Profit Maximisation through Customer Relationship Marketing: Measurement, Prediction and Implementation

Citation

Sigala, M. (2008), "Profit Maximisation through Customer Relationship Marketing: Measurement, Prediction and Implementation", Journal of Product & Brand Management, Vol. 17 No. 5, pp. 366-366. https://doi.org/10.1108/10610420810896121

Fierce and global competition, coupled with the increasing customer sophistication and mobility, have rendered customer relationship marketing a competitive necessity for maximising customer loyalty, retention, and so firms' profits. In this vein, this books aims to provide both professional evidence as well as theoretical underpinning to achieving the exploitation of CRM for making profits. By compiling into one cover six topical articles on different CRM issues, the book provides a holistic framework on how to implement CRM throughout the whole customer lifecycle circle, including customer relationship initiation, maintenance and enhancement, and retention or termination. This is because the book's chapters deal with issues relating to customer acquisition through good customer segmentation and customer selection and prioritisation, customer value enhancement through cross‐selling, building customer loyalty and customer value measurement, customer satisfaction management and customer retention. All chapters' arguments focus and converge into a single outcome: how such CRM practices link and are translated to firms' profit maximisation. Moreover, all chapters provide in depth and critical literature review analyses, statistical models, and practical experiences in terms of how to implement and measure the CRM practices that they explore. The book is reader‐friendly (demonstrated in its writing style and language) and chapters are sequenced in a logical order based on the evolution of the customer lifecycle stages. The book chapters represents journal articles that have been co‐published simultaneously as Journal of Relationship Marketing, Vol. 6, No. 3/4 2007.

The first book article, titled “Objectives of customer centric approaches in relationship marketing,” is written by Lerzan Aksoy, Timothy Keiningham and David Bejou. It is an introductory chapter reviewing the central objectives of CRM and highlighting the need to conduct effective customer segmentation for maximising firm's profits. The second article, “Approaches to customer segmentation,” by Bruce Cooil, Lerzan Aksoy and Timothy Keiningham, first reviews the three major approaches to customer segmentation, (namely, a‐priory, post‐hoc, and hybrid segmentation approaches). Then, it presents how logistic regression, predictive clustering methods, and latent class models can be used for customer segmentation purposes. The chapter demonstrates the practical implications of the former by using a case study of an international retailer called, Migros Turk.

Although the previous chapters concentrate on customer identification and acquisition CRM practices, the third article titled “Cross‐selling: offering the right product to the right customer at the right time,” written by Wagner Kamakura, focuses on cross‐sales as a tool for enhancing customer value, reducing customer acquisition costs for firms, increasing the scope of customer relationship, and so, customer's “share of wallet”, “share of mind,” and customer's costs of switching, and thereby providing firms with great customer learning opportunities and intelligence. The article continues by presenting two analytical tools for making cross‐sales namely acquisition pattern analysis and collaborative filtering. Illustrations and real‐life examples from the industry are provided for making such concepts easier to understand.

The forth article, “Understanding and using customer loyalty and customer value,” by Edward Malthouse and Frank Mulhern, explores the concepts of customer loyalty, customer value, and customer lifetime value (CLV) and their relationship with firms' profits. All concepts are defined and operationalised by providing solid theoretical background, practical tools, and industry examples for demonstrating their practical implications.

The fifth article, titled “Ignoring your best customer? An investigation of customer satisfaction, customer retention and their financial impact,” by Baohong Sun, Ronald Wilcox and Ting Zhu, concentrates on the final stage of customer lifecycle management by discussing the important role of measuring customer satisfaction and finding ways to retain the most profitable customers before they defect. A latent class model is also used for examining the interrelationship amongst satisfaction, retention, and profitability by using data from a large Midwestern US bank.

The last article, “Customer selection and prioritization: the optimal resource allocation approach to maximising customer value” by Namita Bhatnagar, Kiersten Maryott, and David Bejou, reviews and uses optical resource allocation models for comparing and addressing relative investments in customer acquisition versus customer retention strategies. Particular focus and analysis is provided to the practical implications of such models for designing and implementing customer loyalty programmes, which consist of a popular practice for enhancing and maintaining relationships with the most profitable customers.

Overall, this is an excellent and easy‐to‐read book that provides professional context and theoretical underpinning to a current strategic necessity, namely CRM. By bringing together an important synthesis of professional examples, theoretical concepts, and analytical tools and models, the book effectively provides an in‐depth analysis of different strategies for implementing CRM strategies and measuring their success relative to maximising firms' profits. Emphasis is provided on strategies related to the management of all the stages of the customer lifecycle. In this vein, the book significantly helps to crystallise some of the disparate research being done on the field. The book constitutes a comprehensive guide and useful source of references and case studies to graduate students, university faculty, marketing and CRM professionals alike.