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

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.

Autorentext

Kerstin Helmes was born in 1987 in Lexington, Kentucky. She grew up bilingually, speaking German and English, and later moved to Berlin, Germany. Here, she began her business studies at the Freie Universität. After a year abroad she recieved her Bachelor s of Science in Business Administration. During her studies Kerstin obtained practical work experience through various internships at Manpower Engineering, an NH Hotel and a hospital. She also worked for the Kentucky Education Television Network. All of these experiences taught her about companies and their customers which motivated her to write this paper. Presently, she is doing her Masters in Munich.