Linking Customer Management Effort to Customer Profitability in Business Markets

Abstract

Chain-link frameworks such as the service–profit chain (SPC) are much discussed as a means to link customer profits to operational resources under the influence of vendor managers, though empirical testing to date has been limited primarily to consumer services settings. In this article, the authors adapt the SPC framework to accommodate characteristics of business markets, specifically the complex decision-making unit, strategic supplier selection, and resource allocation at the individual customer level. They also extend the SPC framework to allow for a richer description of the complex linkages between vendor effort and account profitability, namely, nonlinear linkages and differential responsiveness occasioned by customer-specific factors such as competitive context. Controlling for such factors illuminates, to some degree, why similar levels of customer management effort and/or performance can yield quite different customer profitability outcomes. The authors present an application that demonstrates how adaptation and extension of the SPC to business markets can provide vendors with (1) insights into the process that culminates in individual customer profitability and (2) useful guidelines for adapting their customer management efforts at the individual account level with an aim to improve account profitability. The results show the importance of accounting for decreasing returns to customer management effort at a given account, and they reinforce the notion of customer delight.