Feng, H, Morgan, NA and Rego, LL (2020) The impact of unprofitable customer management strategies on shareholder value. Journal of the Academy of Marketing Science, 48. pp. 246-269. ISSN 0092-0703
Abstract
A significant proportion of many firms’ customers are unprofitable. The question of how unprofitable customers should be managed has recently received increasing research attention from the customer and manager angles, but the effects of unprofitable customer management (UCM) strategies on shareholder value is unknown. Using an event study methodology, we examine stock market reactions to disclosures of firms’ UCM strategy decisions. Results from a sample of UCM strategy disclosure events reveal an average short-term abnormal stock return of −0.53%. Drawing on signaling theory logic, we explore a number of signal (UCM strategy), signaler (firm engaging in UCM), and signaling environment characteristics that may affect the shareholder value effects of firms’ UCM approaches. Our analyses show that investors respond more favorably to indirect UCM strategies than to direct customer divestment strategies. We also find that particular types of indirect UCM strategy approaches and strategic intent in UCM strategy adoption, stronger firm marketing capabilities and, and positive publicity can help mitigate the generally negative abnormal stock returns observed. Overall, our findings have important implications for marketing theory and provide actionable new insights for managers into how to approach the management of unprofitable customers.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2019, Academy of Marketing Science. This is an author produced version of a journal article published in Journal of the Academy of Marketing Science. Uploaded in accordance with the publisher's self-archiving policy. |
Keywords: | Customer relationship management; Customer relationship termination; Unprofitable customer management; Event study; Abnormal stock return |
Dates: |
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Institution: | The University of Leeds |
Academic Units: | The University of Leeds > Faculty of Business (Leeds) > Marketing Division (LUBS) |
Depositing User: | Symplectic Publications |
Date Deposited: | 07 Aug 2019 14:01 |
Last Modified: | 17 Aug 2020 00:40 |
Status: | Published |
Publisher: | Springer Nature |
Identification Number: | 10.1007/s11747-019-00686-2 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:149377 |