Description
White paper on Taxonomy for Customer Relationship Ownership in Business-to-Consumer Markets:- Consumer-to-business (C2B) is a business model in which consumers (individuals) create value, and firms consume this value. For example, when a consumer writes reviews, or when a consumers gives a useful idea for new product development, then this individual is creating value to the firm, if the firm adopts the input. Excepted concepts are crowd sourcing and co-creation.
White paper on Taxonomy for Customer Relationship Ownership in Business-to-Consumer Markets
Abstract This paper aims at developing a taxonomy with different strategic options for companies to manage their customer relationships using the appropriate relationship ownership alternative. The author argues that one of the key measures for sound customer relationship management (CRM) is how customer relationships are owned. A set of six key strategies and their sub strategies have been identified to help companies manage their customer base to make CRM a more efficient and effective method when selecting the appropriate organisational structure. The concept opens a strategy continuum ranging between internal and external ownership of relationships. Research is limited to business-to-consumer relationships. The paper is entirely conceptual in its nature and comprises a theoretical exploration of possible concepts.
Introduction: Ownership of Relationships as a Marketing Problem In times of fierce competition for market share, companies have to apply new strategies to manage their existing customer segments to enhance their customer relationship management both in services and product marketing (see Grönroos, 1994; Gummesson, 1994; Bitner, 1995; Baker, Buttery and Baker-Buttery, 1998; Berry, 2000). Physical and/or virtual organisational platforms are needed to manage the (sometimes huge) customer base of a company. Some of a firm's customers might be highly profitable; others may need measures to increase the customer relationship's efficiency. In the first case one may think of hyper affluent private banking customers, in the latter case it may be the mass retail customers of a bank. Both segments need to be embedded in the appropriate organisational structure. Companies also have to ask themselves whether it still makes sense to 'own' certain customer relationships in the future. The company may have to choose different approaches for different customer segments in order to be able to administer and manage them properly. Therefore, one of the possible levers for CRM is the choice of ownership of the customer relationships. Relationships as assets for a company are based on the concept of the resourcebased view (Penrose, 1959; Wernerfelt, 1984; Prahalad and Hamel, 1990; Barney 1991; 1992; 1999). This approach is important when it comes to managing the relationships (customers).Ownership as part of the management of relationships can be defined as a company's formal structure to administer its customer portfolio. Only few researchers have analysed potential strategies for the ownership of relationships (Schögel, Birkhofer and Tomczak, 1999) and no proper systematic is known which helps managers to decide which organisational structure to choose for the ownership of relationships. To close the gap a taxonomy will be developed in the following sections that can be used as a management tool.
Developing a Taxonomy for Customer Relationship Ownership Strategies To systemise the potential alternatives a company can choose from, it is imperative to relate to marketing coalition and marketing co-operation research (e.g. Brandenburger and Nalebuff,
3392
1996; Schögel, Birkhofer and Tomczak, 1999; Kakabadse and Kakabadse, 2000; Palmer, 2000). The main idea of each marketing coalition is to be resourceful, i.e. to decrease transaction costs and use partners for joint marketing activities. In a first approach there are three groups of corporate entities which play an important role in forming the taxonomy. They are a) business units within the company, b) external providers and c) competitors (Schögel, Birkhofer and Tomczak, 1999). Using these three types augmented by sub forms it is possible to identify six strategic alternatives as shown in figure one. The six alternatives range on a continuum between the poles 'internal' versus 'external' ownership of the customer relationships. In the next sections each of the strategies will be described including the sub strategies that apply.
Figure 1: Taxonomy of Customer Relationship Ownership Strategies Fully Internal Ownership The first alternative is the traditional approach still widely practiced in companies. Management of the customer relationships lies with the company itself and customers are 'owned' completely internally. None of the organisational structures have to be changed. The company keeps all their customers as is and tries to increase profitability by cross- or upselling, alignment of internal processes and a decrease in transaction costs. For the customer there is no change in organisational setting. The "line of visibility" (Shostack, 1984; 1987; Stauss and Seidel 1997, p. 39) for the customer - in this case indicating which organisation is visible for the customer - does not change. A few advantages and disadvantages can be identified for this alternative. The advantages are:
• That the company remains autonomous and does not lose any market share. •
No change in external perception for the customer. The disadvantages can be: • That unwanted customers remain with the company and cause further profitability loss. • That the company remains encrusted and does not open to new strategic approaches to improve its situation and customer management.
