How and why Dutch companies that pursue customer intimacy use customer accounting

MSc Business Administration

Organizational and Management Control

How and why Dutch companies that pursue customer

intimacy use customer accounting

University of Groningen

Faculty of Economics and Business

This research conducted a qualitative research to explore how and why Dutch companies that pursue customer intimacy use customer accounting. This study focusses on customer accounting and the

four financial techniques (Guilding and McManus, 2002). The finding of this paper is that Dutch companies that pursue customer intimacy use customer accounting to support their strategy. However, the findings show also that the financial customer accounting techniques are hardly used to support customer intimacy strategy. This could be that companies that pursue customer intimacy

focus more on the customer relationship rather than customer profitability.

By

Erik de Jong

Student number: s1914049

g.h.w.dejong@student.rug.nl

Supervisor: prof. dr. ir. P.M.G. van Veen-Dirks

Co-assessor: Mr. dr. W. Kaufmann

Words: 10794

Groningen, January 2015

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Table of content

2.3 Relationship Customer Intimacy and Customer Accounting ... 11

3. Methodology ... 13

3.1 Purpose... 13

3.2 Research instrument ... 13

3.3 Data collection ... 13

3.4 Data analysis ... 14

3.5 Reliability and Validity ... 15

4. Results ... 16

4.1 Customer intimacy ... 16

4.2 Customer Accounting ... 18

4.3 Relationship customer intimacy and customer accounting ... 20

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1. Introduction

Over time business and customer markets transformed through advances in technology, more demanding and well-informed customers, productivity improvements, expansion and competition. According to Sheth et al. (2000) in such an environment, companies have to develop close and profitable relationships with their customers in order to succeed. This strategic choice of developing a close and valuable long term organization-customer relationship is also familiar in the value disciplines of researchers Treacy and Wiersema (1993). They called this concept Customer Intimacy. They recognized that in order to succeed in a fierce market, leading companies have to narrow their business values and meet industry standards. Furthermore, to excel as an organization Treacy and Wiersema (1993) suggest that the operating model of the organization has to align with their value disciplines. This leads to the conclusion that firms have to match the operating model to support their strategy (Johnson and Kaplan, 1987; Brown, Squire and Blackmon, 2007; Saunders, Mann and Smith, 2008).

As one of the components in the paper of Treacy and Wiersema (1995), they make a strong claim about the importance of how managers design and use management accounting system to support the business strategy (Langfield-Smith, 1997; Gerdin and Greve, 2004). Management accounting should support management with information and strategic decision making. With the recent market development, it forces managers to focus on the fundamentals of their organizations and determine the management accounting techniques that fits the organization best (Chenhall, 2003; Roslender and Hart, 2003; Cadez and Guilding, 2007). Therefore, managers operating in a firm that offers to fulfil specific customers (future) needs and prefer a valuable, long term customer-relationship should use management accounting techniques that support these values.

4 previous studies, they found high mean scores of usage and perceived merit of customer accounting practices. Confirming the findings of Guilding and McManus (2002), where Guilding and McManus also found that CA usage is positive related within firms that operates with a market/customer orientation. Although there is positive relation between CA usage and customer orientation, little is known about firms that pursue customer intimacy strategy use customer accounting.

1.1 Purpose

This paper continues the search of understanding the nature and practice of CA in firms. As noted earlier, development of markets leads to that companies focusing on customers’ needs and developing a close and valuable long term customer relationship to gain a competitive advantage. Organizations are expected to use customer focused accounting techniques to gather information, keep control and make decisions to support the customer focused strategy and develop a stronger customer relationship (McManus and Guilding, 2008). Therefore this paper explores the questions “how” and “why” companies that pursue customer intimacy strategy use customer accounting. The explorative research gives more understanding in the two concepts of customer intimacy and customer accounting and their relationship. Additionally, the research aims to gives more insight in the reasons and the decisions these companies make in using customer accounting. Therefore the following research question is formulated: “How and why Dutch companies that pursue customer

intimacy use customer accounting”

1.2 Significance

The limited literature on both concepts and their relationship has highlighted a potential information gap to explore. This paper aims to contribute to existing literature by providing both academics and managers using or considering the use of CA practices, insight in customer accounting. This applies mainly to firms pursuing a customer intimacy strategy. Consequently the insight gained will hopefully prove useful for managers to identify the role that customer accounting can play in providing

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1.3 Summary

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2. Literature review

In this chapter the theory is presented, which forms the basis for the research. First the concept customer intimacy will be reviewed and definite. Next, the concept customer accounting will be described; the comprehensive view and four financial techniques. The final section will present the (expected) relation between the two concepts.

