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It seems to be common sense that to increase profits, firms should prioritize customers (i.e., focus their efforts on the most important customers). However, such a strategy might have substantial negative effects on firms' relationships with customers treated at a low priority level. Prior research does not indicate satisfactorily whether and how customer prioritization pays off. Moreover, although customer prioritization may be strongly present in firms' marketing strategies, firms frequently fail to implement such a strategy. Therefore, it is also important to investigate empirically by which means firms can facilitate implementation. The authors address both issues and conduct a cross-industry study with 310 firms from business-to-consumer and business-to-business contexts together with two independent validation samples. The results show that customer prioritization ultimately leads to higher average customer profitability and a higher return on sales because it (1) affects relationships with top-tier customers positively but does not affect relationships with bottom-tier customers and (2) reduces marketing and sales costs. Furthermore, the ability to assess customer profitability, the quality of customer information, selective organizational alignment, selective senior-level involvement, and selective elaboration of planning and control all positively moderate the link between a firm's prioritization strategy and actual customer prioritization.

Purpose Promotional cues related to notions of fair prices or pricing designed to fit consumers’ needs are prevalent for many service offers. The purpose of this paper is to investigate how both customers’ price fairness and idiosyncratic fit perceptions shape their tariff evaluations. Design/methodology/approach Two experimental studies involving different tariff types and service contexts test the complex interplay of customers’ perceived price fairness and idiosyncratic fit with customer and context characteristics on their tariff evaluations. Findings Customers judge tariffs drawing on both the perceived price fairness and idiosyncratic fit, driven by the perceived price level of the tariff and the perceived pricing transparency of the firm. Customers’ service usage and consumption goals moderate these effects: heavy users and hedonic consumers indicate lower price sensitivity while focusing more on their transparency perception. The role of perceived price fairness and idiosyncratic fit for tariff choice depends on the tariff/service context; idiosyncratic fit is important when it is incidental (e.g. flat rates) rather than intentional (i.e. customized tariffs) and when customers lack the expertise or confidence to evaluate price fairness such as in the case of relatively new services. Originality/value Prior studies focused on either price fairness or idiosyncratic fit and thus cannot fully explain the complex interplay between both in the context of tariff choice. This paper explicates the conditions that affect the relative importance of both concepts and under which incidental offers are better received than premeditated ones.

Research Summary: Low-price market entries, aiming for rapid sales growth, tend to prompt strong competitive reactions. This research explores whether and how firms using low-price entry strategies can mitigate retaliatory incumbent reactions. An experiment with 656 managers shows that entrants can attenuate the strength of incumbents' responses by fostering perceptions of high aggressiveness or low commitment. Entrants may be able to accomplish this by adjusting their entry strategy to embed (subtle) cues of aggressiveness and (lack of) commitment. A replication experiment with university students reinforces our overall theoretical argument. However, the results also indicate that the interpretation of cues embedded in the entry strategy may be affected by the experience of incumbent firm managers. Overall, these results clarify the cognitive foundations of competitive responses to market entry. Managerial Summary: What drives incumbents to respond strongly to market entries, and what can the entrant, if anything, do to mitigate those responses? This research offers empirical evidence and theoretical insights for managers faced with these questions by shedding light on the thinking processes preceding competitive responses. The study shows that while managers are motivated to respond strongly to market entries that appear to be highly consequential to their business, these responses may be mitigated if the entrant manages to foster perceptions of high aggressiveness or low commitment to the market. Managers form these perceptions in part on the basis of the entrant's behavior, creating an opportunity for entrants to adjust their entry strategies in a manner that demotivates strong competitive responses.

