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Loyalty-based segmentation and the customer development process

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  • Knox, Simon

Abstract

As process management fast becomes recognised as the means by which customer value can be created, it is now equally well understood that the mechanism of value delivery is among the core processes. Without managing Customer Development as a core process, the implementation of strategic plans will lack clear focus. The author argues that the function of the Customer Development process is to build relationships with preferred customers. Working on the premise that all customers are not created equal, the priority for customer development in mature markets is to build these preferred relationships among existing customers. It is now accepted wisdom that these customer relationships deliver superior profits. How customer development management select these customers, or groups of customers, and build specific relationships is directed by the Principles of Loyalty Management. These principles acknowledge that customer loyalty is relative which means that customers as well as product and service brands need to be differentiated. The Diamond of Loyalty© provides a new management tool for this purpose by categorising customer purchasing styles according to their level of involvement (i.e. brand or company relationship) and their purchasing portfolio across suppliers. Finally, it is argued that customer development should discriminate in favour of supporting 'high share' customers over 'low share' customers in building preferred relationship among existing customers.

Suggested Citation

  • Knox, Simon, 1998. "Loyalty-based segmentation and the customer development process," European Management Journal, Elsevier, vol. 16(6), pages 729-737, December.
  • Handle: RePEc:eee:eurman:v:16:y:1998:i:6:p:729-737
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    Cited by:

    1. R. Sundarraj, 2006. "A model for standardizing human decisions concerning service-contracts management," Annals of Operations Research, Springer, vol. 143(1), pages 171-189, March.
    2. Bachmann, Frank & Walsh, Gianfranco & Hammes, Eva K., 2019. "Consumer perceptions of luxury brands: An owner-based perspective," European Management Journal, Elsevier, vol. 37(3), pages 287-298.
    3. Sunny R. Igwe & Godswill C. Chukwu, 2016. "Demographic variables and retail choice pattern amongst urban Nigeria consumers," Journal of Asian Business Strategy, Asian Economic and Social Society, vol. 6(6), pages 125-135, June.
    4. Baesens, Bart & Verstraeten, Geert & Van den Poel, Dirk & Egmont-Petersen, Michael & Van Kenhove, Patrick & Vanthienen, Jan, 2004. "Bayesian network classifiers for identifying the slope of the customer lifecycle of long-life customers," European Journal of Operational Research, Elsevier, vol. 156(2), pages 508-523, July.
    5. V. L. Miguéis & D. Van Den Poel & A.S. Camanho & J. Falcao E Cunha, 2012. "Modeling Partial Customer Churn: On the Value of First Product-Category Purchase Sequences," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 12/790, Ghent University, Faculty of Economics and Business Administration.
    6. Martos-Partal, Mercedes & González-Benito, Óscar, 2013. "Studying motivations of store-loyal buyers across alternative measures of behavioural loyalty," European Management Journal, Elsevier, vol. 31(4), pages 348-358.
    7. Herni Justiana Astuti & Keisuke Nagase, 2014. "Patient Loyalty To Healthcare Organizations: Relationship Marketing And Satisfaction," International Journal of Management and Marketing Research, The Institute for Business and Finance Research, vol. 7(2), pages 39-56.
    8. Cristina - Andrada Baba & Raluca Nastase-Anysz, 2020. "Applied Communication Methods of Relationship Marketing for Adapting the Business to the Crisis Environment," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 1246-1258.
    9. Raluca Nastase-Anysz & Andrada Baba, 2020. "Public Sector Intervention in a Period of Crisis: Study Based on Applied Relationship Marketing Principles," European Research Studies Journal, European Research Studies Journal, vol. 0(Special 1), pages 923-935.

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