2.1 Customer intimacy

In a demand driven and customer-centric market, where companies face ever increasing

competition, a key business strategy is leveraging the organization-customer relationships to achieve a competitive advantage (Tuominen et al., 2004). Additionally, Shah et al. (2006) describe five trends that motivate companies to choose extensive customer relationship. (1) Intensifying pressure to improve marketing productivity, (2) increase market diversity, (3) intensifying competition, (4) demanding and well informed customers and consumers (Ruekert, 1992) and (5) accelerating advances in technology (Kalagnanam and Lindsay, 1999). In such an environment, companies are realizing that customer focus strategies provide close and profitable relationships with their customers. The shift of customer focused strategies started with Porter’s product differentiation strategy (Porter, 1980) to high level of customization strategy (Bouwens and Abernethy, 2000). Customization provide firms to effectively differentiate their products or services from competitors by satisfying specific customer demands like product features, timely and reliable delivery, and after sales service. This focus on specific customers’ needs and developing a relationship is represented by customer intimacy, one of the three value disciplines developed by Treacy and Wiersema (1993). Together with product leadership and operational excellence they argue that the disciplines lead to market leadership. They formulize customer intimacy as follows: “Segmenting and targeting markets

precisely and then tailor offerings to match exactly the demands of these niches”.

Recent literature on customer intimacy

7 organization. Habryn et al. (2010) model to measure customer intimacy is presented in figure 1. The model has two dimensions, each on axis. The X-axis show the dimension of the quality of the

relationship with the customer. And the Y-axis shows the degree of adaptability to the customer. This displays that customer intimacy is not only about the quality of the relationship. Additionally, the company has to adapt to the customer and use the acquired knowledge to fulfill customers (future) demands. Customer intimacy exists when both dimensions are high. Therefore customer intimacy are organizations which provide their customers a total solution and whose customer relationship is distributed among multiple employees and across different business units. Brock and Zhou (2012) developed also a measure of customer intimacy. Conducting qualitative and quantitate research, they identified that customer intimacy consist of three dimensions; mutual understanding, closeness and value perception. Illustrating that customer intimacy is a relevant customer relation indicator. They propose the following definition: “Customer intimacy is a customer’s perception of having a very

close and valuable relationship with a supplier, characterized by high levels of mutual understanding”.

Figure 1: Two dimensions of customer intimacy (Habryn et al., 2010)

Definition and dimensions

Whereas in the last decade limited literature is written about customer intimacy and different interpretations, still the literature had common aspects (Cuganesan, 2008; Habryn et al., 2010; Brock and Zhu, 2012). Within the literature the main features of customer intimacy is not only about having a relationship with a customer. Habryn et al. (2010) described it as a strategy that the whole

8 advantage. The companies that pursue customer intimacy invest in customer contact through the whole organization to enhance the relationship and please the customer needs. This by investing in collecting and using detailed customer specific information. Hence forward this interpretation of customer intimacy is implied in this thesis. To measure this concept of customer intimacy, this research has divided the concept in four dimensions. The dimensions are derivative from previous literature and determine interpretation (Cuganesan, 2008; Habryn et al., 2010; Brock and Zhu, 2012).

Organization involvement: The level of involvement of the organization in contacting and supporting the customer relationship.

Customer relationship: The level of how organizations enhance a valuable long term relationship with the customer and showing interest to understand and offer customer (future) needs. Flexibility: The level of flexibility in realizing specific customers’ requests and be able to adapt customer requests during the process.

Customer knowledge: The level of collecting customers’ information, what kind of information, wherefore and why the organization use the customer information.

Although the customer intimacy strategy is increasing in popularity among companies, still companies have to be mindful when seeking in-depth customer relationships. Nunes (2005) state that a company that excessive pursues the one-on-one customer relationship could lead to possible disaster. Nunes (2005) suggests that companies can reduce these issues by interact in many-sided conversations with the customer to prevent the difficult positions of one-on-one customer

communication. According to the author to avoid these pitfalls companies could use the multifaceted conversations to provide a total solution to the customer problems, judge the motivation of

customer involvement, bring neutral participants to set up a genuine conversation and ensure they are not wasting their money on low-involvement customers.

