B2B Scenario 9.1 Barbara Learns about Customer Portfolio Analysis

Barbara Muzychuk, a marketing analyst at a large automotive components manufacturer, knew that her boss had been studying for an MBA. Usually this didnt make much difference to her working day, other than she had to tolerate his frequent use of new, fashionable management jargon. But today he had presented her with some specific analysis that one of his professors had encouraged him to undertake. So she stared at the fairly simple table he had produced (Table 9.5), and pondered the questions that he had asked.

Table 9.5 Customer Portfolio Analysis

	Number of Customers	Percentage of Sales	Percentage of Technical Development Expenditure
Tomorrows Customers	3	0	12
Today's Special Customers	2	51	38
Today's Regular Customers	6	38	38
Yesterday's Customers	3	11	12

Her boss said that this analysis was based on the idea of a customer relationship life-cycle, derived from the work of two professors (Campbell and Cunningham, 1983). She could see the resemblance to the product life-cycle idea that she had studied at university. That had the phases of introduction, growth, maturity and decline. This analysis was evidently applied to her firms customer accounts, and tomorrows customers were rather like the introduction phase, todays special customers like the growth phase, and so on. Barbaras boss wanted her to provide him with an evaluation of the usefulness of this kind of analysis for their firm, and then wanted her to identify what kind of strategic options might be suggested from it. As far as the first question was concerned she could work out that this was basically a two-dimensional matrix for analysing the firms customer relationships; percentage of sales was one way of measuring the current importance of the customer account, and percentage of technical development expenditure was one way of measuring how much they were investing in the customer relationship. Of course, this was just a first approximation. For example, the importance of those three firms in the tomorrows customers category certainly could not be measured by sales, because at the moment they were developing the relationships with a view to generating future sales revenue. Similarly, technical development expenditure was a useful proxy for the amount invested in a customer relationship, but it was not the whole story. For example, Barbara knew that the sales and customer service teams spent a lot of time and energy serving some customers, while other customers were much easier to serve. So, on the first question, Barbara would say that this was an interesting form of analysis but it should be handled with caution. A lot of managerial judgement would be needed to use the information appropriately. Before making any committal decisions based on the analysis one would need to consult the Key Account Management team.

Now, Barbara thought, what about the second question: what kind of strategic options did this analysis suggest?