Summary

There are business that treat varied customers as one; limiting their source of income. And then

there are successful businesses, which treat individual customers as varied sources of income.

Customers are assets whose potential varies in nature and strength as we move across one

segment to another and also from one individual to another. While mass marketing has been a

phenomenon for many decades, as the competition has grown, the newer, modified and arguably

profitable option is the management of customer portfolio. The general objectives of a Company

like the identification of best customer segments, selling existing products to target customers,

targeting new prospective customers, development of products and product attributes and

retaining and maximizing share of wallet, cannot be optimally achieved by a Company without a

number of core competencies. A foundation of customer information is what a Company needs

for a 360 degree approach in reaching the customers on one- on-one basis, which is the customer

portfolio management.

The first, most basic and the most crucial section is being able to have the single view of the

customers. This calls for integrated management of the details available about a customer, rather

than having segregated information maintenance. Also important is, understanding the economic

value of each customer, by using activity based costing methods so that costs-to-serve may be

improved to increase profitability. The rudimentary ways of customer segmentation may not

always be the way to tap specific segment needs. A robust segmentation should not only take

into account the present needs, but also look at the prospective future needs of the customers.

The degree to which a Company adds value to the customers’ lives is subjective and so is the

case vice versa. The retention of most profitable customers and potentially most profitable

customers is the top priority after being able to identify which those segments are. However, the

major issues is identifying this profitable set of customers, not just at present but also in the

future, the success of which is definitely a competency that a Company develops. This

competency of proper identification is to be backed up by proper marketing mechanisms for

making the right offers to the right customers at the right time. One to one customer

communications may be facilitated by using real time customer behavior, through the

applications of programs such as the marketing automation software, interaction management

software and marketing optimization software.

The establishment of an effective customer portfolio management demands the customer value

integration not just into one or two components, but the organization as a whole. This

organizational integration can be made with technology, ownership, accountability and

performance measures. For Companies to follow a proactive stance on customer portfolio

management, it is important to ask and answer the what, how and why questions associated with

customer insights. Only then can the Company discover ways to increase the return on customers

by retaining the profitable customers, making them grow into more profitable and increasing the

service quotient.

A shift from increased sales volume to profitable sales volume is achieved when a Company is

able to measure its customer profitability. A fact based analysis of profits and costs is must, in

order to adopt measure to prevent profitable customers from shifting to the competitors. It is

important to identify value and profit associated with a customer in order to be able to assess

their importance at present and in future. Some important tools for the same may be REM

method, activity based costing methods and other informal techniques. Achieving customer

satisfaction and intimacy, and increasing Company profitability to satisfy shareholders; these are

the two activities that form the most significant short and long term decisions for a business and

their trade-off is an important function for the Company to analyze.