Customer relationships and the heterogeneity of firm performance

Customer relationships and the heterogeneity of firm performance Purpose – The purpose of this paper is to examine how, taking customer relationships as the unit of analysis, the heterogeneity of customer relationship performance influences the heterogeneity of firm performance, and how firms can balance the heterogeneity of customers, customer relationships, and customer portfolios by differentiated business models. Design/methodology/approach – The approach to the topic is one of theoretical analysis and conceptual development. Findings – Value capture is defined as the discounted present value of all future economic profit from the relationship. Three sources of value capture heterogeneity are identified: the customer, the relationship with the customer, and the interdependence between customers in a customer base. Relationship performance can be improved by investing in business model differentiation, in order to facilitate controlled adaptation to specific customer relationships and/or customer portfolios. Firms have to manage parallel business models and a central capability is the ability to create internal fit between the elements of a specific business model. Research limitations/implications – The research presented relates to business‐to‐business customer relationships. Some of the conceptual thinking will not be applicable in consumer relationships. Practical implications – A firm should have an optimum mix of customer relationships in its customer base, in relation to firm goals and strategy. Management needs to recognize the heterogeneity of customer relationship performance, and manage customer portfolios accordingly. In order to deal with the heterogeneity, it may be necessary to manage parallel business models. This will necessitate new capabilities, such as customer insight generation, account management, modularized production platforms, and relationship performance control. Originality/value – For a scholarly audience the paper contributes to the discussion on how marketing improves firm performance by assuming responsibility for increasing firms' market value. For a practitioner audience it offers ideas for genuinely customer‐centric management. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Business & Industrial Marketing Emerald Publishing

Customer relationships and the heterogeneity of firm performance

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Publisher
Emerald Publishing
Copyright
Copyright © 2009 Emerald Group Publishing Limited. All rights reserved.
ISSN
0885-8624
DOI
10.1108/08858620910966246
Publisher site
See Article on Publisher Site

Abstract

Purpose – The purpose of this paper is to examine how, taking customer relationships as the unit of analysis, the heterogeneity of customer relationship performance influences the heterogeneity of firm performance, and how firms can balance the heterogeneity of customers, customer relationships, and customer portfolios by differentiated business models. Design/methodology/approach – The approach to the topic is one of theoretical analysis and conceptual development. Findings – Value capture is defined as the discounted present value of all future economic profit from the relationship. Three sources of value capture heterogeneity are identified: the customer, the relationship with the customer, and the interdependence between customers in a customer base. Relationship performance can be improved by investing in business model differentiation, in order to facilitate controlled adaptation to specific customer relationships and/or customer portfolios. Firms have to manage parallel business models and a central capability is the ability to create internal fit between the elements of a specific business model. Research limitations/implications – The research presented relates to business‐to‐business customer relationships. Some of the conceptual thinking will not be applicable in consumer relationships. Practical implications – A firm should have an optimum mix of customer relationships in its customer base, in relation to firm goals and strategy. Management needs to recognize the heterogeneity of customer relationship performance, and manage customer portfolios accordingly. In order to deal with the heterogeneity, it may be necessary to manage parallel business models. This will necessitate new capabilities, such as customer insight generation, account management, modularized production platforms, and relationship performance control. Originality/value – For a scholarly audience the paper contributes to the discussion on how marketing improves firm performance by assuming responsibility for increasing firms' market value. For a practitioner audience it offers ideas for genuinely customer‐centric management.

Journal

Journal of Business & Industrial MarketingEmerald Publishing

Published: Jun 12, 2009

Keywords: Buyer‐seller relationships; Organizational performance

References

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