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Chapter 9 - Lecture5b Lecture5b: ,eachbringingitsown...

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Business-to-Business Marketing Lecture 5b Relationship portfolio management
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Principles of portfolio management Companies rely upon a range of customers , each bringing its own  type of value Marketers borrow from financial management the idea of  “balanced investments  that mature at different times, producing a  steady stream of returns over the long-run Portfolio management  involves  all decisions to maintain a well- balanced portfolio of customers , that ensures that a company  earns value over the long-run by harvesting excess profit and  invest them  in future offerings A key for business success is the  integrated management  of the  whole portfolio of relationships  (i.e. customers) of a firm Lecture 5b: Relationship portfolio management
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Option Build Actions Build a relationship further for growth, investing  where  necessary to achieve this growth. Maintain Maintain the current levels of management effort in a  relationship in order to collect the benefits  from the  relationship now through large volumes , high profits  or a  greater share  of the customer’s purchases. Harvest Harvest the value in the relationship by taking the current  monetary value  it brings while at the same time beginning  to reduce the cost of servicing the relationship over time. Reduce Reduce in the immediate future the level of management  commitment to a relationship because the returns are  diminishing with little prospect of reversal . Table 9.1. Typical strategic options for a relationship Lecture 5b: Relationship portfolio management
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Strategic option of a relationship should be chosen in an  integrated way , since relationships are inter-related Classification of relationships   in categories  is necessary for  understanding of strategic options Iterative process of breaking down the customer base  into  smaller clusters (groups of customers per relationship type),  similarly to customer segmentation  Different classification criteria  apply, as in market segmentation Very realistic to have a varying number of  relationship  (customer) clusters  that in their interior require similar  managerial approach Lecture 5b: Relationship portfolio management
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Relationship classification process Early classification by Jackson (1985), that identified the two  ends in a relationship continuum : Always-a-share  customers (transactional ) driven by price 
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