IDEAS home Printed from https://ideas.repec.org/a/eee/joinma/v23y2009i2p147-156.html
   My bibliography  Save this article

Reversing the Logic: The Path to Profitability through Relationship Marketing

Author

Listed:
  • Kumar, V.
  • Pozza, Ilaria Dalla
  • Petersen, J. Andrew
  • Shah, Denish

Abstract

Many firms have experienced greater success through implementing relationship marketing strategies. This is achieved by gaining knowledge about their own customers through database marketing and about the general marketplace through marketing research. Over time, this has led firms to adopt a general framework which we call the conventional path to profitability. This conventional framework suggests that new product innovation leads to acquisition, acquisition combined with a rich experience leads to satisfaction, satisfaction leads to loyalty and customer retention, and loyalty/retention leads to profitability. However, we show that some of the links in the framework are weak based on both academic research and marketplace realities. Consequently, we reverse the logic of the conventional path to profitability. We introduce a new approach that starts the customer relationship management strategy with customer profitability and the notion that different customers should be rewarded and satisfied differently. In addition, we outline a strategy that relationship marketing firms can implement, leading to higher levels of customer profitability and offer directions for future research.

Suggested Citation

  • Kumar, V. & Pozza, Ilaria Dalla & Petersen, J. Andrew & Shah, Denish, 2009. "Reversing the Logic: The Path to Profitability through Relationship Marketing," Journal of Interactive Marketing, Elsevier, vol. 23(2), pages 147-156.
    • Handle: RePEc:eee:joinma:v:23:y:2009:i:2:p:147-156
    DOI: 10.1016/j.intmar.2009.02.003
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1094996809000346
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.intmar.2009.02.003?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. V. Kumar & Rajkumar Venkatesan & Tim Bohling & Denise Beckmann, 2008. "—The Power of CLV: Managing Customer Lifetime Value at IBM," Marketing Science, INFORMS, vol. 27(4), pages 585-599, 07-08.
    2. Gupta, Sunil, 2009. "Customer-Based Valuation," Journal of Interactive Marketing, Elsevier, vol. 23(2), pages 169-178.
    3. Kumar, V., 2008. "Customer Lifetime Value — The Path to Profitability," Foundations and Trends(R) in Marketing, now publishers, vol. 2(1), pages 1-96, August.
    4. Ratchford, Brian T., 2009. "Online Pricing: Review and Directions for Research," Journal of Interactive Marketing, Elsevier, vol. 23(1), pages 82-90.
    5. W-K Ching & M K Ng & K-K Wong & E Altman, 2004. "Customer lifetime value: stochastic optimization approach," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 55(8), pages 860-868, August.
    6. Neslin, Scott A. & Shankar, Venkatesh, 2009. "Key Issues in Multichannel Customer Management: Current Knowledge and Future Directions," Journal of Interactive Marketing, Elsevier, vol. 23(1), pages 70-81.
    7. Blattberg, Robert C. & Malthouse, Edward C. & Neslin, Scott A., 2009. "Customer Lifetime Value: Empirical Generalizations and Some Conceptual Questions," Journal of Interactive Marketing, Elsevier, vol. 23(2), pages 157-168.
    8. Shankar, Venkatesh & Balasubramanian, Sridhar, 2009. "Mobile Marketing: A Synthesis and Prognosis," Journal of Interactive Marketing, Elsevier, vol. 23(2), pages 118-129.
    9. Ruth N. Bolton, 1998. "A Dynamic Model of the Duration of the Customer's Relationship with a Continuous Service Provider: The Role of Satisfaction," Marketing Science, INFORMS, vol. 17(1), pages 45-65.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ernest Tweneboah-Koduah & Augustine Yuty Duweh Farley, 2015. "Relationship between Customer Satisfaction and Customer Loyalty in the Retail Banking Sector of Ghana," International Journal of Business and Management, Canadian Center of Science and Education, vol. 11(1), pages 249-249, December.
