It seems to be common sense that to increase profits, companies should prioritize customers (i.e., focus their efforts on the most important customers). However, such a strategy might have substantial negative effects on firms’ relationships with customers treated at a low priority level.
Prior research does not indicate satisfactorily whether and how customer prioritization pays off. Moreover, although customer prioritization may be strongly present in a company’s marketing strategy, companies frequently fail to implement such a strategy. Therefore, it is also important to investigate empirically by which means companies can facilitate implementation. The results show that customer prioritization ultimately leads to higher average customer profitability and a higher return on sales because it (1) affects relationships with top-tier customers positively but does not affect relationships with bottom-tier customers and (2) reduces marketing and sales costs. Furthermore, the ability to assess customer profitability, the quality of customer information, selective organizational alignment, selective senior-level involvement, and selective elaboration of planning and control all positively moderate the link between a firm’s prioritization strategy and actual customer prioritization.
This document gives inspiration on how to refocus efforts on profitable current customers - ensuring better return from efforts through customer insights and prioritization.