Organizations operating model

Besides multifaceted conversations with the customer to successfully pursue customer intimacy strategy, companies have to align the operating model with their strategy (Johnson and Kaplan, 1987; Treacy and Wiersema, 1993). Treacy and Wiersema split the operating model in four

9 The operating model describes the way an organization does business today (Casadesus-Masanell and Ricart, 2010). According to Treacy and Wiersema (1993) the optimal operating model for the customer intimacy centers: “on an obsession with the core processes of solution development, results

management and relationship management, a business structure that delegates decision-making to employees who are close to the customer, management systems that are geared toward creating results for carefully selected and nurtured clients and a culture that embraces specific rather than general solutions and thrives on deep and lasting client relationships.”

Nowadays, much literature and empirical research is done regarding the relationship to strategies and the operating model components (eg Chenhall and Langfield-Smith, 1998; Chenhall, 2003; Barad and Dror, 2008; Slater et al., 2011; Iqbal and Sharma, 2012). Hardly anything has examined customer intimacy. Only Osarenkhoe (2008) investigated what the characteristics of the culture of a market-oriented firm applying customer intimacy philosophy are. Osarenkhoe (2008) highlights the business culture of an insurance company and concluded that firms have to understand the current and changing needs of customers and coordinate with the corresponding values in the firms’ business culture. The companies have to maintain an informed workforce so that it is aligned with the customer intimacy strategy. This requires a culture of listening and networking with resources directed at building relationships with customers.

2.2. Customer accounting

10 associated with a customer or group of customers (Guilding and McManus, 2002). These customer accounting tools are described in the following sections.

Customer profitability analysis

In the literature and in the customer accounting practice the most widely referred tool is customer profitability analysis (CPA). The analysis measures, by tracking the sales and costs of a specific customer, the profit gain from a specific customer (Guilding and McManus, 2002). Based on ABC methodology, the analysis allocate overhead costs to specific customers. This allocation is based on customers’ activity information (Kaplan and Narayanan, 2001). In the beginning Bellis-Jones (1989) mention to use CPA to support business decisions. Later others used the CPA to identify customers that generate losses (Ward, 1992) or assist resource allocation decision making and provide support for management control (Guilding et al., 2001). Additionally, Kaplan and Narayanan (2001) describe how CPA could support management actions to modify unprofitable customers to profitable ones. The analysis present an outline of the customer activities and could lead to improvements, pricing adjustments or relationship management. Van Veen-Dirks and Molenaar (2009) concluded that CPA is most appropriate in a customer focused, flexible organic organization that operates in highly competitive market. In the more recent literature the CPA tool has increased in attention (Guerreiro et al., 2008; Holm et al., 2011; Krakhmal, 2008; van Raaij et al., 2003).

Customer segment profitability analysis

The customer segment profitability analysis calculate the profit of a customer segments rather than one customer (Guilding and McManus, 2002). The segmentation can be based on variables, like customer purchase, that distinguishes them from other customers. The analysis could be useful when the profits or margins are too small on individual customer level for processing customer accounting (Hartfeil, 1996; Hudson, 1994; Storbacka, 1997). The analysis could be interested to show most desirable customer segments to the company (Kaplan and Norton, 1996). A case study of Foster et al. (1996) show the benefits of the customer segment profitability analysis. The result of the analysis presented that 38% of the total company revenues was supplied by the largest customer segment, provided over 67% of the total operating income; and the small customer segment which

represented 39% of company revenues, generate a negative contribution towards the operating income.

Lifetime customer profitability analysis

11 predict future profitability (Kumar and Shah, 2004). The interest in the analysis has grown in the recent years and play an important role in studies. The analysis could be useful in performance measurement (Rust et al., 2004), product offering (Shih and Liu, 2008) and targeting customers (Haenlein et al, 2006). These studies show that lifetime customer profitability analysis could be an important tool for managers. Compared to the CPA, the lifetime customer profitability analysis extend the time horizon for customer profitability analysis to include future years.

Valuation of customers or customer groups as assets

As described the analysis above the customer lifetime profitability analysis calculated the expected future earnings of a specific customer. Boyce (2000) argues that the customer lifetime profitability analysis present the expected cash flow of the customer. In addition, the cash flow determine the value of the firm (Hillier et al., 2012), which results that using the customer cash flow the customer value can be calculated. All assets value are measured and managed and customers are important intangible assets of a firm. The customers form a large part of a company's overall value. The valuation of customers can provide a useful representative firm value (Lehmann et al., 2005). Besides Lehmann et al. (2005) state that customer acquisition costs could see as investment decisions. Which could evaluated the decision in terms of expected profit. In this context, the analysis becomes an important tool in the management of customer relationships.

