Reinartz and Kumar presented a model where customers are segmented into four dissimilar classifications. These classifications are drawn based on the forecasted length of the relationship, and level of profitability, which are used as variables of defining the customers’ level of customer loyalty. From their argument, reference is drawn to the classification, which a customer can be identified with, towards deciding the strategic revenue management technique to be used, towards maximizing the profits realized from the sustained relationship.
According to the framework created by the authors, these four classes of customers may be explained as loyal, depending on the model of a survey applied in checking their characteristics. All four tend to show characteristics of repeat clients, but some of the classes do not contribute much profit into the business to bring in profits, which warrant directing focus on pursuing them. Therefore, these different classes should be subjected to different strategies, as explained below:
Respective strategies for the different customer classifications
- Strangers (Lowest profitability group)
RM should not invest in the relationships of this category. The customers within this class often show the characteristics of loyal clients, although they rarely contribute much value, besides not showing other characteristics of loyalty. According to the authors of the model, the clients under this classification should not be given much attention, as the only limited value can be drawn from them, thus being of little value to the business. - Barnacles (Low profitability potential group)
In case the share of wallet is down, emphasis should be placed on up-wards and cross-selling. On the other hand, in case the size of the wallet is small, strict cost-control measures should be imposed. The clients under this classification tend to generate low profitability. They value the business and its products and services but spend very little on increasing the value of the business. The ideal strategy for this group is attempting to sell to this group products and services that are associated with what they already have; otherwise, resources and dedication should be directed to other classes. - Butterflies (High profitability potential)
The business should make revenues from its accounts for as long as they remain active. The clients under this classification are profitable to the business but present less loyalty to the business. Therefore, they should be intensely served while still interested in the services and the products of the business. However, after it is apparent that the purchases from them have declined, investing in them, in terms of effort and time, should not be continued. - True Friends (Highest profitability potential)
The business should implement moves to delight this class of customers, so they can be nurtured, retained and defended for their continued contribution. These are the highest class in terms of loyalty, as they consider the company and its products and services. These customers bring in the highest level of profit. Due to their great contribution, the authors suggest that these clients should be greatly rewarded; offered high-value, exclusive products and other attractive benefits.