Customer asset management in action: using customers portfolio for allocating resources across business-to-business relationships for improved shareholder value

Suvi Nenonen Customer asset management in action: using customer portfolios for allocating resources across business-to-business relationships for improved shareholder value Customers are crucial assets to all firms as customers are the ultimate source of all cash flows. Regardless this financial importance of customer relationships, for decades there has been a lack of suitable frameworks explaining how customer relationships contribute to the firm financial performance and how this contribution can be actively managed. In order to facilitate a better understanding of the customer asset, contemporary marketing has investigated the use of financial theories and asset management practices in the customer relationship context. Building on this, marketing academics have promoted the customer lifetime value concept as a solution for valuating and managing customer relationships for optimal financial outcomes. However, the empirical investigation of customer asset management lags behind the conceptual development steps taken. Additionally, the practitioners have not embraced the use of customer lifetime value in guiding managerial decisions - especially in the business-to-business context. The thesis points out that there are fundamental differences between customer relationships and investment instruments as investment targets, effectively eliminating the possibility to use financial theories in a customer relationships context or to optimize the customer base as a single investment portfolio. As an alternative, the thesis proposes the use of customer portfolio approach for allocating resources across the customer base for improved shareholder value. In the customer portfolio approach, the customer base of a firm is divided into multiple portfolios based on customer relationships’ potential to contribute to the shareholder value creation. After this, customer management concepts are tailored to each customer portfolio, designed to improve the shareholder value in their own respect. Therefore, effective customer asset management with the customer portfolio approach necessitates that firms are able to manage multiple parallel customer management concepts, or business models, simultaneously. The thesis is one of the first empirical studies on customer asset management, bringing empirical evidence from multiple business-to-business case studies on how customer portfolio models can be formed, how customer portfolios can be managed, and how customer asset management has contributed to the firm financial performance.

Customer asset management in action: using customers portfolio for allocating resources across business-to-business relationships for improved shareholder value

Suvi Nenonen Customer asset management in action: using customer portfolios for allocating resources across business-to-business relationships for improved shareholder value Customers are crucial assets to all firms as customers are the ultimate source of all cash flows. Regardless this financial importance of customer relationships, for decades there has been a lack of suitable frameworks explaining how customer relationships contribute to the firm financial performance and how this contribution can be actively managed. In order to facilitate a better understanding of the customer asset, contemporary marketing has investigated the use of financial theories and asset management practices in the customer relationship context. Building on this, marketing academics have promoted the customer lifetime value concept as a solution for valuating and managing customer relationships for optimal financial outcomes. However, the empirical investigation of customer asset management lags behind the conceptual development steps taken. Additionally, the practitioners have not embraced the use of customer lifetime value in guiding managerial decisions - especially in the business-to-business context. The thesis points out that there are fundamental differences between customer relationships and investment instruments as investment targets, effectively eliminating the possibility to use financial theories in a customer relationships context or to optimize the customer base as a single investment portfolio. As an alternative, the thesis proposes the use of customer portfolio approach for allocating resources across the customer base for improved shareholder value. In the customer portfolio approach, the customer base of a firm is divided into multiple portfolios based on customer relationships’ potential to contribute to the shareholder value creation. After this, customer management concepts are tailored to each customer portfolio, designed to improve the shareholder value in their own respect. Therefore, effective customer asset management with the customer portfolio approach necessitates that firms are able to manage multiple parallel customer management concepts, or business models, simultaneously. The thesis is one of the first empirical studies on customer asset management, bringing empirical evidence from multiple business-to-business case studies on how customer portfolio models can be formed, how customer portfolios can be managed, and how customer asset management has contributed to the firm financial performance.

Customer Commitment and Key Account Management

What is the nature of customer commitment in business-to-business relationships and what are its antecedents? What Key Account Management practices help to build customer commitment? Commitment is an important element of Key Account Management since customer relationships are built upon a the foundation of commitment. Building long-term key account relationships occurs by enhancing and maintaining their commitment. Customer commitment has various antecedents, and managing commitment involves focusing on these antecedents. This paper explains the nature of commitment and describes its antecedents. It also suggests how to manage each of these antecedents to strengthen customer commitment.

