Managing Customer Relationship- Qualifying prospects for relationship building

The Qualifying Prospects for Relationship Building (QPR) matrix

The relationship matrix method is based on the relationship life cycle theory that can be used to determine what priorities should be given in managing customer relationships. To ensure long-term profitability and value creation, a company should focus on building a strong and lasting relationship for continuous growth in terms of value and profit.

It has 2 dimensions: Potential profitability of customer and opportunities for adding value. The basic idea behind the matrix is that the customer having highest potential profitability and which gives the highest opportunities for adding value the better it is for the company.
Placing profitability/opportunities in the matrix results in 4 approaches in the qualifying prospects for relationship building of a company:

1. Build a Strong and lasting relationship (=high profitability, high opportunity for adding value).- use large amounts of cash and are leaders in the business so they should also generate large amounts of cash.-Opportunity for adding values is very high. If needed any attempt should be made to acquire or retain the customer, because the rewards will be a very high if a relationship is maintained.
2. Focus on loyalty-building program (=high profitability, low opportunity for adding value).- Profits and cash generation should be high, and because of the low potential for adding values and growth, investments would be.
3. Use a non customized approach (= low profitability, High opportunity for adding value). - have the worst relationship characteristics of all, because low potential profitability and high opportunity for adding values.
-avoid and minimize the number of such relationships with a company.
4. Seek better opportunities elsewhere. (=low growth, low market share).- beware of any new plans for value building.- Efforts should be made to get out of the relationship as these companies will simply absorb great amounts of time and effort
Some limitations of the Relationship Matrix include:
1. It all depends on the potential profitability with/without considering the dynamic nature of market/client.
2. Sometime the value received from low profitability customers are more than High profitability customer. The values in the form of experience and knowledge transfer.
The QPR (qualifying prospects relationship building) matrix - This graph describes the qualifying prospects for relationship building depending upon the opportunities for adding value and potential profitability of customer from the relationship.