Relationship Portfolios - Past, Present and Future

Since the 1980s the concepts of portfolio management have been adopted within the context of understanding business markets. Academics on both sides of the Atlantic have conceptualized and empirically tested a variety of customer and supplier portfolio models. More recently the concept of an indirect portfolio of relationships and its management has also been introduced. This paper reviews the role of relationship portfolios: customer, supplier and indirect in the context of business-to-business markets. We critically assess the most significant models, map their evolution and consider what the future holds for relationship management. We then discuss the manner in which portfolios and network can be integrated in order to provide a practical guide for marketing management. In conclusion we recognize the importance of conceptualizing the network as a set of portfolios (customer, supplier and indirect) and suggest that, in the context of business-to-business marketing at the very least, portfolio analysis provides the key to successful relationship management and important inputs to strategic management. Introduction The origins of portfolio theory lie in financial investment (Markowitz, 1952 and Sharpe, 1963). The concept has also been widely adopted in other spheres of management such as strategic management and marketing, as a mechanism for aiding decisions about resource allocation. No strategic management or marketing text appears to be complete without the inclusion of the Boston Consulting Group (BCG) growth share matrix or the McKinsey model. When used effectively, these models provide guidance for resource allocation and the BCG model, despite its inherent weaknesses, is probably one of the most widely used management decision aids. The concepts of portfolio management have also been adopted within the context of understanding business markets. Portfolios provide a mechanism for conceptualizing and managing the customer, supplier and indirect sets of relationships which surround a firm. The growth of interest in 'relationship' marketing has also put greater emphasis on the study of these relationship portfolios. This paper is written very much from a business marketing perspective. Specifically, because in this arena the role of relationship management is acknowledged to be critical to gaining competitive advantage (Hakansson, 1982, Turnbull and Valla, 1986, Ford, 1990, 1997 and Sheth and Sharma,1997). The paper reviews work on both sides of the Atlantic in this area. It critically assesses the significant models, maps their evolution and considers what the future holds for relationship portfolio management. Relationship Portfolio Models The bulk of models that have been conceptualized are based in either customer or supplier relationship modelling. However, Zolkiewski and Turnbull (1999) also raised the importance of modelling the set of indirect relationships which surround a firm. (Indirect relationships are those with actors who influence the operation of the organization and can include Government (national and local), institutions such as universities and lobby groups, for example.) The models which have been developed include both two and three-dimensional axes along with single, two and three-step analysis phases. They are listed in Table 1 below. The most significant of these models are then reviewed in the following sections. Table 1 Summary of Portfolio Models Year Customer Portfolio Models Supplier Portfolio Models Indirect Portfolio Models 1982 Cunningham and Homse Cunningham