Profitable Customer Management: A Study in Retail Banking

The increasing focus of relationship marketing and customer relationship management (CRM) studies on issues of customer profitability has led to the emergence of an area of research on profitable customer management. Nevertheless, there is a notable lack of empirical research examining the current practices of firms specifically with regard to the profitable management of customer relationships according to the approaches suggested in theory. This thesis fills this research gap by exploring profitable customer management in the retail banking sector. Several topics are covered, including marketing metrics and accountability; challenges in the implementation of profitable customer management approaches in practice; analytic versus heuristic (‘rule of thumb’) decision making; and the modification of costly customer behavior in order to increase customer profitability, customer lifetime value (CLV), and customer equity, i.e. the financial value of the customer base. The thesis critically reviews the concept of customer equity and proposes a Customer Equity Scorecard, providing a starting point for a constructive dialog between marketing and finance concerning the development of appropriate metrics to measure marketing outcomes. Since customer management and measurement issues go hand in hand, profitable customer management is contingent on both marketing management skills and financial measurement skills. A clear gap between marketing theory and practice regarding profitable customer management is also identified. The findings show that key customer management aspects that have been proposed within the literature on profitable customer management for many years, are not being actively applied by the banks included in the research. Instead, several areas of customer management decision making are found to be influenced by heuristics. This dilemma for marketing accountability is addressed by emphasizing that CLV and customer equity, which are aggregate metrics, only provide certain indications regarding the relative value of customers and the approximate value of the customer base (or groups of customers), respectively. The value created by marketing manifests itself in the effect of marketing actions on customer perceptions, behavior, and ultimately the components of CLV, namely revenues, costs, risk, and retention, as well as additional components of customer equity, such as customer acquisition. The thesis also points out that although costs are a crucial component of CLV, they have largely been neglected in prior CRM research. Cost-cutting has often been viewed negatively in customer-focused marketing literature on service quality and customer profitability, but the case studies in this thesis demonstrate that reduced costs do not necessarily have to lead to lower service quality, customer retention, and customer-related revenues. Consequently, this thesis provides an expanded foundation upon which marketers can stake their claim for accountability. By focusing on the range of drivers and all of the components of CLV and customer equity, marketing has the potential to provide specific evidence concerning how various activities have affected the drivers and components of CLV within different groups of customers, and the implications for customer equity on a customer base level.

Customer Relationship Dissolution - What Do We Know and What Do We Need to Know?

Our paper can be seen as a supplement to Halinen-Kaila and Tähtinen' s (2000) review of different direct research approaches on the ending of exchange relationships. Our purpose is to illuminate the borderline between research explicitly focusing on ending and research implicitly considering ending of relationships. Another purpose is to give an overview of how researchers within the Nordic School of Service Management and Nordic School of Relationship Marketing have approached customer relationship ending. A third purpose is to put forward a managerial perspective and managerial issues related to relationship ending. Finally we present some conclusions regarding further research avenues concerning relationship ending.

A Story about a Message that was a Story: Message Form and its Implications to Knowledge Flow

Knowledge Flow, my dear friend! I would like to introduce you to a close relative of yours: Organizational Communication. You might want to take a moment to hear what your newfound kin has to say. As bright as you are dear Flow, you're missing a piece of the puzzle - for one cannot study any aspect of an organization relating to communication without acknowledging the message. Without a message, communication does not exist. Organizational Communication has always appreciated this. Perhaps the time has come for you to join rank and do so too? The main point of this work is to prove that the form of a message considerably affects communication, interpretation - and knowledge flow. As stories are at the heart of this thesis; and entertaining, reader-friendly communication its main argument, the entire manuscript is written in story form and is intentionally breaking academic writing tradition as far as writing style goes. Each chapter reads as a story of sorts and put together they create a grand narrative of my journey as a PhD student, the research I have conducted and the outcomes of this work. Thus if a reader hopes to make any sense of this title, she must read it in the same way one would read a novel, from beginning to end. This is a thesis with three aspirations. First, it sets out to prove that knowledge flow cannot be studied without a message. Second, it moves on to give the reader a once-over of a much used message form: storytelling. After these two goals are tackled the path is clear to research if message form indeed is as essential as claimed. I do so through both a qualitative and a quantitative study. The former acted as both a stepping stone into the research area and as an inspirational pilot, from which the research design for the larger quantitative study was drawn. Together, these two studies answered my research question - and allowed me to fulfill the third, final and foremost aspiration of this study - bridging the gap between two separate fields of knowledge management: knowledge flow and storytelling.

