Table of Contents

I. Introduction 2

II. Customer portfolio concept 3

2.1 Concept of customer portfolio and its application in company 3

2.1.1 Customer Lifetime Value (CLV) 3

2.1.2 Market segmentation 4

2.1.3 Sales forecasting methods 5

2.1.4 Activity based costing 6

2.2 Customer portfolio application of “CDNow” 6

2.3. Concept application for e-tailer companies 8

III. Conclusion 10

References 11

Introduction

In business, customers are always considered as the basis of a company’s profitability (Gupta et al., 2004; Hogan et al., 2002; Rappaport, 1998; Wayland and Cole, 1994). It leads to a customer – centric view in practice in general as well as in marketing in particular. According to Rust et al., (2005), the limited resources allocated efficiently for maximizing value requires a relationship – oriented customers and strong, long – lasting customer retention. Focusing on current customers is the right strategy, especially offering a positive lifetime profitability relationship when acquiring new customers is more expensive than retaining existing ones (Morgan and Hunt, 1994; Reichheld and Teal, 1996; Bitran & Mondschein, 1997). However, there is not only lifetime profitability relationship, but also different treatments of customers in marketing tools are advisable. Determining the right strategic balance between acquisition and retention efforts as well as add-on selling is an important decision in management. Therefore, the focus of this paper is regarding the optimal mix of customer segments within customer portfolio which its aims to optimise business performance in sales growth or enhanced customer profitability acrossing the entire customer base.

The applied case study for this theory is an e-tailer