DISCOVERING A NEW B2B APPROACH TO SUCCESSFUL CUSTOMER PROFITABILITY ENHANCEMENT The case of Formica-PSM

Abstract

Profitability of businesses is a very interesting area to study, as this is the key to survival and development for all companies. Despite its crucial importance, many companies are managing profitability by using rather restricted and short-term measures. This thesis presents an alternative way to obtain profitability, which implies a focus on customer relationship management.

Our aim is consequently to determine which relationship characteristics are related to customer profitability in order to focus on the most promising prospects. To accomplish this purpose and to increase the knowledge in our area of research, a theoretical model will be developed. Based on these findings we will further suggest implications for tailored customer management.

The subject of customer profitability was approached from a quantitative perspective and in the context of our case company Formica-PSM in Sweden. The company is active in the high pressure laminate industry, which is characterised by maturity and overcapacity. This further emphasises the need for innovative ways to enhance profitability.

The results of our research allowed us to identify six relationship characteristics that are directly influencing customer profitability and six additional determinants of these direct factors that indirectly affect customer profitability. Once the customer base was segmented in terms of their level of profitability, they were evaluated on the basis of these identified factors. Finally, conclusions and recommendations were drawn for customers to be targeted in a way that corresponds to their current or potential contribution to profit.