Diakoniatyön paikka ihmisten arjessa

This study examines the diaconia work of the Finnish Evangelical Lutheran Church from the standpoint of clients. The role of diaconia work has grown since the early 1990s recession, and since it established itself as one of the actors along with other social organizations. Previous studies have described the changing role of diaconal work, especially from the standpoint of diaconia workers and co-operators. This research goes back to examine, beyond the activities of the diaconia work of everyday practices, its relations of ruling which are determining practices. The theoretical and methodological framework rises from the thinking of Dorothy E. Smith, the creator of institutional ethnography. Its origins are in feminism, Marxism, phenomenology, etnomethodology, and symbolic interactionism. However, it does not represent any school. Unlike the objectivity-based traditional sociology, institutional ethnography has its starting point in everyday life, and people s subjective experience of it. Everyday life is just a starting point, and is used to examine everyday life s experiences of hidden relations of ruling, linking people and organizations. The level of generalization is just on the relations of ruling. The research task is to examine those meanings of diaconia work which are embedded in its clients experiences. The research task is investigated with two questions: how diaconia work among its clients takes shape and what kinds of relations of ruling exist in diaconia work. The meanings of diaconia work come through an examination of the relations of ruling, which create new forms of diaconal work compared with previous studies. For the study, two kinds of data were collected: a questionnaire and ethnographic fieldwork. The first data set was collected from diaconal workers using the questionnaire. It gives background information of the diaconia work process from the standpoint of the clients. In the ethnographic study there were two phases. The first ethnographic material was collected from one local parish by observing, interviewing clients and diaconal workers and gathering documents. The number of observations was 36 customer appointments, and 29 interviews. The second ethnographic material was included as a part of the analysis, in which ruling relations in people s experiences were collected from the transcribed data. Close reading and narrative analysis are used as analysing methods. The analysis has three phases. First, the experiences are identified with close reading; the following step is to select some of the institutional processes that are shaping those experiences and are relevant for the research. At the third stage, those processes are investigated in order to describe analytically how they determine people s experience. The analysis produces another narrative about diaconia work, which provides tools for examining the diaconal work from a new perspective. Through the analysis it is possible to see diaconia as an exchange ratio, in which the exchange takes place between a client and a diaconia worker, but also more broadly with other actors, such as social workers, shop clerks, or with other parishioners. The exchange ratio is examined from the perspective of power which is embedded in the client s experiences. The analysis reveals that the most important relations of ruling are humiliation and randomness in the exchange ratio of diaconia work; valuating spirituality above the bodily being; and replacing official social work. The results give a map about the relations of ruling of diaconia work which gives tools to look at diaconia work s meanings to the clients. The hidden element of humiliation in the exchange ratio breaks the current picture of diaconia work. The ethos of the holistic encounters and empathic practices are shown to be of another kind when spirituality is preferred to the bodily being. Nevertheless, diaconia appears to be a place for a respectful encounter, especially in situations where the public sector s actors are retreating on liability or clients are in a life crisis. The collapse of the welfare state structures imposes on diaconia work tasks that have not previously belonged to it. At the local level, clients receive partners from diaconia workers in order to advocate them in the welfare system. Actions to influence the wider societal structures are not reached because of lacking resources. An awareness of the oppressive practices of diaconia work and their critical reviewing are the keys to the development of diaconia work, since there are such practices even in holistic and respectful diaconia work. While the research raises new information for the development of diaconia work, it also opens up new aspects for developing other kinds of social work by emphasizing the importance of taking people s experiences seriously. Keywords: diaconia work, institutional ethnography, Dorothy E. Smith, experience, customer, relations of ruling.

