Rendez

Relationship management (and the related relationship marketing) is based on the finding that customer retention is less expensive than customer acquisition.

All customers are not of equal value to a services organization.

• Valarie A. Zeithaml, Roland T. Rust, and Katherine N. Lemon, “The Customer Pyramid: Creating and Serving Profitable Customers,” California Management Review, Vol. 43, No. 4, Summer 2001, pp 118-142.
  • Abstract: As relationships and service become increasingly pivotal in business, the profitability of customers is becoming more important than the profitability of products. .... This article presents a management methodology called the “Customer Pyramid” that enables a firm to supercharge its profits by customizing its responses to distinct customer profitability tiers. The Customer Pyramid provides a tool for managers to strengthen the link between service quality and profitability and to determine the optimal allocation of often scarce resources to maximize profitability. Product and service strategies, customized for each customer tier, become more closely aligned with an individual customer’s underlying utility functions.

A client relationship requires an investment of energy.

• David Maister, “Do You Really Want Relationships?” (2005). See at davidmaister.com).

Relationships are not only business-to-customer, but can also be inter-organizational.

• Digest of “Symposium on Inter-Organizational Relations”, available on systemicbusiness.org
• “Aligning relationships: Optimizing the value of strategic outsourcing”, IBM G510-3464-00 (2003), available on ibm.com .

Customers can be modeled as promoters or detractors from the business

• Fred Reichheld. “The Microeconomics of Customer Relationships”, MIT Sloan Management Review. Winter 2006. Vol. 47, Iss. 2; p. 73
  • Abstract: The article focuses on research on the use of net-promoter score, a metric that can help managers evaluate how investments aimed at improving the customer experience actually affect a company’s growth rate. Quantifying the value of a promoter or a detractor is the best way of understanding in numerical terms why and how customer relationships matter to a company’s financial performance. A useful way of figuring out strategic priorities is to map your customer base on the promoter-passive-detractor scale and then to divide each category into high-profit and low-profit customers.

Services can be considered by the type of benefit offered, and the degree of service separability.

• Leonard L. Berry, Venkatesh Shankar, Janet Turner Parish, Susan Cadwallader, Thomas Dotzel. “Creating New Markets Through Service Innovation”, MIT Sloan Management Review. Winter 2006. Vol. 47, Iss. 2; p. 56. (See at MIT Sloan Management Review).
  • Abstract: ... by thinking about a service in terms of its core benefits and the separability of its use from its production, managers can more easily see how to outinnovate their competitors. Before they can do so, though, they must understand the different types of market-creating service innovations as well as the factors that enable them.
  • The authors introduce and describe a two-by-two matrix whose taxonomy helps managers think strategically about service innovations that can create new markets.

Client relations are largely based on trust.

• David H. Maister, Charles H. Green and Robert M. Galford, The Trusted Advisor, Free Press, 2001. (See at davidmaister.com).

Entrepreneurism can be framed as getting the right social and virtual embedded ties.

• Thomas B. Lawrence, Eric A. Morse, Sally W. Fowler. “Managing Your Portfolio of Connections”, MIT Sloan Management Review. Winter 2005. Vol. 46, Iss. 2; p. 59
  • Embedded ties (social, virtual)
  • Abstract: To conduct business with customers, suppliers, partners and other external parties, companies have three options: arm’s-length, socially embedded and virtually embedded ties. Arm’s-length ties are connections that exist solely for a particular business transaction. The problem with arm’s-length ties is that they have difficulty handling transactions that are uncertain, complex or opportunistic. Embedded ties are connections that overcome the weaknesses of arm’s-length ties by inserting the transaction in a supportive context, either social or virtual. With a socially embedded tie, trust, sharing of proprietary information and joint problem solving form the foundation for an economic relationship to minimize the risk of transactions. In a virtually embedded tie, an economic relationship is facilitated and maintained through the use of electronic technologies that help minimize the risk of transactions through increased transparency, widespread information sharing and community-based problem solving. Companies in different environments are likely to benefit from the use of different combinations of those types of connections.

These references are suggested as part of the Stadia 2006 International Service Business Management Sessions. Please respond with comments to suggest additional readings or express opinions on those above.