Customer value, profitability and risk management

Abstract

In prior chapters, a phrase something like 'without customers there is no business and no organisation' has been regularly stated in a range of forms. Oddly, the significance of this phrase is not greatly reflected in either management accounting or marketing texts and the teaching of these areas (Gleaves, Burton, Kilshoff, Bates & Whittington, 2008). While customer profitability (CP), and customer value (CV) to a lesser extent, appear in management accounting texts, considerations of customer lifetime value (CV) and customer equity (CE), which are beginning to have some resonance in marketing texts and the literature do not (Dwyer, J997; Berger & Nasr, 1998; Bayon, Gutsche & Bauer, 2002; Kotler, 2003; Gupta & Lehmann, 2003 & 2005; Rust, Lemon & Zeithaml, 2004; Storbacka, 2006). While there is evidence of definitional issues related to these terms within the marketing literature and, to a lesser degree, between the marketing and management accounting literatures (Gleaves, et al, 2008), given the centrality of customer to an organisation's revenues and profit, little appears to have been done in exploring the link between customer and organiational value (Bauer & Hammerschmidt, 2005). Further, given the significance of customers to organisational survival, little has been done to assess the business risk implications of this significant organisational relationship (Ryals, 2002).