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

Investing in existing customers is widely accepted as a promising strategy because it is believed to be less costly than attracting new ones. Recent research by Reinartz et al. [39] provides indications, however, that it could also be profitable to simultaneously focus on a customer segment being more transaction-oriented. In this contribution – using the example of an e-tailer – we specifically look at the question regarding the optimal mix of different customer segments within a customer portfolio. Portfolio Selection Theory is applied to develop a model to determine the optimal proportion of the different customer types from a value-based risk management perspective. A first evaluation is realized with a publicly accessible set of empirical data from the e-tailer CDNow. The results of the model provide a basis for the alignment of future CRM-activities.