Targeting customers: A financial approach based on creditworthiness

Abstract

Targeting is usually undertaken based on customer-based marketing metrics such as geography, demography and usage rates. A complimentary approach is targeting using business unit-based customer metrics such as customer profitability figures and credit rating codes. The Norwegian fishing industry has been chosen for the context of this study because of its high level of attributable costs and reliable measures of profitability. Customer profitability accounts are described and international credit rating agencies have furnished credit rating codes for the same customers (n=144). Even if customer profitability increases with decreasing creditworthiness, the statistical results (significance levels) are not convincing. In order to manage customers for risk-adjusted profit, there is a need for an information system that provides customer metrics necessary for decision making that at a minimum include customer profitability accounts and credit rating codes for each of the customers. In this way, customer credit risks can be properly compensated for.Journal of Targeting, Measurement and Analysis for Marketing (2008) 16, 261–273; doi:10.1057/jt.2008.18; published online 20 October 2008 [ABSTRACT FROM AUTHOR]