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Partial Internal Ownership The second potential strategy can be called 'partial internal ownership' of the customer relationships. The company "shifts" customer segments or certain customer relationships to some other strategic business unit (SBU). This strategy corresponds with the above mentioned alternative a) of managing customer relationships through a business unit within the company. There are various sub strategies that can be identified: a) shifting customer relationships to another SBU b) foundation of a new "internal" SBU, and c) foundation of an "external" SBU. Shifting customer relationships to another SBU: Customer relationships or whole customer segments can be moved to another and more efficiently operated SBU. An example of this sub strategy is the shift of retail customers from an asset management unit to a private customers unit where they are managed together with affluent customers. Foundation of a new "internal" SBU: A new organisational unit can be created. A bank could found its own SBU for retail customers to split them from highly affluent customers. Foundation of a new "external" SBU: Finally, the foundation can focus on its own spin-off or subsidiary: "(?) many organisations develop world-class competencies in supplementary or non-core activities that they, in turn, spin off into separate organisations with the intent of making them profitable" (Kakabadse and Kakabadse, 2000, pp. 685). This form of managing the customer relationships can be called "individual spin-off" or "individual venture" (Kakabadse and Kakabadse, 2000, p. 685). In many cases the individual venture remains within the organisational structure of the parent company but has its own market access and acts as a separate profit centre. In all three cases there is a change in the line of visibility for the customers as they will be introduced to a different SBU to take care of them. The advantages of the alternative are: • A clear organisational separation and responsibility for each of the customer segments by creating distinct divisions. As each SBU is its own profit centre a more focused and profit controlled management of the single customer segments is possible. • The chance of separate branding of each of the SBUs. This helps the customers to identify their specific SBU. Some disadvantages are: • The costs of the re-organisation of the SBUs. The foundation of a new SBU may exceed the costs of applying a more efficient way of customer management with other measures. • The lack of the customers' differentiation of the new sub brands. Some customers may get confused with the branding of the new SBUs and may only focus on the parent brand. Co-operative Ownership The third alternative 'distributes' customer relationships to other providers or companies. This option relates to the above mentioned alternative b) external providers and is a form of cooperation. Basically, it is a strategic alliance which helps create a joint marketing effort (Kakabadse and Kakabadse, 2000, p. 687). There are two different forms: a) co-operation with a bottleneck or b) co-operation on a common platform. Co-operation with a bottleneck: One of the companies or a provider acts as the primus inter pares, i.e. it is the bottleneck towards the customer and bundles all the activities so that the customer has a single point of contact with that particular company (line of visibility). Only the company acting as the bottleneck has its own proper branding; the secondary providers do not appear as branded units (see also Schögel, Birkhofer and Tomczak, 1999, pp. 13).
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Co-operation on a common platform: Instead of choosing one of the providers as a bottleneck each of the providers or companies acts as equal partners on a joint (virtual) platform (see Schögel, Birkhofer and Tomczak, 1999, pp. 12). For the customer, this results in several touch points with different providers. The advantages of 'co-operative ownership' are: • That each of the companies or providers has direct or indirect access to the customers. • That each of the providers or companies brings in specific knowledge and resources that can be offered to the customers. Some disadvantages are: • Customer confusion as of the number of different providers approaching the consumer. • Power constellations within the co-operation that may prevent proper management of the customer relationships. Merged Ownership On the continuum we are approaching the 'external ownership' pole. The fourth strategy relates to the foundation of a joint spin-off through different companies: "Certain companies form spin-off, market facing units in co-operation with other commercial entities" (Kakabadse and Kakabadse, 2000, p. 686). There are no sub strategies for 'merging' the customer relationships. The idea is to bundle two or more companies' competences in one physical or virtual spin-off to make use of scale effects. This "joint