    2. Ho, Hillbun & Tien, Keng-Ming (Terence) & Wu, Anne & Singh, Sonika, 2021. "A sequence analysis approach to segmenting credit card customers," Journal of Retailing and Consumer Services, Elsevier, vol. 59(C).
    3. Even, Adir & Shankaranarayanan, G. & Berger, Paul D., 2010. "Managing the Quality of Marketing Data: Cost/benefit Tradeoffs and Optimal Configuration," Journal of Interactive Marketing, Elsevier, vol. 24(3), pages 209-221.
    4. Dalla Pozza, Ilaria & Goetz, Oliver & Sahut, Jean Michel, 2018. "Implementation effects in the relationship between CRM and its performance," Journal of Business Research, Elsevier, vol. 89(C), pages 391-403.
    5. Rémi Mencarelli & Carole Lombart, 2017. "Influences of the perceived value on actual repurchasing behavior: Empirical exploration in a retailing context," Post-Print hal-01592035, HAL.
    6. Lee, Hyoung-joo & Shin, Hyunjung & Hwang, Seong-seob & Cho, Sungzoon & MacLachlan, Douglas, 2010. "Semi-Supervised Response Modeling," Journal of Interactive Marketing, Elsevier, vol. 24(1), pages 42-54.
    7. Blattberg, Robert C. & Malthouse, Edward C. & Neslin, Scott A., 2009. "Customer Lifetime Value: Empirical Generalizations and Some Conceptual Questions," Journal of Interactive Marketing, Elsevier, vol. 23(2), pages 157-168.
    8. Aksoy, Lerzan & Buoye, Alexander & Aksoy, Pelin & Larivière, Bart & Keiningham, Timothy L., 2013. "A Cross-national Investigation of the Satisfaction and Loyalty Linkage for Mobile Telecommunications Services across Eight Countries," Journal of Interactive Marketing, Elsevier, vol. 27(1), pages 74-82.
    9. Peltier, James W. & Zahay, Debra & Lehmann, Donald R., 2013. "Organizational Learning and CRM Success: A Model for Linking Organizational Practices, Customer Data Quality, and Performance," Journal of Interactive Marketing, Elsevier, vol. 27(1), pages 1-13.
    10. Mencarelli, Rémi & Lombart, Cindy, 2017. "Influences of the perceived value on actual repurchasing behavior: Empirical exploration in a retailing context," Journal of Retailing and Consumer Services, Elsevier, vol. 38(C), pages 12-21.
    11. Verhoef, Peter C. & Venkatesan, Rajkumar & McAlister, Leigh & Malthouse, Edward C. & Krafft, Manfred & Ganesan, Shankar, 2010. "CRM in Data-Rich Multichannel Retailing Environments: A Review and Future Research Directions," Journal of Interactive Marketing, Elsevier, vol. 24(2), pages 121-137.
    12. Fader, Peter S. & Hardie, Bruce G.S., 2009. "Probability Models for Customer-Base Analysis," Journal of Interactive Marketing, Elsevier, vol. 23(1), pages 61-69.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Blattberg, Robert C. & Malthouse, Edward C. & Neslin, Scott A., 2009. "Customer Lifetime Value: Empirical Generalizations and Some Conceptual Questions," Journal of Interactive Marketing, Elsevier, vol. 23(2), pages 157-168.
    2. Verhoef, Peter C. & Venkatesan, Rajkumar & McAlister, Leigh & Malthouse, Edward C. & Krafft, Manfred & Ganesan, Shankar, 2010. "CRM in Data-Rich Multichannel Retailing Environments: A Review and Future Research Directions," Journal of Interactive Marketing, Elsevier, vol. 24(2), pages 121-137.
    3. Glady, Nicolas & Lemmens, Aurélie & Croux, Christophe, 2015. "Unveiling the relationship between the transaction timing, spending and dropout behavior of customers," International Journal of Research in Marketing, Elsevier, vol. 32(1), pages 78-93.
    4. Kumar, V., 2010. "A Customer Lifetime Value-Based Approach to Marketing in the Multichannel, Multimedia Retailing Environment," Journal of Interactive Marketing, Elsevier, vol. 24(2), pages 71-85.
