Profitable customer management: reducing costs by influencing customer behaviour

Abstract

Purpose

The purpose of this paper is to investigate how firms attempt to increase the profitability of specific groups of extant customers by achieving adjustments in customer behaviour that consequently lead to reduced costs associated with serving these customers.

Design/methodology/approach

The paper takes the form of multiple case studies in the retail banking sector. Three specific initiatives launched by European retail banks for the stated (partial) purpose of modifying customer behaviour in order to reduce customer‐related costs are evaluated.

Findings

The findings from the three case studies show that strategies that aim to modify customer behaviour in a positive way can successfully decrease the costs of interacting with customers while at the same time maintaining and even increasing customer retention and customer‐related revenues.

Research limitations/implications

This study is limited to an assessment of three initiatives carried out by three European banks. The findings bring the issue of costs into customer relationship management in a constructive manner, abandoning the view of cost reductions as a necessary evil or drastic measure to handle problematic customers.

Practical implications

Marketing and customer relationship managers who consider strategies to change customer behaviour in a cost‐reducing way as a complement to traditional revenue and loyalty enhancement strategies will expand their opportunities to achieve increases in customer lifetime value (CLV) and customer equity (CE).

Originality/value

The paper reclaims the management of costs as a key customer management activity, thereby answering calls for more attention to cost issues in marketing.

Citation

Persson, A. (2013), "Profitable customer management: reducing costs by influencing customer behaviour", European Journal of Marketing, Vol. 47 No. 5/6, pp. 857-876. https://doi.org/10.1108/03090561311306912