2.3 Relationship Customer Intimacy and Customer Accounting

To pursue the strategic direction of the organization Chenhall (2003) presents in his study that certain types of management account systems will be more suited to particular strategies.

12 demands. The important role for the financial techniques is to identify (future) profitable and

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3. Methodology

The following aspects of how the research is conducted will be described in this section: purpose of the research, research instrument, data collection, data analysis and reliable and validity criteria.

3.1 Purpose

The purpose of the thesis is to research the use customer accounting and the relationship to the customer intimacy strategy. Little is known about why and how companies that pursue the customer intimacy strategy use customer accounting. This is a starting point for the theory-development process (van Aken et al., 2007). To explore and explain this relationship, semi-structured interviews are used to collect the data.

3.2 Research instrument

Blum et al. (2008) recommend using a non-standardized qualitative research interview when studying an exploratory theme. In this paper, the usage of semi-structured interviews are chosen as the method of data collection. Saunders et al. (2009) state that a semi-structured interview is suitable for an explanatory and explorative research. Although the usage of a semi-structured interview has predetermined topics and questions, nevertheless, during the interview the researcher could ask additional question when unexpected variables or relationships arise. Semi-structured interviews also provide the opportunity to respond to answers, where the interviewees could elaborate their previous responses. This results in a rich and detailed set of data (Saunders et al., 2009). These data helps not only to reveal and understand the what and the how but also to place more emphasis on exploring the why (Saunders et al., 2009). The most important aspect during the interview is to understand the reasons for the decisions the participants have taken, or to

understand the reasons for their attitudes and opinions (Saunders et al., 2009). The aim of the interview will be to obtain data that enables to answer the research questions.

3.3 Data collection

14 strategy. The outcome is that the companies pursue the customer intimacy concept. The findings are presented later in section 4. Using previous literature (Brock and Zhou, 2012; Guilding and McManus, 2002) a list of themes and questions are formulated. The interview questions are composite by former questionnaires and interviews of previous literature or additional questions that emerged during the interview (Tashakkori and Teddlie, 1998). In the interview a set of themes is used that reflect the variables being studied related to the research topic. These are incorporated into in interview guide (appendix A). The topics along with initial question and questions that may be used to follow up initial responses in the interview may produce greater detail from the participants (King, 2004). The order of questions is identifying the level of customer intimacy, use of customer

accounting and in the ending the relation between the two concepts. A description was explained to the interviewee, where theoretical concepts need to be used, to have the same understanding (Easterby-Smith et al., 2008). The narrow timeframe could influence the feasibility of the research to answer the research question (Kothari, 2004).

Table 1: Characteristics of the interviewed companies and managers

3.4 Data analysis

After the interviews, the data were transcript and “unitized”. That is a part or unit of data that match a theme, will be attached. The themes are based on the literature, interview questions and found data (Saunders et al., 2009). Yin (2003) preference for devising theoretical expectations prior to data collection as a means to analyze data. In this research the approach to analyze the data is pattern matching. Pattern matching involves predicting a pattern of outcomes based on theory to explain what you expect to find. This pattern is discussed in the result section.

Company Function Employees Industry

1 Manager new business development 700 Floor construction

2 Coordinator applied research 120 Soil and water research/products

3 HR manager 380 Graphic media

4 Commercial business manager 900 Electro technical installation

5 Technical director 90 Disable bicycle manufacturer

6 Director 40 Roof construction

7 Director 170 Electro technical installation

8 Director 10 Filter construction

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3.5 Reliability and Validity

According to Yin (2003) reliability and validity are the important research-oriented quality criteria. The outcomes of the research have to be judged by these criteria’s.

Reliability implicate that in case other researchers replicate the research, they find the same findings (Easterby-Smith et al. 2008). In this research, semi-structured interviews are the only research instrument used for data collection. This may weaken the reliability of the research, because the interpretation of the researcher could influence the results. The researcher could interpret the answers of the questions and ask the probe questions to his interest (Easterby-Smith et al., 2008). Therefore, the research is difficult to replicate. Also, reliability may be weak because of the small group of participants. This was not possible to increase the number of respondents due to time constraints. However, reliability can be established through transparency and openness by the researcher. Hence, in the appendix the interview schedule with the predetermine list of themes and questions is added (appendix A). The interview schedule will lower the treat to reliability (Saunders et al., 2009). Furthermore, this type of research is chosen because of its explorative nature for complex phenomena. Therefore, an attempt to ensure that qualitative, non-standardized research could be replicated by other researchers would not be realistic or feasible without undermining the strength of this type of research.

