Customer Relationships

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When Should You Fire Customers?

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Many customers are simply not profitable. Letting them go is one option, but so is trying to train them out of expensive behavior. Options suggested by Jiwoong Shin and K. Sudhir, both of Yale School of Management, include reducing services to unprofitable customers and educating them to use less costly service channels. “We recognize the mix of concerns, both ethical and practical, that swirl around firing customers,” write Shin and Sudhir. “We advocate firing customers only as a last resort.”

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Are Many of Your Customers Unprofitable?

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In the new Summer 2011 issue of MIT Sloan Management Review, marketing scholars V. Kumar and Denish Shah report some intriguing findings from a study they conducted linking certain types of marketing techniques -- those aimed at increasing customer lifetime value (CLV)  -- to stock price increases.

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Why the Highest Price Isn’t the Best Price

There are several questions an organization should ask to improve its pricing strategy, including: What is the marketing strategy in this segment? What is the differential value that is transparent to target customers? What is the price of the next best alternative offering? What is the customer’s expectation of a “fair” price?

By asking these questions and others, an organization can choose a price point that provides the largest long-term value to the supplier.

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Managing Your Portfolio of Connections

Traditionally, a company’s links to its customers, suppliers and other external parties have been based upon either arm’s-length transactions or socially embedded ties. Electronic technologies have enabled a third and more flexible option, dubbed “virtually embedded ties.”

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The Innovation Subsidy

Companies should focus less on marketplace premiums for their innovations and more on opportunistically exploiting subsidies for innovations. Thus Microsoft‘s Windows 95 development effectively garnered a $900 million subsidy by drawing upon a valuable technical population to test and help improve the system. An innovation subsidy, says the author, is individuals‘ and institutions‘ cost-effective bartering of resources to reduce risk.

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Exploring Scale: The Advantages of Thinking Small

Sometimes large-scale operational efficiencies can mask opportunities. In their research, the authors found that small-scale operations provide significant advantages in four areas. Using case studies, the authors illustrate how companies in a wide variety of industries have found the hidden benefits of small-scale approaches, concluding that executives who learn when it is better to think small can have a potentially huge impact on their companies‘ long-term success.

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The Real Value of Customer Loyalty

It's a marketing truism: Higher buying rates and lower service costs make long-term customers more valuable. That, of course, influences what companies spend on customer acquisition and retention. But according to an August 2001 working paper titled “Customers as Assets,” by Sunil Gupta and Donald R.

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