Relationship Characteristics and Cash Flow Variability: Implications for Satisfaction, Loyalty, and Customer Portfolio Management

Crina O. Tarasi, Ruth Bolton, Anders Gustafsson, Beth A. Walker

Research output: Contribution to journalArticlepeer-review

21 Scopus citations


Service firms seek customers with high revenues, profits, or lifetime value. However, they frequently ignore variations in consumption that lead to cash flow variability and adversely influence service operations and financial performance. This study shows that variation in individual customers' consumption or spending on services can be decreased in ways that are actionable by most managers, without decreasing revenues or profits. First, customer satisfaction has a double-whammy effect: lower cash flow variability and higher cash flow levels. This finding is important because firms can increase satisfaction in many ways. Second, customers who participate in loyalty programs have more variable cash flows, but not higher average cash flows. Hence, firms should design loyalty programs to improve customer satisfaction or intangible benefits (e.g., membership recognition), rather than offering economic incentives. Third, customers who purchase many different offerings, or allocate a large share of their purchases to the firm, have higher cash flow variability and higher average cash flows. Firms can optimize the customer portfolio by combining customers with high variability with customers who have different, offsetting cash flow patterns. Fourth, personal characteristics, such as age and income, also influence cash flow variability. Empirical findings are robust across two settings: telecommunications and financial services. The study describes sensitivity analyses of how different service and relationship marketing strategies influence a firm's business outcomes. The article concludes with insights into how to integrate service management principles, which emphasize consistency or low variability in processes, with customer relationship management principles that emphasize growing relationships and cash flows.

Original languageEnglish (US)
Pages (from-to)121-137
Number of pages17
JournalJournal of Service Research
Issue number2
StatePublished - May 2013


  • cash flow variability
  • customer lifetime value
  • customer portfolio management
  • customer satisfaction
  • loyalty programs
  • relationship marketing
  • segmentation
  • service management

ASJC Scopus subject areas

  • Information Systems
  • Sociology and Political Science
  • Organizational Behavior and Human Resource Management


Dive into the research topics of 'Relationship Characteristics and Cash Flow Variability: Implications for Satisfaction, Loyalty, and Customer Portfolio Management'. Together they form a unique fingerprint.

Cite this