Managing Appreciating and Depreciating Customer Assets

Abstract

Customer asset management is a vital component of the CRM implementation process. This article suggests that customer valuation efforts should include the social influence (e.g., word-of-mouth and modeling) of customers in their profitability evaluation. Existing approaches to customer evaluation have failed to capture the social impact of customers and the potential impact of future customers. Additionally, previous research has blindly focused on the concept of loyalty without fully realizing that loyalty does not equal profitability. Using the traditional concepts of the product life cycle and the adoption-diffusion curve, the authors develop a framework that suggests timing benchmarks for the management of both profitable and unprofitable customers. Specifically, customer management activities should be split into two stages: an acclimation and evaluation stage and a discrimination and elimination stage. We identify six customer portfolio categories based on profitability, customer loyalty, and social influence along with providing tactics to manage each segment effectively. Finally, the authors conclude with a discussion of how to “fire” unprofitable customers.