Although highly relevant for marketing practice, few studies provide conceptual and empirical insights into customer portfolio management. Furthermore, most approaches to analyzing customer portfolios are static. This article discusses three neglected key issues relevant for a dynamic customer portfolio analysis: (1) Does a static versus a dynamic valuation lead to a different prioritization of customer segments in a portfolio? (2) How does offensive or defensive management of segment dynamics affect portfolio value? and (3) Do reliable predictors for dynamics of a customer's position in the portfolio exist? As a tool for customer portfolio analysis, the authors develop a segment-based customer-lifetime-value model. They capture customer dynamics by analyzing how customers switch between segments of different values across time. The authors apply their tool with longitudinal data from four firms with up to 300,000 customers. The results from the empirical analysis and a simulation study provide answers to the three key issues raised. First, compared with a dynamic analysis, a static approach overestimates the value of some customer segments but underestimates others. Second, a defensive versus offensive management of value dynamics is relatively more appropriate for middle-tier segments, whereas the opposite holds true for bottom-tier segments. Third, general customer characteristics and aggregated transaction characteristics indicate future segment dynamics, whereas specific product usage data differentiate customers according to current value.

Research Summary: Low‐price market entries, aiming for rapid sales growth, tend to prompt strong competitive reactions. This research explores whether and how firms using low‐price entry strategies can mitigate retaliatory incumbent reactions. An experiment with 656 managers shows that entrants can attenuate the strength of incumbents’ responses by fostering perceptions of high aggressiveness or low commitment. Entrants may be able to accomplish this by adjusting their entry strategy to embed (subtle) cues of aggressiveness and (lack of) commitment. A replication experiment with university students reinforces our overall theoretical argument. However, the results also indicate that the interpretation of cues embedded in the entry strategy may be affected by the experience of incumbent firm managers. Overall, these results clarify the cognitive foundations of competitive responses to market entry. Managerial Summary: What drives incumbents to respond strongly to market entries, and what can the entrant, if anything, do to mitigate those responses? This research offers empirical evidence and theoretical insights for managers faced with these questions by shedding light on the thinking processes preceding competitive responses. The study shows that while managers are motivated to respond strongly to market entries that appear to be highly consequential to their business, these responses may be mitigated if the entrant manages to foster perceptions of high aggressiveness or low commitment to the market. Managers form these perceptions in part on the basis of the entrant’s behavior, creating an opportunity for entrants to adjust their entry strategies in a manner that demotivates strong competitive responses.

Relatively little is known about pricing in the export business, particularly how to organize and implement export pricing within firms and how these issues affect export performance. Therefore, this study investigates antecedents of export performance, specifically the organizational aspects of export pricing and price adaptation and the moderating role of export market characteristics, including export market turbulence, enforcement of contracts, and corruption ranks of the export market. Using a large-scale survey sample of 295 exporting firms in Austria and Germany and secondary data on the export markets involved, the authors show that both the intensity of internal pricing coordination and price adaptation have a positive effect on export performance. Specifically, in highly turbulent export markets, the intensity of internal pricing coordination contributes to export performance. Furthermore, a high level of horizontal dispersion of pricing authority is advisable in countries in which the enforcement of contracts is difficult.

Despite the high practical relevance, prior research does not provide a clear picture whether the effectiveness of new product preannouncements is contingent upon order of entry and whether the message content of preannouncements for pioneering products should be different from those for followers. Drawing on diffusion research, the authors examine how preannouncements that focus on risk reduction and the product’s relative advantage influence the relationship between preannouncement intensity and new product success, taking into account order of entry. A cross-industry study investigating 151 new product launches shows that for pioneers, a message focus aimed at reducing perceived product risk positively influences preannouncement effectiveness. Furthermore, a relative advantage focus negatively affects preannouncement effectiveness and thus is rather counterproductive for pioneers. With regard to early followers, results indicate a positive influence of a risk reduction focus on preannouncement effectiveness. A relative advantage focus, however, is only effective if the product category is already established when the early follower product is launched. Finally, for late followers, only preannouncements which strongly emphasize the relative product advantage lead to a positive effect of preannouncements on new product success.

Focusing marketing efforts on the most valuable customers so as to increase company profits is not as straightforward as it seems. There is a downside to customer prioritization such as negative reaction from low priority customers. Taking this into account we still show that prioritizing customers does lead to higher profitability and more return on sales. There are two reasons for this. Firstly, it has a positive effect on the key characteristics of a firm's relationship with its elite customers while not affecting the lower level. Secondly, it reduces sales and marketing costs. Customer prioritization is more effective and efficient than equal treatment. We also show that firms can rely on six key levers relating to a company's organizational structure and processes, enabling proper implementation of customer prioritization. [PUBLICATION ABSTRACT]