spin-off" (Kakabadse and Kakabadse, 2000, p. 685) will be branded and original customers from the founding organisations may be shifted to the new spin-off or new customers will be managed through the new joint subsidiary. Existing customers can become part of the new spin-off but will have to face a change with regard to their line of visibility. The advantages can be described as: • The use of synergies is obvious as customer relationships of two or more different companies are pooled in one new company. • The chance for separate branding disconnected from the parent companies. Disadvantages can be: • An increase in conflicts between the parties if the management of the new spin-off is not organised properly. • The irritation of the customers. Customers may not appreciate becoming part of a different entity and may terminate their relationship with the new provider. Partial External Ownership Partial external ownership or 'leasing out' of customer relationships is the fifth strategy in the taxonomy. It is another form of co-operation but with fewer strings attached than the merged ownership. This strategy borrows elements from outsourcing (see Kakabadse and Kakabadse, 2000; McIvor, 2000; de Boer, Gaytan, and Arroyo, 2006) to address organisational competitiveness (Jiang and Qureshi, 2006) and from the concept of franchising (see e.g. Castrogiovanni and Justis, 1998; Sydow, 1998; Sashi and Karuppur, 2002). The objective is to outsource the customer relationships without the 'de facto' losing ownership. The usage of the customer database is granted to one or more other companies. This concept is based on the following logic. It is a co-operation between independent companies ('franchiser' and 'franchisee'). The 'franchisee' manages the customers based on the regulations given by the 'franchiser'. The 'franchisee' compensates the 'franchiser' for the usage rights of the customer relationships. For customers the line of visibility will be drawn between them and the 'franchisee'. This type a) of franchising can be called a 'single sided lease' (or franchising). A 3395
second type b) is a 'double sided lease' of relationships. A company A ('franchiser') can lease out its customer relationships to a company B ('franchisee'). In return the 'franchisee' (B) acts as a 'franchiser' as well and leases out its own existing customer relationships to the first company (A). This form of ownership has some advantages: • No loss of customer relationship ownership. The original company still owns the customer relationships. • Potential increase of profits through a wider customer base or new access to customers. The disadvantages may be: • An uncontrolled access of customer relationships may occur if customers are being leased out to more than one company. • Customer confusion about who the company is selling to. Fully External Ownership The final strategy relating to the above mentioned alternative c) competitors (see also Bengtsson and Kock, 1999) is called 'fully external ownership' or 'selling' of customer relationships. This option means a total externalisation of customer relationships by selling (parts of) the customer base. The company sells its customer assets to one or more competitors or partners. There are two forms that can be identified: a) isolated selling or b) integrated selling. Isolated selling means the sale of a certain and very specific customer segment only. Integrated selling means the whole company including its customer segments is purchased by another company. This usually happens during a merger and acquisition (M&A) process. There are some advantages to this alternative:
• Increase of profitability for the selling company/owners through the return from the sale. •
Access to new customer segments for the purchasing company. Disadvantages are: • The loss of strategic positions and market share in certain areas of business for the seller. • That the remaining customer segments of the selling company may lose customers because they defect from the company after having heard of the sale.
Conclusion and Future Research The text has indicated that there are six main strategies for customer relationship ownership including a variety of sub strategies. Manager can use the taxonomy in their decision making process. It will support them by being able to compare several strategic alternatives before making the decision. When having to choose the right strategy managers have to take several factors into account: potential conflicts with the company to co-operate with or sell to; conflicts with customers due to the change in organisational structure / management approach; costs and benefits of the reorganisation. For most of the explained strategies examples in practise can be found that support the idea of the theoretical concept. In order to verify the concept research should focus on analysing whether all forms or other sub forms can be found as organisational structures and whether the taxonomy has to be altered if at all.
