Transferring Portfolio Selection Theory to CustomerPortfolio Management – The Case of an e-Tailer

Investing in existing customers is widely accepted as a promisingstrategy because it is believed to be less costly than attracting new ones. Recentresearch by Reinartz et al. [39] provides indications, however, that it could alsobe profitable to simultaneously focus on a customer segment being moretransaction-oriented. In this contribution – using the example of an e-tailer – wespecifically look at the question regarding the optimal mix of different customersegments within a customer portfolio. Portfolio Selection Theory is applied todevelop a model to determine the optimal proportion of the different customertypes from a value-based risk management perspective. A first evaluation isrealized with a publicly accessible set of empirical data from the e-tailerCDNow. The results of the model provide a basis for the alignment of futureCRM-activities....