With increased competition and globally maturing markets, relationship marketing has emerged as the new mantra. Although companies are successfully using customer satisfaction to create closer and more profitable relationships with customers, the myopic pursuit of such relationships often backfires. Consider a U.S.-based catalog retailer that recently embarked on a campaign to build closer relationships with its loyal and most profitable customers, only to find that it was not bringing enough new customers into its portfolio to grow the business over time. Similarly, a European financial services company recently shifted its focus to serving larger retail-banking accounts, but after losing a large share of its smaller accounts in the process, economies of scale and productivity suffered.
A new view of relationship marketing is emerging. Customer portfolio management is a process of creating value across a company’s customer relationships — from arm’s-length transactions to strategic partnerships — with an emphasis on balancing closer customer relationships with weaker ones (Johnson and Selnes, 2004). In an economy where only so many customers will ever be truly loyal, churn customers lower a company’s unit costs and provide a basis for future cash flow. How the various perspectives on relationship marketing have evolved into customer portfolio management reveals some early lessons gained from this view and illustrate how companies are implementing this new marketing philosophy.
The Evolution of Relationship Marketing
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