Loyalty-based segmentation and the customer development process

Simon Knox

European Management Journal, 1998, vol. 16, issue 6, 729-737

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.

Date: 1998
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