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References Baker, M., Buttery, E.A., Richter-Buttery, E.M., 1998. Relationship Marketing in Three Dimensions. Journal of Interactive Marketing 12(4), 47-62. Barney, J. B. 1991. Firm Resources and Sustained Competitive Advantage. Journal of Management 17 (1), 99-120. Barney, J. B. 1992. Integrating Organizational Behavior and Strategy Formulation Research: A Resource Based Analysis, in: Shrivastava, P., Huff, A., Dutton, J. (eds.), Advances in Strategic Management, Vol. 8, Greenwich, CI, 39-61. Barney, J. B. 1999. How a Firm's Capabilities Affect Boundary Decisions. Sloan Management Review 40 (Spring), 137-145. Berry, L.L., 2000. Relationship Marketing of Services. Growing Interest, Emerging Perspectives. In: Sheth, J.N., Parvatiyar, A. (eds.), Handbook of Relationship Marketing, London, 149-170. Bitner, M.J., 1995. Building Service Relationships. It's all about Promises. Journal of the Academy of Marketing Science 23 (4), 246-251. Bengtsson, M., Kock, S., 1999. Cooperation and competition in relationships between competitors in business networks. Journal of Business & Industrial Marketing 14(3), 178-193. Brandenburger, A.M., Nalebuff, B.J., 1996. Co-opetition, New York. Castrogiovanni, G.J., Justis, R.T., 1998. Franchising configurations and transitions. Journal of Consumer Marketing 15 (2), 170-190. De Boer, L., Gaytan, J., Arroyo, P., 2006. A satisficing model of outsourcing. Supply Chain Management: An International Journal 11(5), 444-455. Grönroos, C., 1994. From Marketing Mix to Relationship Marketing: Towards a Paradigm Shift in Marketing. Management Decision 32 (2), 4-20. Gummesson, E., 1994. Making Relationship Marketing Operational. International Journal of Service Industry Management 5 (5), 5-20. Jiang, B., Qureshi, A., 2006. Research on outsourcing results: current literature and future opportunities. Management Decision 44 (1), 44-55. Kakabadse, N., Kakabadse, A., 2000. Critical Review - Outsourcing: a paradigm shift. Journal of Management Development 19 (8), 670-728. McIvor, R., 2000. A practical framework for understanding the outsourcing process. Supply Chain Management: An International Journal 5 (1), 22-36. Palmer, A., 2000. Co-operation and competition: a Darwinian synthesis of relationship marketing. European Journal of Marketing 34 (5/6), 687-704.
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Penrose, E. T., 1959. The Theory of the Growth of the Firm, New York/London. Prahalad, C. K., Hamel, G. 1990. The Core Competences of the Corporation. Harvard Business Review 68 (3), 79-91. Sashi, C.M., Karuppur, D.P., 2002. Franchising in global markets: towards a conceptual framework. International Marketing Review 19 (5), 499-524. Schögel, M., Birkhofer, B., Tomczak, T., 1999. Kooperative Leistungssysteme: Eigenschaften, Herausforderungen und Lösungsansätze. Thexis 16 (3), 10-16. Shostack, G.L., 1984. Designing services that deliver. Harvard Business Review 62(1), 133139. Shostack, G.L., 1987. Service positioning through structural change. Journal of Marketing 51(1), 34-43. Stauss, B., Weinlich, B., 1997. Process-oriented measurement of service quality. Applying the sequential incident technique. European Journal of Marketing 31 (1), 33-55. Sydow, J., 1998. Franchise systems as strategic networks studying network leadership in the service sector. Asia Pacific Journal of Marketing and Logistics 10 (2), 108-120. Wernerfelt, B. 1984. A Resource-Based View of the Firm. Strategic Management Journal 5 (2), 171-180.
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doc_699002930.docx
White paper on Taxonomy for Customer Relationship Ownership in Business-to-Consumer Markets:- Consumer-to-business (C2B) is a business model in which consumers (individuals) create value, and firms consume this value. For example, when a consumer writes reviews, or when a consumers gives a useful idea for new product development, then this individual is creating value to the firm, if the firm adopts the input. Excepted concepts are crowd sourcing and co-creation.
White paper on Taxonomy for Customer Relationship Ownership in Business-to-Consumer Markets
Abstract This paper aims at developing a taxonomy with different strategic options for companies to manage their customer relationships using the appropriate relationship ownership alternative. The author argues that one of the key measures for sound customer relationship management (CRM) is how customer relationships are owned. A set of six key strategies and their sub strategies have been identified to help companies manage their customer base to make CRM a more efficient and effective method when selecting the appropriate organisational structure. The concept opens a strategy continuum ranging between internal and external ownership of relationships. Research is limited to business-to-consumer relationships. The paper is entirely conceptual in its nature and comprises a theoretical exploration of possible concepts.