    5. repec:tiu:tiutis:52e91e47-4a2d-4e7b-bb23-3926b842ae30 is not listed on IDEAS
    6. Risselada, Hans & Verhoef, Peter C. & Bijmolt, Tammo H.A., 2010. "Staying Power of Churn Prediction Models," Journal of Interactive Marketing, Elsevier, vol. 24(3), pages 198-208.
    7. Sridhar N. Ramaswami & S. Arunachalam, 2016. "Divided attitudinal loyalty and customer value: role of dealers in an indirect channel," Journal of the Academy of Marketing Science, Springer, vol. 44(6), pages 770-790, November.
    8. Lee, Hyoung-joo & Shin, Hyunjung & Hwang, Seong-seob & Cho, Sungzoon & MacLachlan, Douglas, 2010. "Semi-Supervised Response Modeling," Journal of Interactive Marketing, Elsevier, vol. 24(1), pages 42-54.
    9. Yao Zhang & Eric T. Bradlow & Dylan S. Small, 2015. "Predicting Customer Value Using Clumpiness: From RFM to RFMC," Marketing Science, INFORMS, vol. 34(2), pages 195-208, March.
    10. Fader, Peter S. & Hardie, Bruce G.S., 2009. "Probability Models for Customer-Base Analysis," Journal of Interactive Marketing, Elsevier, vol. 23(1), pages 61-69.
    11. Patrick Winter & Paul Alpar, 2018. "On the relationship between print and mobile channels for newspapers," Electronic Markets, Springer;IIM University of St. Gallen, vol. 28(1), pages 79-92, February.
    12. Polo, Yolanda & Sese, F. Javier & Verhoef, Peter C., 2011. "The Effect of Pricing and Advertising on Customer Retention in a Liberalizing Market," Journal of Interactive Marketing, Elsevier, vol. 25(4), pages 201-214.
    13. Kim, Jungkeun, 2019. "The impact of different price promotions on customer retention," Journal of Retailing and Consumer Services, Elsevier, vol. 46(C), pages 95-102.
    14. Eva Ascarza & Bruce G. S. Hardie, 2013. "A Joint Model of Usage and Churn in Contractual Settings," Marketing Science, INFORMS, vol. 32(4), pages 570-590, July.
    15. Shankar, Venkatesh & Inman, J. Jeffrey & Mantrala, Murali & Kelley, Eileen & Rizley, Ross, 2011. "Innovations in Shopper Marketing: Current Insights and Future Research Issues," Journal of Retailing, Elsevier, vol. 87(S1), pages 29-42.
    16. Li, Xi & Dahana, Wirawan Dony & Li, Tongmao & Yuan, Jingbo, 2021. "Behavioral changes of multichannel customers: Their persistence and influencing factors," Journal of Retailing and Consumer Services, Elsevier, vol. 58(C).
    17. Herhausen, Dennis & Binder, Jochen & Schoegel, Marcus & Herrmann, Andreas, 2015. "Integrating Bricks with Clicks: Retailer-Level and Channel-Level Outcomes of Online–Offline Channel Integration," Journal of Retailing, Elsevier, vol. 91(2), pages 309-325.
    18. Even, Adir & Shankaranarayanan, G. & Berger, Paul D., 2010. "Managing the Quality of Marketing Data: Cost/benefit Tradeoffs and Optimal Configuration," Journal of Interactive Marketing, Elsevier, vol. 24(3), pages 209-221.
    19. V Kumar & Amalesh Sharma & Shaphali Gupta, 2017. "Accessing the influence of strategic marketing research on generating impact: moderating roles of models, journals, and estimation approaches," Journal of the Academy of Marketing Science, Springer, vol. 45(2), pages 164-185, March.
    20. Krishen, Anjala S. & Dwivedi, Yogesh K. & Bindu, N. & Kumar, K. Satheesh, 2021. "A broad overview of interactive digital marketing: A bibliometric network analysis," Journal of Business Research, Elsevier, vol. 131(C), pages 183-195.
    21. Rocío G. Martínez & Ramon A. Carrasco & Cristina Sanchez-Figueroa & Diana Gavilan, 2021. "An RFM Model Customizable to Product Catalogues and Marketing Criteria Using Fuzzy Linguistic Models: Case Study of a Retail Business," Mathematics, MDPI, vol. 9(16), pages 1-31, August.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:joinma:v:23:y:2009:i:2:p:147-156. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.journals.elsevier.com/journal-of-interactive-marketing/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.