profitability

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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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  • Read Time: 1 min 

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.

09-Marketing-500

In Praise of Honest Pricing

Companies should spend less time trying to fool customers with hidden charges and devote more effort to competing on differences that really matter, say the authors. Imaginative managers may want to consider how a move toward honest pricing in their industry — such as unit pricing at supermarkets and the U.S. government”s Energy Star program — could help sell more and better products to a loyal customer base.

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The Delta Model: Adaptive Management for a Changing World

On the basis of research into 100 enterprises, the authors developed a helpful strategic tool, the Delta Model. Companies using the framework define strategic positions that reflect new sources of profitability, align the strategic options with their activities, and establish processes that adapt well to change. The researchers outline practical mechanisms for obtaining feedback from the adaptive processes, and they offer critical metrics to track performance.

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07-Marketing-500

Do Customer Loyalty Programs Really Work?

The contention that loyal customers are always more profitable is a gross simplification, according to the authors. They posit that such schemes do not fundamentally alter market structure and, instead, increase market expenditures without really creating any extra brand loyalty. Dowling and Uncles suggest ways to design an effective program.

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02-Marketing-500

Are U.S. Managers Superstitious about Market Share?

Superstition has always had a big impact on human behavior, sometimes yielding macroeconomic effects for even the most industrialized societies. An example of the effects of superstition is the rate of Japanese births from 1960 to 1990 (see Figure 1). A general, steady decline is evident in recent decades.

05-Strategy-500

The Decline and Rise of IBM

IBM is making a comeback. Although many observers had counted the company out — “It’s a dinosaur, an implosion, a wreck,” various commentators said — its revival was probable, even predictable, because cycles of decline and revitalization have been the company’s pattern through many decades.P

07-Marketing-500

First to Market, First to Fail? Real Causes of Enduring Market Leadership

“Be first to market” is one of the most enduring principles in business theory and practice. But the authors point out that many pioneer companies have failed, whereas most current market leaders were not pioneers. In analyzing why this is so, the authors found that market leaders embody five factors that are critical to success.

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