Validity refers that the research measures what it should measure (Van Aken et al., 2007). Three type of validity would be tested. Internal validity concerns with justifying the right conclusions. In the context of the research, the representative companies were selected because they were identified with the customer intimacy concept. Extern validity is concerned regarding the generalization of the results. Because this is an explorative qualitative research the findings are only applicable to

population in the same context of the research. Lastly, the construct validity is tested. This type concentrated if the measure tested the intended construct. In this research the themes and concepts were developed with the use of theory. The questions being able to be clarified, meanings of

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4. Results

This chapter describes the main findings of the interviews and is divided into three parts. The first part is a description of the main findings of the concepts, financial techniques and the relationship between those two. In the second part, the findings are analyzed and discussed compared to the literature.

4.1 Customer intimacy

The customer intimacy strategy was examined in the interview. In the sections below the results in each of the four dimensions is described.

Organization involvement with the customer

The first dimension concerns the involvement of the whole organization with the customer. The managers were asked how the organization has contact with the customer. Nine of the ten managers state that after the first contact with an employee, more employees, divisions or business units are involved in the process. Depending on the customer request divisions like technical support, (after) service, planning or even the board are participating in the process. In this way they try to serve the customer as good as possible. One manager mentioned that they changed the business structure to get closer to the customer. First the account manager was the communication line between the company and the account manager of the customer. After the change he says: “After the change we

let all the relevant employees meet with the employees of the customer. All stakeholders who are interesting to us, learn to know each other. This will create added value”. The results of the interview

indicate that the company seeks more engagement with the customer to bind the customer to the company.

Customer relationship

The customer relationship dimension looks at how organizations enhance a valuable long term relationship with the customer and how they show interest to understand and offer (future) customer needs. The main findings were that all managers pursue a valuable long term relationship with the customer and explore customer needs through conversation, evaluation, customer

satisfaction tests and market research. The managers state that to establish a good relationship they need the trust of the customer and maintain involvement in discussing with the customer the progress and results. Managers answered the question with: “The customer is king” and “The

17 customer are core business according to the managers in this research. Consequently they discuss with the customer how to achieve customer wishes. These requests could be developing new products, solving problems, giving advice or support implementation. Four managers mentioned to would offer total solutions to the customers. As one manager formalized: “Therefore, we certainly try

to think ahead. We try to provide a total solution instead of a single product.” This shows that

companies try to think along with their customers and look forward to help the customers.

Flexibility

Flexibility focusses on to which extent an organization is flexible in realizing specific customers requests and to what extent an organization is able to adapt customer request during the process. The results show a two findings. The managers are flexible in answering different specific customers demands. A manager says that customers can already design a large part of the product on the Internet. He said as well: “What we always do, is to help a customer as much as possible.” Some managers are going to the client to make the special adaptations or testing products in order to see if it matches the customer wish. While the responses of the managers indicate that they are flexible in realizing customer specifics demands, nine managers state that adaption in the process is difficult. This is because most companies have large projects with a deadline to finish the project. Therefore have no time to change customer request, to prevent they will pass the deadline and get a penalty. This ensures that it is difficult to change requests during the process. One manager had a different reason. His company strived for a quick delivery times and thus once the process starts the company is no longer capable of changing the product. The manager of a media company making news magazines was very flexible. His company have to make adjustments shortly before production to put recent topics in the magazines.

Customer knowledge

The last dimension concerns customer knowledge. To research this dimension, managers were asked if they acquire customers’ information, what kind of information, wherefore they use the customer information and why. All managers confirm that they collect customer information. Nine managers bring the information in a CRM system or other system package together. Gathering all kinds of customer information in terms of customer contact data, tenders, financial data, complaints, special requests, last contacts and customer hobbies. The managers use the customer information for a variety of reasons. The data is used to provide a better understanding of the customer, target (new) customers with discounts or updates and improve the organization objectives; “We store the

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happens in such a project.” Mainly the reason to collect customer information was to gain better

knowledge of the customer or own organization and used for new opportunities. As one manager said: “The ideas come from the CRM. We need to do thing different through customer thinking and

you can also see which customers are in the system.”

4.2 Customer Accounting

In the following section the results concerning customer accounting will be presented. Firstly, the comprehensive use of customer accounting is presented. Secondly, the four customer financial accounting techniques are presented.

