Reshaping Corporate Strategy

Customer profitability can be increased and managed. By sorting customers into profitability tiers (a Customer Pyramid), service can be tailored to achieve even higher profitability levels. Highly profitable customers can be pampered appropriately, customers of average profitability can be cultivated to yield higher profitability, and unprofitable customers can be either made more profitable or weeded out. Tailoring service to the customer's profitability level can make a company's customer base more profitable, increasing its chances for success in the marketplace.
(n1.) R. Brooks, "Alienating Customers Isn't Always a Bad Idea, Many Firms Discover," Wall Street Journal, January 7, 1999, pp. A1 and A12.
(n2.) V. Zeithaml, "Service Quality, Profitability, and the Economic Worth of Customers," Journal of the Academy of Marketing Science, 28/1 (Winter 2000): 67-85.
(n3.) R. Buzzell and B.Gale, The PIMS Principles: Linking Strategy to Performance (New York, NY: The Free Press, 1987).
(n4.) Zeithaml, op. cit.
(n5.) R.N. Bolton and J. Drew, "A Longitudinal Analysis of the Impact of Service Changes on Customer Attitudes," Journal of Marketing, 55/1 (January 1991): 1-9.
(n6.) R.T. Rust, A.J. Zahorik, and T.L. Keiningham, Return on Quality: Measuring the Financial Impact of Your Company's Quest for Quality (Burr Ridge, IL: Irwin, 1994).
(n7.) V.A. Zeithaml, L.L. Berry, and A. Parasuraman, "The Behavioral Consequences of Service Quality," Journal of Marketing, 60/2 (April 1996): 31-46.
(n8.) R.N. Bolton, "A Dynamic Model of the Duration of the Customer's Relationship with a Continuous Service Provider: The Role of Satisfaction," Marketing Science, 17/1 (Winter 1998): 45-65.
(n9.) A.J. Zahorik and R.T. Rust, "Modeling the Impact of Service Quality on Profitability: A Review," in Terri Swartz et al., eds., Advances in Services Marketing and Management (Greenwich, CT: JAI Press, 1992), pp. 247-276.
(n10.) G. Hartfeil, "Bank One Measures Profitability of Customers, Not Just Products," Journal of Retail Banking Services, 18/2 (1996): 24-31.
(n11.) D. Connelly, "First Commerce Segments Customers by Behavior, Enhancing Profitability," Journal of Retail Banking Services, 19/1 (1997): 23-27.
(n12.) R. Rust, V. Zeithaml, and K. Lemon, Driving Customer Equity: How Customer Lifetime Value is Reshaping Corporate Strategy (New York, NY: The Free Press, 2000).
(n13.) V. Zeithaml, "Consumer Perceptions of Price, Quality and Value: A Means-End Model and Synthesis of Evidence," Journal of Marketing, 52/3 (July 1988): 2-22.
(n14.) J.S. Johnson, "Home Depot Renovates," Fortune, November 23, 1998, pp. 200-204+.
(n15.) James Brian Quinn, "Strategic Outsourcing: Leveraging Knowledge Capabilities," Sloan Management Review, 40/4 (Summer 1999): 9-22.
(n16.) Robert Hiebeler, Thomas B. Kelly, and Charles Ketteman, Best Practices: Building Your Business with Customer-Focused Solutions (New York, NY: Simon and Schuster, 1998), pp. 125-27. Discussed in V. A. Zeithaml and M. J. Bitner, Services Marketing and Management (New York, NY: McGraw-Hill, 2000).
(n17.) F. Newell, Customer Relationship Management in the New Era of Internet Marketing (New York, NY: McGraw-Hill, 2000), pp. 232-236.
(n18.) Ibid., p. 236.
(n19.) D.V. Fites, "Make Your Dealers Your Partners," Harvard Business Review, 74/2 (March/April 1996): 84-95.
(n20.) K. Schill, "Dial-a-Deal," The News and Observer, January 31, 1999, p. E1-3.
California Management Review Summer2001, Vol. 43 Issue 4, p118