Building profitable business relationships

After working on his thesis for more than seven years, Massey marketing lecturer Dr Ravi Balasubramanian finally crossed the stage to receive his doctoral degree at his graduation ceremony in Wellington last week.

The native of Bombay, India says he has always been interested in business, even when he started his working life after an undergraduate degree in chemistry. “It didn’t take me long to realise that I wanted to get into the business side of things, and my career path veered into sales, marketing, and general management positions in the chemical and pharmaceutical industries.”

Dr Balasubramanian went on to do his Master of Management Studies at Bombay University, and also began working at the university as a part-time lecturer before leaving his homeland for New Zealand.

“I moved to New Zealand in 1996 for a complete change of life,” he says. “The pollution in Bombay was making my daughter sick and the doctors said, ‘Move to somewhere with better air quality.’ I couldn’t think of a better place than New Zealand.”

Dr Balasubramanian began his career as a full-time academic when he joined Wellington Polytechnic as a lecturer in 1997. Since the merger with Massey University in 1999, he has taught various marketing papers within the Bachelor of Business Studies. He says the University has been very supportive while he pursued his own studies.

Dr Balasubramanian’s PhD thesis explores the links between relationship marketing and the profitability of customers. The topic grew from his interest in the financial outcomes of marketing, something he feels that many marketers don’t pay enough attention to.

“I think the key learning for companies is that they need to actively consider the money they are making from their customers before embarking on business relationship development activity. This sounds simple, but too many organisations focus more on their sales figures, but that is not a predictor of actual profit since costs of serving a customer may not be linked to sales level.”

Dr Balasubramanian says the costs associated with serving a customer often get lumped together as overheads, so companies may not have a clear idea on how much an individual customer is costing them. For his thesis, he created a theoretical model that integrated the nature of the business relationship with a customer and the associated costs and profitability.

He says that most firms operating in business-to-business markets have a small number of very profitable customers and a much larger number of marginally profitable or unprofitable customers.

“Understanding how to measure the profitabilty of each customer is very important, and it allows you to differentiate customers so that you can adopt an appropriate relationship marketing strategy,” Dr Balasubramanian says.

“Complex service requirements come at a cost to companies, but if your service and supply arrangements are valuable to your customer, you should be able to charge an appropriate price.”

Dr Balasubramanian was one of seven doctoral candidates to graduate during Massey University’s two Wellington campus ceremonies. A total of 626 students were capped.