Customer accounting

The use of customer accounting as a process to collect, measure, communicate and report on customer or customer group level is confirmed by all ten managers. Almost all managers use

customer accounting to collect customer data and monitor this data. The managers use the customer information to check and monitor objectives, market and customer position, budgets, customer trends and potential customers. One manager said: “That is used for supervision. We keep a good

track of the information.” Or another manager said: “Based on the data in the database, you specific your business policy. What can you do with existing clients, what to do for new customers and

possible new markets.” This information is reported to the management to manage daily business or

make adjustments. Managers use customer accounting in order to receive more information from customers, in order to improve their organization and understand their customer. The measured customer information helps managers to serve the customer, which in turns leads to better negotiation positions and specific discounts or offers. Furthermore, some managers suggest that they use more customer accounting if there was a (sufficient) supporting system in the organization or enough capacity available: “We just need more, as a manager we need more information for

managing, to understand where we earn our money.”

Customer profitability analysis

19 more stable variable than profit. In addition, another reason is that companies use profitability metrics at product/service level rather than customer level. This is because companies sell different products/services to the same customer. And where they may make a loss on one product, they gain on another product. Therefore they produce profitability figures for each project to see which projects to keep or let go. The other three managers use customer profitability analysis. These managers say that they use the profit numbers internally to evaluate the customer. The figures helps answer questions like: “How do customers end in a positive or negative outcome” and “who are our top customers”. This information helps determine the managers whether the customer remains doing business or cut loose. A manager also said that the results are also taken along to the customer evaluation and discussed with the customer.

Customer profitability segment analysis

The use of customer profitability segment analysis is evenly divided by the managers. The results of the interviews show that five managers use that kind of analysis in the company and the other five managers do not use the technique. The five managers use the profitability per customer segment to monitor the customer groups and whether they are profitable. This metrics helps the managers to answer: What earns the company of a certain customer group? The managers said that the metrics help the company to position the customers and show insights where there were potential

opportunities for the company. The main argument put forward by managers who do not use customer profitability segment analysis is that they use segmentation by product level. In their view it is more relevant for the company to show profit figures selected on product group than customer group. As one manager says: “you can see which products are requested or are profitable and which

are not”. Another reason mentioned by two managers was that the technique is not relevant to the

company because they serve only one customer group or segment.

Lifetime customer profitability analysis

The lifetime customer profitability analysis technique is hardly use by the examined managers. Only one manager confirmed that they are using such a technique. He says the company is not investing only in the first year of the customer relationship, but in several years. He explains that the lifetime profitability analysis helps to realize that certain relationships have a certain life cycle. The other nine managers say they do not use such techniques. Their motivation was that the market changed so quickly that it was difficult to predict which customers are still with the company in five year’s time. As one manager state: “A few years ago, you still had contracts of four or five years with a customer.

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to look further ahead because customer commit any longer.” The market fluctuation caused that

managers focus on the short term. Another answer was that they use experience and feelings to determine what the expected profit from a customer would be.

Valuation of customers or customer groups as assets

The technique to value a customer or group of customers as an asset is not used by the interviewed managers. The main argument is that the technique is unknown and they do not know what the added value is of this particular metric. Three managers respond that they value customers based on feeling or guts. One manager expressed it as; “That is more an emotional indicator”. And one

manager determine the value of the customer with other techniques, for example the previous discussed financial techniques.

4.3 Relationship customer intimacy and customer accounting

All managers indicated that the use of customer accounting certainly supports the customer intimacy philosophy. The managers said that the use of customer accounting allows them to get better

understanding of their customers. The information provides objective data which the managers can monitor and use for decision making. Consequently the managers argue that they could better respond to customer demands and find solutions to customer problems. Stated by a manager: “An

analysis of the customer information helps the annual planning, what you are going to do next year, what are your goals.” However, the results for the relationship between customer intimacy and the

four customer financial accounting techniques are insignificant. The few managers who use one or two of the financial techniques state that it helps supports customer intimacy because the financial techniques present how much the company earns from a particular customer or customer group. This information provide insight in the top customers of the company, but also reveal the customers that generate losses. The information supports the managers when engaging with the customers to discuss their relationship. This allowed the managers to take a better position in the market by measuring what customers or customer groups gain or costs the company. Furthermore, it can provide them with information to decide in which customer (group) to invest. One manager said: “You can make choices of who we want to keep and we want to lose. You can make real choices. Or

tell the customer that he can stay our clients but that means for this price.” Only the results clearly

21 says it: "That is not our business philosophy. We are not a sales firm. We could not manage based on

sales because we have also have bad sales. However, we are a relationship organization. Therefore we now have nine to ten times more customers so that we revenue the same amount in years." and

another manager: "The point is that the customer is happy and you with him. That generate profits.

