Customer prioritization strategies, which focus a firm's efforts on its
most important customers, are expected to improve account profitability.
Anecdotal evidence suggests, however, that such strategies may also
undermine account profitability by inducing customers to become overly
demanding. Building on social exchange theory, this research evaluates
these competing perspectives across two field studies and finds that
prioritization is best understood as a double-edged sword. Specifically,
the results reveal that prioritization efforts initiate both a
gratitude-driven process, which enhances sales and profit, and an
entitlement-driven process, which increases service costs and reduces
profit. Importantly, the findings indicate that prioritization tactics
differ in the extent to which they trigger these competing processes and
thus in their ability to influence account profitability. Finally, the
results also reveal that critical moderators (competitive intensity and
prioritization transparency) determine the extent to which the
entitlement-driven process undermines the gratitude-driven process. For
managers, the findings suggest that both the tactics employed and
moderating conditions determine whether prioritization has a positive,
negative, or negligible effect on prioritized accounts' profitability.
[ABSTRACT FROM AUTHOR]