Emerging bioenergy business at Finnish independent industrial sawmills

Finnish forest industry is in the middle of a radical change. Deepening recession and the falling demand of woodworking industry´s traditional products have forced also sawmilling industry to find new and more fertile solutions to improve their operational preconditions. In recent years, the role of bioenergy production has often been highlighted as a part of sawmills´ business repertoire. Sawmilling produces naturally a lot of by-products (e.g. bark, sawdust, chips) which could be exploited more effectively in energy production, and this would bring more incomes or maybe even create new business opportunities for sawmills. Production of bioenergy is also supported by government´s climate and energy policies favouring renewable energy sources, public financial subsidies, and soaring prices of fossil fuels. Also the decreasing production of domestic pulp and paper industry releases a fair amount of sawmills´ by-products for other uses. However, bioenergy production as a part of sawmills´ by-product utilization has been so far researched very little from a managerial point of view. The purpose of this study was to explore the relative significance of the main bioenergy-related processes, resources and factors at Finnish independent industrial sawmills including partnerships, cooperation, customers relationships and investments, and also the future perspectives of bioenergy business at these sawmills with the help of two resource-based approaches (resource-based view, natural-resource-based view). Data of the study comprised of secondary data (e.g. literature), and primary data which was attracted from interviews directed to sawmill managers (or equivalent persons in charge of decisions regarding bioenergy production at sawmill). While a literature review and the Delphi method with two questionnaires were utilized as the methods of the study. According to the results of the study, the most significant processes related to the value chain of bioenergy business are connected to raw material availability and procurement, and customer relationships management. In addition to raw material and services, the most significant resources included factory and machinery, personnel, collaboration, and geographic location. Long-term cooperation deals were clearly valued as the most significant form of collaboration, and especially in processes connected to raw material procurement. Study results also revealed that factors related to demand, subsidies and prices had highest importance in connection with sawmills´ future bioenergy business. However, majority of the respondents required that certain preconditions connected to the above-mentioned factors should be fulfilled before they will continue their bioenergy-related investments. Generally, the answers showed a wide divergence of opinions among the respondents which may refer to sawmills´ different emphases and expectations concerning bioenergy. In other words, bioenergy is still perceived as a quite novel and risky area of business at Finnish independent industrial sawmills. These results indicate that the massive expansion of bioenergy business at private sawmills in Finland is not a self-evident truth. The blocking barriers seem to be connected mainly to demand of bioenergy and money. Respondents´ answers disseminated a growing dissatisfaction towards the policies of authorities, which don´t treat equally sawmill-based bioenergy compared to other forms of bioenergy. This proposition was boiled down in a sawmill manager´s comment: “There is a lot of bioenergy available, if they just want to make use of it.” It seems that the positive effects of government´s policies favouring the renewables are not taking effect at private sawmills. However, as there anyway seems to be a lot of potential connected to emerging bioenergy business at Finnish independent industrial sawmills, there is also a clear need for more profound future studies over this topic.

Offering Development in the Restaurant Sector. A Comparison Between Customer Perceptions and Management Beliefs

The present study concentrates on a small – but important – area of marketing: offering development within the service sector, more exactly the restaurant sector. The empirical part of the study has been carried out in the Helsinki metropolitan area using six successful restaurants. First, a conceptual offering development model is developed based on how the management perceives the offering development processes. Second, customer perceptions of offerings and management beliefs about how the customers perceive the offerings are analysed. Finally, an extended offering development model is created based on the management perceptions (the first model) as well as on observed gaps between customer perceptions of offerings and management beliefs about the customer perceptions. The study reveals that customer perceptions and management beliefs are rather similar but also that some differences exist. These differences are taken into account in the extended offering development model (the second model). The empirical data was collected through interviews and surveys. All together 393 customers and 14 managers participated in the study. The study suggests that successful offering development has to be closely connected with the general strategy of the company. A shared vision within the company in combination with a systematic strategic offering development process create a sound basis for the practical development work. The main contribution of the study is the extended offering development model forming a framework for further studies within the area.

Water Management in Cambodia Resources and Relations

In Cambodia, water has a special purpose as a source of life and livelihoods. Along with agriculture, fishing and forest use, industry, hydropower, navigation and tourism compete for the water resources. When rights and responsibilities related to essential and movable water are unclear, conflicts emerge easily. Therefore, water management is needed in order to plan and control the use of water resources. The international context is characterized by the Mekong River that flows through six countries. All of the countries by the river have very different roles and interests already depending on their geographical location. At the same time, water is also a tool for cooperation and peace. Locally, the water resources and related livelihoods create base for well-being, for economical and human resources in particular. They in turn are essential for the local people to participate and defend their rights to water use. They also help to construct the resource base of the state administration. Cambodia is highly dependent on the Mekong River. However, Cambodia has a volatile history whose effects can be seen for example in population structure, once suspended public institutions and weakened trust in the society. Relatively stable conditions came to the country as late as in the 1990s, therefore Cambodia for example has a weak status within the Mekong countries. This Master s thesis forms international, national and local interest groups of water use and analyzes their power relations and resources to affect water management. The state is seen as the salient actor as it has the formal responsibility of the water resources and of the coordination between the actions of different levels. In terms of water use this study focuses on production, in management on planning and in power relations on the resources. Water resources of Cambodia are seen consisting of the Mekong River and Tonle Sap Lake and the time span of the study is between the years 1991 and 2006. The material consists of semi-structured interviews collected during summer 2006 in Finland and in Cambodia as well as of literature and earlier studies. The results of the study show that the central state has difficulties to coordinate the actions of different actors because of its resource deficit and internal conflicts. The lessons of history and the vested interests of the actors of the state make it difficult to plan and to strengthen legislation. It seems that the most needed resources at the central state level are intangible as at the village level instead, the tangible resources (fulfilling the basic needs) are primarily important. The local decision-making bodies, NGOs and private sector mainly require legislation and legitimacy to support their role. However, the civil society and the international supporters are active and there are possibilities for new cooperation networks. Keywords: Water management, resources, participation, Cambodia, Mekong