Profit is not only gaining money. Because that is not the essence of this company. Sales must be generated, otherwise you will not exist. But the basis is to bring value to the client and then comes without saying the profit." Therefore managers prefer a stable relationship. Next up a manager said: "Keeping a customer is easier than a finding a new customer” and “As said keeping customers is top priority." This shows that managers may keep bad customers because it is harder to find a new

customer. These results show that the managers focus on maintaining a good relationship with the customer even though the financial figures may tell them to let the customer go. Another related reason for not using financial techniques is because managers make decisions entirely based on their feelings or guts. One managers expressed said: "I just should have a good feeling about the customer.

And if I have a good feeling, then it is okay. For efficiency, you do not look only at the numbers." And

another manager says: "That is not analyzed in the form of hard numbers. But that is more a question

of feeling." This implies that the managers do not act on numbers but on guts and feeling. Instead of

using financial techniques to support their decisions. The third reason is that managers indicate that bad or unprofitable customers, provide more than only revenue. Besides the revenue the customers advertise for the company. That is difficult to specify in value or revenue to a particular customer. As one manager said: "The downside of it is that some bad customers can also bring in good customers." The financial techniques produce customer information on profitability where half of the managers manage their policy based on sales as in; objectives, budgets and predictions. The findings of the interviews indicate that there is a relationship between customer intimacy and customer accounting. However, the results also indicate that the financial techniques are hardly use to support the

strategy.

4.4 Discussion

This section compare the findings of the research and to results of existing studies and discussing the upcoming differences.

There exist not a clear concept of customer intimacy in the literature. However, this research

22 relationship, but also adapt to the customer to fulfill his needs. The results of the four dimensions that are related to customer intimacy show that the managers company is pursuing the customer intimacy strategy. The organizations try to involve the whole organization as much possible in the process. Centers the customer in the process and attempts to develop a close relationship. This relationship building is fostered by customer knowledge and flexibility to fulfil customer requests. These results measure positive recognition in the description of the customer intimacy concept in the companies and indicate that the managers desire a valuable relationship with the customer and the interest in the customers (future) needs. Beside Gelbert et al. (2003) suggest to build a successful relationship the companies need specific customer information. In this research the managers confirmed that they collect customer information. The reasons was to get better insight in the customer and own organization. The literature report that the use of customer accounting is

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5. Conclusion

The final chapter present the conclusions, limitations of the study and discuss potential topics for further research.

5.1 Conclusions

This research is an introduction into the use of customer accounting in the Netherlands. In particular, it focusses on the examination of how and why companies that pursue customer intimacy use customer accounting. Focusing mainly on the financial metrics, the study supports new theoretical insights in the relationship between customer intimacy and customer accounting. The literature suggests that companies pursuing customer intimacy use management tools to gather customer information, monitor this information and manage desirable outcomes (Brock and Zhu, 2012). In addition, the literature shows the benefits of customer accounting tools for managers to receive this specific customer information (Guilding and McManus, 2002). This research examined ten Dutch companies pursuing a customer intimacy strategy and investigated the use of customer accounting, with a focus on financial techniques. Two main findings were that all managers use customer accounting to support the customer intimacy strategy. While the major unexpected outcome of the research is that the managers hardly use the examined financial customer accounting techniques to support customer intimacy. The main reasons is that managers focus more on the value of the customer relationship and manage based on feelings and guts rather than the hard numbers. This research hopefully opens the door to further research concerning how the use of customer accounting in pursuing customer intimacy in the Netherlands is used.

5.2 Implications

In addition, several limitations can be addressed when analyzing the results. A qualitative research is controlled by the researcher. The researcher has to be objective with regards to the outcome of the research, even though interests, assumptions and thoughts could influence the results (Collins, 1992). In the research, interviews are the only source of collecting data. Using multiple research methods could make the research stronger. Continuing, the participants of the research are not “financial” managers which could mean that these managers may have no insight in the use of financial techniques of the company. In context of customer intimacy, the research relied only on one side of the organization – customer relationship. Therefore little is known concerning customers perception. A last notion of limitation is that the interview sample may be too small to make

24

5.3 Further research

The research investigated how and why Dutch companies that pursue customer intimacy use

customer accounting. Emerge from the discussion and limitation section interesting topics appear for further research.

25

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30 Kenmerken van customer intimacy dat het niet alleen om een goede relatie met een klant gaat. Het gaat om de filosofie die vanuit de hele organisatie gedragen wordt en de verworven kennis uit de relatie aan de huidige en toekomstige aanbod te voldoen en daarmee een

concurrentievoordeel te behalen. Een bedrijf combineert gedetailleerde klantinformatie en een snelle reactie operationele structuur om aan de behoeften van de klant te voldoen.