Introduction: Ownership of Relationships as a Marketing Problem In times of fierce competition for market share, companies have to apply new strategies to manage their existing customer segments to enhance their customer relationship management both in services and product marketing (see Grönroos, 1994; Gummesson, 1994; Bitner, 1995; Baker, Buttery and Baker-Buttery, 1998; Berry, 2000). Physical and/or virtual organisational platforms are needed to manage the (sometimes huge) customer base of a company. Some of a firm's customers might be highly profitable; others may need measures to increase the customer relationship's efficiency. In the first case one may think of hyper affluent private banking customers, in the latter case it may be the mass retail customers of a bank. Both segments need to be embedded in the appropriate organisational structure. Companies also have to ask themselves whether it still makes sense to 'own' certain customer relationships in the future. The company may have to choose different approaches for different customer segments in order to be able to administer and manage them properly. Therefore, one of the possible levers for CRM is the choice of ownership of the customer relationships. Relationships as assets for a company are based on the concept of the resourcebased view (Penrose, 1959; Wernerfelt, 1984; Prahalad and Hamel, 1990; Barney 1991; 1992; 1999). This approach is important when it comes to managing the relationships (customers).Ownership as part of the management of relationships can be defined as a company's formal structure to administer its customer portfolio. Only few researchers have analysed potential strategies for the ownership of relationships (Schögel, Birkhofer and Tomczak, 1999) and no proper systematic is known which helps managers to decide which organisational structure to choose for the ownership of relationships. To close the gap a taxonomy will be developed in the following sections that can be used as a management tool.
Developing a Taxonomy for Customer Relationship Ownership Strategies To systemise the potential alternatives a company can choose from, it is imperative to relate to marketing coalition and marketing co-operation research (e.g. Brandenburger and Nalebuff,
3392
1996; Schögel, Birkhofer and Tomczak, 1999; Kakabadse and Kakabadse, 2000; Palmer, 2000). The main idea of each marketing coalition is to be resourceful, i.e. to decrease transaction costs and use partners for joint marketing activities. In a first approach there are three groups of corporate entities which play an important role in forming the taxonomy. They are a) business units within the company, b) external providers and c) competitors (Schögel, Birkhofer and Tomczak, 1999). Using these three types augmented by sub forms it is possible to identify six strategic alternatives as shown in figure one. The six alternatives range on a continuum between the poles 'internal' versus 'external' ownership of the customer relationships. In the next sections each of the strategies will be described including the sub strategies that apply.
Figure 1: Taxonomy of Customer Relationship Ownership Strategies Fully Internal Ownership The first alternative is the traditional approach still widely practiced in companies. Management of the customer relationships lies with the company itself and customers are 'owned' completely internally. None of the organisational structures have to be changed. The company keeps all their customers as is and tries to increase profitability by cross- or upselling, alignment of internal processes and a decrease in transaction costs. For the customer there is no change in organisational setting. The "line of visibility" (Shostack, 1984; 1987; Stauss and Seidel 1997, p. 39) for the customer - in this case indicating which organisation is visible for the customer - does not change. A few advantages and disadvantages can be identified for this alternative. The advantages are:
• That the company remains autonomous and does not lose any market share. •
No change in external perception for the customer. The disadvantages can be: • That unwanted customers remain with the company and cause further profitability loss. • That the company remains encrusted and does not open to new strategic approaches to improve its situation and customer management.
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Partial Internal Ownership The second potential strategy can be called 'partial internal ownership' of the customer relationships. The company "shifts" customer segments or certain customer relationships to some other strategic business unit (SBU). This strategy corresponds with the above mentioned alternative a) of managing customer relationships through a business unit within the company. There are various sub strategies that can be identified: a) shifting customer relationships to another SBU b) foundation of a new "internal" SBU, and c) foundation of an "external" SBU. Shifting customer relationships to another SBU: Customer relationships or whole customer segments can be moved to another and more efficiently operated SBU. An example of this sub strategy is the shift of retail customers from an asset management unit to a private customers unit where they are managed together with affluent customers. Foundation of a new "internal" SBU: A new organisational unit can be created. A bank could found its own SBU for retail customers to split them from highly affluent customers. Foundation of a new "external" SBU: Finally, the foundation can focus on its own spin-off or subsidiary: "(?) many organisations develop world-class competencies in supplementary or non-core activities that they, in turn, spin off into separate organisations with the intent of making them profitable" (Kakabadse and Kakabadse, 2000, pp. 685). This form of managing the customer relationships can be called "individual spin-off" or "individual venture" (Kakabadse and Kakabadse, 2000, p. 685). In many cases the individual venture remains within the organisational structure of the parent company but has its own market access and acts as a separate profit centre. In all three cases there is a change in the line of visibility for the customers as they will be introduced to a different SBU to take care of them. The advantages of the alternative are: • A clear organisational separation and responsibility for each of the customer segments by creating distinct divisions. As each SBU is its own profit centre a more focused and profit controlled management of the single customer segments is possible. • The chance of separate branding of each of the SBUs. This helps the customers to identify their specific SBU. Some