Pain in juvenile idiopathic arthritis : parents and children as agents of disease management

Juvenile idiopathic arthritis (JIA) is a severe childhood disease usually characterized by long-term morbidity, unpredictable course, pain, and limitations in daily activities and social participation. The disease affects not only the child but also the whole family. The family is expected to adhere to an often very laborious regimen over a long period of time. However, the parental role is incoherently conceptualized in the research field. Pain in JIA is of somatic origin, but psychosocial factors, such as mood and self-efficacy, are critical in the perception of pain and in its impact on functioning. This study examined the factors correlating and possibly explaining pain in JIA, with a special emphasis on the mutual relations between parent- and patient-driven variables. In this patient series pain was not associated with the disease activity. The degree of pain was on average fairly low in children with JIA. When the children were clustered according to age, anxiety and depression, four distinguishable cluster groups significantly associated with pain emerged. One of the groups was described by concept vulnerability because of unfavorable variable associations. Parental depressive and anxiety symptoms accompanied by illness management had a predictive power in discriminating groups of children with varying distress levels. The parent’s and child’s perception of a child’s functional capability, distress, and somatic self-efficacy had independent explanatory power predicting the child’s pain. Of special interest in the current study was self-efficacy, which refers to the belief of an individual that he/she has the ability to engage in the behavior required for tackling the disease. In children with JIA, strong self-efficacy was related to lower levels of pain, depressive symptoms and trait anxiety. This suggests strengthening a child’s sense of self-efficacy, when helping the child to cope with his or her disease. Pain experienced by a child with JIA needs to be viewed in a multidimensional bio-psycho-social context that covers biological, environmental and cognitive behavioral mechanisms. The relations between the parent-child variables are complex and affect pain both directly and indirectly. Developing pain-treatment modalities that recognize the family as a system is also warranted.

Supervisors' emerging role in second-generation knowledge management

This study examines supervisors' emerging new role in a technical customer service and home customers division of a large Finnish telecommunications corporation. Data of the study comes from a second-generation knowledge management project, an intervention research, which was conducted for supervisors of the division. The study exemplifies how supervision work is transforming in high technology organization characterized with high speed of change in technologies, products, and in grass root work practices. The intervention research was conducted in the division during spring 2000. Primary analyzed data consists of six two-hour videorecorded intervention sessions. Unit of analysis has been collective learningactions. Researcher has first written conversation transcripts out of the video-recorded meetings and then analyzed this qualitative data using analytical schema based on collective learning actions. Supervisors' role is conceptualized as an actor of a collective and dynamic activity system, based on the ideas from cultural historical activity theory. On knowledge management researcher has takena second-generation knowledge management viewpoint, following ideas fromcultural historical activity theory and developmental work research. Second-generation knowledge management considers knowledge embedded and constructed in collective practices, such as innovation networks or communities of practice (supervisors' work community), which have the capacity to create new knowledge. Analysis and illustration of supervisors' emerging new role is conceptualized in this framework using methodological ideas derived from activity theory and developmental work research. Major findings of the study show that supervisors' emerging new role in a high technology telecommunication organization characterized with high speed of discontinuous change in technologies, products, and in grass-root practices cannot be defined or characterized using a normative management role/model. Their role is expanding two-dimensionally, (1) socially and (2) in new knowledge, and work practices. The expansion in organization and inter-organizational network (social expansion) causes pressures to manage a network of co-operation partners and subordinates. On the other hand, the faster speed of change in technological solutions, new products, and novel customer wants (expansion in knowledge) causes pressures for supervisors to innovate quickly new work practices to manage this change. Keywords: Activity theory, knowledge management, developmental work research, supervisors, high technology organizations, telecommunication organizations, second-generation knowledge management, competence laboratory, intervention research, learning actions.

A model Integrating the Facilities Management Process with the Building End User’s Business Process (ProFacil)

The ProFacil model is a generic process model defined as a framework model showing the links between the facilities management process and the building end user’s business process. The purpose of using the model is to support more detailed process modelling. The model has been developed using the IDEF0 modelling method. The ProFacil model describes business activities from the generalized point of view as management-, support-, and core processes and their relations. The model defines basic activities in the provision of a facility. Examples of these activities are “operate facilities”, “provide new facilities”, “provide re-build facilities”, “provide maintained facilities” and “perform dispose of facilities”. These are all generic activities providing a basis for a further specialisation of company specific FM activities and their tasks. A facilitator can establish a specialized process model using the ProFacil model and interacting with company experts to describe their company’s specific processes. These modelling seminars or interviews will be done in an informal way, supported by the high-level process model as a common reference.