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The Right Way to Manage Unprofitable Customers

2020
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Release : 2020
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Book Synopsis The Right Way to Manage Unprofitable Customers by : Vikas Mittal

Download or read book The Right Way to Manage Unprofitable Customers written by Vikas Mittal. This book was released on 2020. Available in PDF, EPUB and Kindle. Book excerpt: Problem customers can cost your business lots of money, but quickly ejecting them may not be the best way to relieve the burden. Mittal, of Rice University, Sarkees, of Penn State, and Murshed, of Towson University, explore the ins and outs of customer divestment. Using real-world examples, the authors show how deciding to end a relationship with a customer segment or individual can increase profitability, improve employee morale, address capacity constraints, and bolster a business strategy. However, divestment also comes with potential downsides for various constituencies, including employees and remaining customers, both of whom may wonder whether they're next. In addition, ethical and legal consequences -- and the risk of bad publicity -- always loom. Before you rush to action, say the authors, walk through their five-part customer divestment framework. First, reassess the context of present customer relationships, looking beyond simple profitability. You may find that the most productive option is to educate customers rather than drop them. In some cases, if you renegotiate the value proposition with them, both of you will win. In other instances, you'll want to migrate customers to other subsidiaries or providers, as long as the move is undertaken -- and perceived to be conducted -- in good faith. If it becomes necessary to terminate a customer relationship, use a direct, interpersonal approach. No business can afford to squander its customer base, so divestment should not be boiled down to determining merely who is profitable and who is not -- the strategic consequences are too weighty. In the end, the decision about whether to divest might prove to be the toughest customer of all.

Kim McDonald

Artists, Australian
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Genre : Artists, Australian
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Book Synopsis Kim McDonald by :

Download or read book Kim McDonald written by . This book was released on . Available in PDF, EPUB and Kindle. Book excerpt:

What to do with Unprofitable Customers? Customer Lifetime Value, Customer Metrics of Adverse Behavior, and Feasible Strategies for Managing Unprofitable Customers

2017-05-23 Business & Economics
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Release : 2017-05-23
Genre : Business & Economics
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Book Rating : 369/5 ( reviews)

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Book Synopsis What to do with Unprofitable Customers? Customer Lifetime Value, Customer Metrics of Adverse Behavior, and Feasible Strategies for Managing Unprofitable Customers by : Anna Balashova

Download or read book What to do with Unprofitable Customers? Customer Lifetime Value, Customer Metrics of Adverse Behavior, and Feasible Strategies for Managing Unprofitable Customers written by Anna Balashova. This book was released on 2017-05-23. Available in PDF, EPUB and Kindle. Book excerpt: Bachelor Thesis from the year 2016 in the subject Business economics - Offline Marketing and Online Marketing, grade: 1,3, University of Münster, language: English, abstract: In this paper, I analyze how customer metrics like Customer lifetime value (CLV) are linked to strategies for managing unprofitable customers. Valuing customers or their behavior, respectively, has become an indispensable issue for any commercial activity. When determining causes and reasons of the customers’ contribution to firm value or performance, the customer base usually is analyzed and evaluated, whereas profitable and unprofitable customers are identified. Especially the subject of unprofitable customers, the methods to single them out and their input on the firm’s financial performance have been thoroughly discussed in the literature. Because regular financial metrics have restricted diagnostic potential, relying on customer metrics appears more suitable for determining customer’s profitability. There are diverse methods for evaluating customers, such as previous period customer revenue, past customer value, customer lifetime duration and customer lifetime value (CLV). CLV examines customer profitability from a prospective perspective, foreseeing future customer behavior and discounting future cash flows. CLV and its measurement models, depending on the kind of customers and products obtained by the company, provide a basis for strategic and tactical decisions. Customer’s persistent adverse behavior can lead to unprofitable outcome and should be considered by determining profitability on the base of CLV. There are several strategies for handling unprofitable customers. Before applying one of these, it is necessary to measure potential benefits and losses, as the chosen strategy can have a longrun effect on the firm’s clientele. There are some interconnections between various CLV measurement models, other customer metrics and strategies applied to unprofitable customers.

Relationship U-Turn: Approaches to Increase the Value of an Unprofitable Customer

2011-06 Business & Economics
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Release : 2011-06
Genre : Business & Economics
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Book Rating : 599/5 ( reviews)

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Book Synopsis Relationship U-Turn: Approaches to Increase the Value of an Unprofitable Customer by : Kerstin Helmes

Download or read book Relationship U-Turn: Approaches to Increase the Value of an Unprofitable Customer written by Kerstin Helmes. This book was released on 2011-06. Available in PDF, EPUB and Kindle. Book excerpt: Customer relationship management concentrates to a great extent on the profitable customers and how to enhance their profitability. Little insight has been given on how to treat the "wrong" customer. This literature research paper shows that customer profitability and overall firm profitability can be improved when dealing with unprofitable customers. The managerial approaches discussed focus on maintaining the customer relationship. For this reason, this paper differs from the general widespread strategy of termination or "firing" an invaluable customer. First, relationship marketing and "Relationship U-turn" are introduced in this paper. Second, customer value and methods of measuring customer value are discussed. The body of this paper concentrates on different approaches that try to turn unprofitable customer relationships into profitable ones. Some of the approaches focus on letting the customer take over more of the value chain activities such as self-service. Other approaches look more at the non-monetary value a customer can provide such as positive word-of-mouth. Examples from business-to-business (B2B) and business-to-consumer (B2C) markets are given for each approach and discussed in detail. The paper concludes with ideas for future research and a discussion. It emphasizes that companies need to realize that every customer is an asset that contributes to the value of a firm. However, customers differ in their needs and a company has to tailor its offering to meet these needs. Only when a company takes a more customer-centric view can it be successful, especially in mature markets.

Managing Customers Profitably

2009-01-22 Business & Economics
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Release : 2009-01-22
Genre : Business & Economics
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Book Rating : 364/5 ( reviews)

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Book Synopsis Managing Customers Profitably by : Lynette Ryals

Download or read book Managing Customers Profitably written by Lynette Ryals. This book was released on 2009-01-22. Available in PDF, EPUB and Kindle. Book excerpt: This book is a response to a need in the market place in the fast-growing field of customer profitability analysis and the profitable management of customer relationships. It combines innovative approaches to calculating the value of customers, with the management strategies necessary to make and keep customers profitable. It includes easy-to-follow instructions on how to calculate customer profitability, including worked examples (non-technical) and discusses strategies and their applications for organizations to manage customers profitably. Based on cases and feedback from the KAM Club and other research, there will be many business-to-business as well as business-to-consumer examples. The book assumes some level of numeracy in its readership. The contents include: Assessing product costs, costs to serve and how these can be estimated, and how to deal with customer-specific overhead costs. It discusses the uses and limitations of the use of customer profitability analysis, and illustrates how to calculate customer lifetime value using two methods, one with actual numbers and one which estimates relative customer lifetime value. Provides an innovative approach to calculating the lifetime value of a customer by taking risk into account. Demonstrates how to recognise and value the relationship benefits of customers, such as word of mouth. Brings into discussion the idea that how customers are managed, links to their profitability. Describes how financial portfolio analysis and theory apply to marketing and how, their application to marketing relates to the optimisation of marketing spend.

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