disadvantages are: • The costs of the re-organisation of the SBUs. The foundation of a new SBU may exceed the costs of applying a more efficient way of customer management with other measures. • The lack of the customers' differentiation of the new sub brands. Some customers may get confused with the branding of the new SBUs and may only focus on the parent brand. Co-operative Ownership The third alternative 'distributes' customer relationships to other providers or companies. This option relates to the above mentioned alternative b) external providers and is a form of cooperation. Basically, it is a strategic alliance which helps create a joint marketing effort (Kakabadse and Kakabadse, 2000, p. 687). There are two different forms: a) co-operation with a bottleneck or b) co-operation on a common platform. Co-operation with a bottleneck: One of the companies or a provider acts as the primus inter pares, i.e. it is the bottleneck towards the customer and bundles all the activities so that the customer has a single point of contact with that particular company (line of visibility). Only the company acting as the bottleneck has its own proper branding; the secondary providers do not appear as branded units (see also Schögel, Birkhofer and Tomczak, 1999, pp. 13).
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Co-operation on a common platform: Instead of choosing one of the providers as a bottleneck each of the providers or companies acts as equal partners on a joint (virtual) platform (see Schögel, Birkhofer and Tomczak, 1999, pp. 12). For the customer, this results in several touch points with different providers. The advantages of 'co-operative ownership' are: • That each of the companies or providers has direct or indirect access to the customers. • That each of the providers or companies brings in specific knowledge and resources that can be offered to the customers. Some disadvantages are: • Customer confusion as of the number of different providers approaching the consumer. • Power constellations within the co-operation that may prevent proper management of the customer relationships. Merged Ownership On the continuum we are approaching the 'external ownership' pole. The fourth strategy relates to the foundation of a joint spin-off through different companies: "Certain companies form spin-off, market facing units in co-operation with other commercial entities" (Kakabadse and Kakabadse, 2000, p. 686). There are no sub strategies for 'merging' the customer relationships. The idea is to bundle two or more companies' competences in one physical or virtual spin-off to make use of scale effects. This "joint spin-off" (Kakabadse and Kakabadse, 2000, p. 685) will be branded and original customers from the founding organisations may be shifted to the new spin-off or new customers will be managed through the new joint subsidiary. Existing customers can become part of the new spin-off but will have to face a change with regard to their line of visibility. The advantages can be described as: • The use of synergies is obvious as customer relationships of two or more different companies are pooled in one new company. • The chance for separate branding disconnected from the parent companies. Disadvantages can be: • An increase in conflicts between the parties if the management of the new spin-off is not organised properly. • The irritation of the customers. Customers may not appreciate becoming part of a different entity and may terminate their relationship with the new provider. Partial External Ownership Partial external ownership or 'leasing out' of customer relationships is the fifth strategy in the taxonomy. It is another form of co-operation but with fewer strings attached than the merged ownership. This strategy borrows elements from outsourcing (see Kakabadse and Kakabadse, 2000; McIvor, 2000; de Boer, Gaytan, and Arroyo, 2006) to address organisational competitiveness (Jiang and Qureshi, 2006) and from the concept of franchising (see e.g. Castrogiovanni and Justis, 1998; Sydow, 1998; Sashi and Karuppur, 2002). The objective is to outsource the customer relationships without the 'de facto' losing ownership. The usage of the customer database is granted to one or more other companies. This concept is based on the following logic. It is a co-operation between independent companies ('franchiser' and 'franchisee'). The 'franchisee' manages the customers based on the regulations given by the 'franchiser'. The 'franchisee' compensates the 'franchiser' for the usage rights of the customer relationships. For customers the line of visibility will be drawn between them and the 'franchisee'. This type a) of franchising can be called a 'single sided lease' (or franchising). A 3395
second type b) is a 'double sided lease' of relationships. A company A ('franchiser') can lease out its customer relationships to a company B ('franchisee'). In return the 'franchisee' (B) acts as a 'franchiser' as well and leases out its own existing customer relationships to the first company (A). This form of ownership has some advantages: • No loss of customer relationship ownership. The original company still owns the customer relationships. • Potential increase of profits through a wider customer base or new access to customers. The disadvantages may be: • An uncontrolled access of customer relationships may occur if customers are being leased out to more than one company. • Customer confusion about who the company is selling to. Fully External Ownership The final strategy relating to the above mentioned alternative c) competitors (see also Bengtsson and Kock, 1999) is called 'fully external ownership' or 'selling' of customer relationships. This option means a total externalisation of customer relationships by selling (parts of) the customer base. The company sells its customer assets to one or more competitors or partners. There are two forms that can be identified: a) isolated selling or b) integrated selling. Isolated selling means the sale of a certain and very specific customer segment only. Integrated selling means the whole company including its customer segments is purchased by another company. This usually happens during a merger and acquisition (M&A) process. There are some advantages to this alternative:
• Increase of profitability for the selling company/owners through the return from the sale. •
Access to new customer segments for the purchasing company. Disadvantages are: • The loss of strategic positions and market share in certain areas of business for the seller. • That the remaining customer segments of the selling company may lose customers because they defect from the company after having heard of the sale.
