Managing customer profitability using portfolio matrices

Abstract

Many companies have invested in systems such as enterprise resource planning (ERP) and customer relationship management (CRM) with the aim of managing their customers better. To do this well, however, a company must first understand customer profitability. This paper proposes a customer portfolio method of achieving this. Using a database of 130,000 customers from an internet service provider (ISP), this method demonstrates significant gains and returns on investments, by going beyond customer loyalty and instead advocating a proactive way of managing different customer groups based on their profitability.