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February 05, 2013

Strategy from the Outside In: Profiting from Customer Value Write-Up - Part II

I. Introduction In Strategy from the Outside In: Profiting from Customer Value, George S. Day and Christine Moorman use research to determine business strategies that separate successful from unsuccessful firms. This write-up shall have a section, titled § II. Brief Summary, which outlines each chapter in Chapters 7 through 13, including the conclusion. This write-up shall also have a section, titled III. Application, which shall apply the material from § II. Brief Summary to a firm (hereinafter "Firm A") with which I worked as a business consultant. Firm A is a multi-national holding company that specializes in acquiring, supporting, and growing its subsidiary companies through accelerated organic growth as well as through acquisitions and/or strategic joint ventures and divestitures.

II. Brief Summary

Chapter 7. The Third Imperative: Capitalize on the Customer as an Asset

For a firm, the profitability of the customer asset - the sum of the discounted long-term profits associated with the customer's purchases and referrals - is based on three principles. First, that a firm must distinguish between behavioral loyalty – the frequency of customer purchases from a firm when a need arises – and attitudinal loyalty – an attachment to the firm and/or its specific products or services. Second, that a firm must manage customers to engage in behaviors that directly result in increased economic profits for the firm. These include giving the firm a greater share of wallet, purchasing new products and services, and lowering price sensitivity, etc. And third, that a firm must be capable of capitalizing on the customer asset, which will be addressed in Chapter 8.

Chapter 8. Capitalizing on the Customer as an Asset

To be capable of…...

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