| Summary: | There has been an increasing recognition of the importance of customer profitability
analysis and its use in a relationship marketing strategy (Carrol, 1992-1993; Johnson,
1992; Storbacka, 1993). Yet, to date, this has largely been unsubstantiated by
academic research. A case study was conducted at a bank to describe a relationship
marketing strategy and a customer profitability analysis (CPA) system and to discover
how the customer profitability information provided by the CPA system is used to
support the relationship marketing strategy.
The Bank follows a relationship marketing strategy as described by Christopher et al
(1991). It was found that the bank currently has a first generation CPA system
(Bellis-Jones, 1989). Recognising the limitations of such an analysis, the bank is in
the process of designing and implementing a new CPA system, which clearly exhibits
the characteristics of second generation CPA (Foster & Gupta, 1994). It was found
that customer revenue is easily definable, yet customer costs and customer risk pose a
significant issue when included in a CPA system. A number of cost and risk areas are
still unresolved, as are some issues regarding the use of the customer profitability
information.
The Bank does not use customer profitability as the basis of its customer segmentation
due to the inadequacy of the current CPA system to accurately determine customer
profitability. Instead, income is used as a substitute for profitability and it is income
that forms the basis of the bank's customer segmentation. It was also found that the
Bank intends to merge CPA information with customer relationship information, once
the new customer profitability system is implemented.
Despite limitations, this thesis extends the body of knowledge concerning
management accounting information and relationship marketing, by providing a
valuable insight into these areas in a New Zealand context.
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