Customer Portfolio Management: Implications for the Asian Hospitality Industry

by Prof. Michael D. Johnson

2 May 2008

Over the past two decades, management thought has evolved from a focus on market share and economies of scale to a focus on quality, satisfaction and customer loyalty. Today´s global market economies require a more dynamic and holistic approach to customer management. Global competition and an abundance of customer choices have dramatically affected any one company´s ability to rely myopically on close relationships to generate profits. At its core, customer portfolio management (CPM) is about creating value with customers who maintain very different relationships with a company, from acquaintances, to friends, to partners. A closely related concept, customer portfolio strategy (CPS), addresses the question of just how to optimize the value of a customer portfolio over time. CPM recognizes that all customers in a company´s portfolio are capable of creating value, but in fundamentally different ways and at different points in time. Understanding and using the concept requires understanding your customers as a portfolio of very different assets. For example, partners are more likely to create value through higher margins, while acquaintances create value through economies of scale.

In this presentation, Professor Johnson will specifically explore the implications of CPM for the Asian hospitality industry. Drawing on the lessons of US economic development and the global evolution of management practices, as well as considering unique aspects of the Asian hospitality industry, Professor Johnson will discuss 1) the rapid growth stage of many Asian hospitality ventures, as with hotels and restaurants; 2) the scalability of these service organizations vis-à-vis manufacturing organizations; 3) the fundamental changes in the diffusion of service innovations via technology; and 4) the potential volatility in financial markets. The CPM framework will be used to suggest how Asian hospitality companies should adapt to changing market conditions.