Algemeen

Herkent uw organisatie in deze omschrijving?

In hoeverre ?

Organization level

Op welk level heeft uw organisatie contact met de klant? (Sales, accountmanagers, top management)

Hoe heeft uw organisatie dat georganiseerd?

Relatie klant

Op welke manier heeft u of uw organisatie contact met de klant?

Hoe om schrijft u in het algemeen de relatie met de klant?

7. Appendix

Interview schedule

Met dit onderzoek wil kijken naar bedrijven die de customer intimacy visie streven zijn waarom en hoe ze customer accounting gebruiken. Dit interview zal om en nabij drie kwartier duren. Dit interview wordt opgenomen en is anoniem en in mijn scriptie zullen geïnterviewde personen dus nooit bij naam genoemd worden. Deze inleiding geeft even kort weer wat ik van plan ben. Is alles tot zover helder?

Customer intimacy (

Algemene vragen:

Wie bent u? Wat is uw functie? Korte introductie van uw bedrijf?

31

Flexibiliteit

Hoe reageert uw organisatie op verzoeken van klanten? Vindt u dat uw organisatie flexibel is naar de klant?

Customer knowledge

1. Verzamelt uw organisatie klantgegevens? 2. Hoe worden de klantgegevens vastgelegd? 3. Wat wordt er van de klant vastgelegd? 4. Waarvoor gebruikt uw de klant gegevens?

Customer accounting

(Guilding and McManus, 2002)

Dit proces van identificeren, meten, communiceren en rapporteren van economische informatie dat is gerelateerd aan een klant of klantengroep. Financiële praktijken/technieken gericht op de beoordeling van de winst, verkoop, of contante waarde van de winst in verband met een klant of een groep klanten.

32 1. Maakt uw organisatie gebruik van z’n techniek?

2. Hoe gebruikt uw organisatie de techniek? 3. Waarom gebruikt uw organisatie de techniek?

Customer profitability analysis

Berekening van de winst verdiend van een specifieke klant. De winst berekening is gebaseerd op de kosten en de omzet die kan worden herleid tot een bepaalde klant.

Customer segment profitability analysis

De technieken van het uitvoeren van een winstgevendheid van klanten analyse (zoals hierboven gedefinieerd), op een marktsegment of klantengroep basis.

1. Maakt uw organisatie gebruik van z’n techniek? 2. Hoe gebruikt uw organisatie de techniek? 3. Waarom gebruikt uw organisatie de techniek?

Lifetime customer profitability analysis

Een techniek die de levenslange winstgevendheid van klanten analyse. Dit instrument richt zich op alle verwachte toekomstige inkomstenstromen en de kosten van het onderhoud van een bepaalde klant.

33

Valuation of customers or customer groups as assets

Waardering van klanten of klantgroepen als activa heeft betrekking op de berekening van de waarde van de klanten aan het bedrijf. Dit kan worden uitgevoerd door het berekenen van de contante waarde van alle toekomstige winsten toe te schrijven aan een bepaalde klant of een groep klanten.

1. Maakt uw organisatie gebruik van z’n techniek? 2. Hoe gebruikt uw organisatie de techniek? 3. Waarom gebruikt uw organisatie de techniek?

Zijn er andere technieken die uw organisatie gebruikt om het identificeren, meten, communiceren en rapporteren van economische informatie van een klant?

Relationship between Customer Intimacy and Customer Accounting

Hoe dan? Hoe werkt dat? Waar loopt uw

34 Helpt customer profitability analyse uw organisatie bij de customer intimacy strategy?

Helpt customer segment profitability analysis uw organisatie bij de customer intimacy strategy?

Helpt lifetime customer profitability analysis uw organisatie bij de customer intimacy strategy?

Helpt valuation of customers uw organisatie bij de customer intimacy strategy?

Helpt andere techniek uw organisatie bij de customer intimacy strategy? Hoe dan?

Hoe werkt dat? Waar loopt uw

organisatie tegen aan?

Hoe dan? Hoe werkt dat? Waar loopt uw

organisatie tegen aan?

Hoe dan? Hoe werkt dat? Waar loopt uw

organisatie tegen aan?

Hoe dan? Hoe werkt dat?

Waar loopt uw organisatie tegen aan?

Hoe dan? Hoe werkt dat? Waar loopt uw