1.1 How to define a customer portfolio?
The notion of portfolio has greatly evolved before the firms’ consumer base was considered as a portfolio. In chapter 2 a part of the literature review depicts an evolution of the portfolio management notion. A customer portfolio can be defined as a set of customers divided into several segments (or clusters) based on similar attributes. These discriminant features can be both economic (willingness to pay, budget constraint, etc.) and sociological (gender, age, socio-professional category, etc.). The underlying objective of this segmentation is to optimally allocate the company’s resources.
When dealing with customer portfolio management (CPM), two dimensions can be considered. On the one hand, it can be assumed that a customer stays in the same segment throughout their life in the firm’s portfolio. On the other hand, a dynamic approach can be adopted as suggested by Homburg, Steiner, and Totzek (2009) on dynamics in customer portfolio. In their article, the authors question the static analysis by assuming that a customer can switch between segments. They explain that one of the firm’s objectives is to convert less valuable customers into more valuable ones.