Conclusion and Future Research The text has indicated that there are six main strategies for customer relationship ownership including a variety of sub strategies. Manager can use the taxonomy in their decision making process. It will support them by being able to compare several strategic alternatives before making the decision. When having to choose the right strategy managers have to take several factors into account: potential conflicts with the company to co-operate with or sell to; conflicts with customers due to the change in organisational structure / management approach; costs and benefits of the reorganisation. For most of the explained strategies examples in practise can be found that support the idea of the theoretical concept. In order to verify the concept research should focus on analysing whether all forms or other sub forms can be found as organisational structures and whether the taxonomy has to be altered if at all.
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References Baker, M., Buttery, E.A., Richter-Buttery, E.M., 1998. Relationship Marketing in Three Dimensions. Journal of Interactive Marketing 12(4), 47-62. Barney, J. B. 1991. Firm Resources and Sustained Competitive Advantage. Journal of Management 17 (1), 99-120. Barney, J. B. 1992. Integrating Organizational Behavior and Strategy Formulation Research: A Resource Based Analysis, in: Shrivastava, P., Huff, A., Dutton, J. (eds.), Advances in Strategic Management, Vol. 8, Greenwich, CI, 39-61. Barney, J. B. 1999. How a Firm's Capabilities Affect Boundary Decisions. Sloan Management Review 40 (Spring), 137-145. Berry, L.L., 2000. Relationship Marketing of Services. Growing Interest, Emerging Perspectives. In: Sheth, J.N., Parvatiyar, A. (eds.), Handbook of Relationship Marketing, London, 149-170. Bitner, M.J., 1995. Building Service Relationships. It's all about Promises. Journal of the Academy of Marketing Science 23 (4), 246-251. Bengtsson, M., Kock, S., 1999. Cooperation and competition in relationships between competitors in business networks. Journal of Business & Industrial Marketing 14(3), 178-193. Brandenburger, A.M., Nalebuff, B.J., 1996. Co-opetition, New York. Castrogiovanni, G.J., Justis, R.T., 1998. Franchising configurations and transitions. Journal of Consumer Marketing 15 (2), 170-190. De Boer, L., Gaytan, J., Arroyo, P., 2006. A satisficing model of outsourcing. Supply Chain Management: An International Journal 11(5), 444-455. Grönroos, C., 1994. From Marketing Mix to Relationship Marketing: Towards a Paradigm Shift in Marketing. Management Decision 32 (2), 4-20. Gummesson, E., 1994. Making Relationship Marketing Operational. International Journal of Service Industry Management 5 (5), 5-20. Jiang, B., Qureshi, A., 2006. Research on outsourcing results: current literature and future opportunities. Management Decision 44 (1), 44-55. Kakabadse, N., Kakabadse, A., 2000. Critical Review - Outsourcing: a paradigm shift. Journal of Management Development 19 (8), 670-728. McIvor, R., 2000. A practical framework for understanding the outsourcing process. Supply Chain Management: An International Journal 5 (1), 22-36. Palmer, A., 2000. Co-operation and competition: a Darwinian synthesis of relationship marketing. European Journal of Marketing 34 (5/6), 687-704.
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