term relation; and considering the fact that maintaining customers is costly, efforts or maintaining invaluable customers and or customers who do not intend to turnover, leads to waste of funds. This fact usually holds regarding the relationship between organizations and customers that a large percentage of organization's revenues yield from a small percentage of customers [16]. In addition, a significant part of customers' base is not profitable.…”

Section: Issn(e): 2223-1331/issn(p): 2226-5724mentioning

confidence: 99%

Exploratory Study on Causes of Valuable Costumers Turnover in Irans Private Banking Industry (Case Study: Physician Specialists Society)

Hosseini

Rezaei

2015

Journal of Asian Scientific Research

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“…Many aggregate models start by assuming specific acquisition costs per customer. However, outside simple direct marketing contexts, cost per customer is not a straightforward calculation (e.g., Niraj et al 2001). This observation leads to three questions about Big M models of service and relationships:…”

Section: Models Of Service and Relationships Should Incorporate Metrimentioning

confidence: 99%

Invited Commentary—The Implications of “Big M” Marketing for Modeling Service and Relationships

Bolton

2006

Marketing Science

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Rust and Chung (2006) provide an excellent integration and assessment of current models of service and relationships, as well as a thought-provoking agenda for future research. In this brief essay, I identify some challenges, opportunities, and priorities for improving models of service and relationships. Rust and Chung (2006) integrate two distinctive streams of research-models of service and relationships-that are rapidly converging. This convergence is noteworthy because it reflects a shift in the content and boundaries of the marketing discipline, as exemplified by the new definition of marketing recently adopted by the American Marketing Association:Marketing is an organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders.I read Rust and Chung's (2006) manuscript shortly after the Journal of Marketing's special section on customer relationship management (CRM) went to press. In their introduction to the special section, Boulding et al. (2005, p. 156) argue that "CRM is the outcome of the continuing evolution and integration of marketing ideas and newly available data, technologies and organizational forms." They observe that a common definition of CRM is emerging, articulated by Payne and Frow (2005, p. 168) as follows:CRM is a strategic approach concerned with creating improved shareholder value through the development of appropriate relationships with key customers and customer segments. CRM unites the potential of relationship marketing strategies and [information Although invited commentaries are not formally peer-reviewed and represent the opinion of the author, authors were carefully chosen based on their outstanding expertise in the areas of their respective commentaries. technology] to create profitable, long-term relationships with customers and other key stakeholders. CRM provides enhanced opportunities to use data and information to both understand customers and co-create value with them. This requires a cross-functional integration of processes, people, operations and marketing capabilities that is enabled through information, technology and applications.Payne and Frow's definition suggests that models of service and relationships have the potential to play a central role in marketing science and practice. However, Hunt (2004, p. 22) offers a prescient warning about the recent shift toward a "service-dominant" logic in marketing:The emerging dominant logic has many implications, but not entirely what [Vargo and Lusch (2004)] have in mind. They believe marketing should be at the center of the integration and coordination of the crossfunctional processes of a service-centered business model. But this depends on what is meant by marketing. It will probably not be the marketing function that is found in most firms. Instead, it will be marketing as a general management responsibility of the top team that will play the crucial roles of 1 navigat...

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Customer Profitability in a Supply Chain

Cited by 235 publications

References 6 publications

Customer-Base Concentration: Implications for Firm Performance and Capital Markets

Customer-Base Concentration: Implications for Firm Performance and Capital Markets

Exploratory Study on Causes of Valuable Costumers Turnover in Irans Private Banking Industry (Case Study: Physician Specialists Society)

Invited Commentary—The Implications of “Big M” Marketing for Modeling Service and Relationships

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