Customer asset management at DHL in
Asia
Jochen Wirtz, Indranil Sen and Sanjay Singh
Jochen Wirtz is the
Academic Director of the
UCLA – NUS EMBA at the
National University of
Singapore, Singapore.
Indranil Sen was the
Research and Planning
Manager Asia Pacific, DHL,
when this case was written.
Sanjay Singh was a MBA
student at the National
University of Singapore
when this case was written.
Disclaimer. This case is written
solely for educational purposes
and is not intended to represent
successful or unsuccessful
managerial decision making.
The author/s may have
disguised names; financial and
other recognizable information
to protect confidentiality.
DOI 10.1108/20450621111117413
Introduction
DHL serves a wide range of customers, from global enterprises to the occasional customer who
ships the odd one or two documents a year. To be able to effectively manage such a diverse
customer base, DHL implemented a sophisticated customer segmentation cum loyalty
management system. The focus of this system is to assess the profitability from its customers,
reduce customer churn, and increase DHL’s share of shipments.
Company background and market environment
DHL, the international air express and logistics company, serves a wide range of customers,
from global enterprises with sophisticated and high volume supply-chain solutions shipping
anything from spare parts to documents, to the occasional customer who ships the odd one or
two documents a year. Plate 1 and 2 show some of DHL’s logistics operations. To be able to
effectively manage such a diverse customer base, DHL implemented a sophisticated customer
segmentation cum loyalty management system. The focus of this system is to assess the
profitability from its customers, reduce customer churn, and increase DHL’s share of shipments.
Customer segmentation
To achieve this, the first task was to segment its customers into actionable segments with
distinct needs. DHL defined three main segments. First, ‘‘strategic customers’’ are extremely
high-volume shippers with a full range of logistics solutions and express-shipment needs.
This segment consists of approximately of DHL’s top 250 customers worldwide, which are
mostly large multinationals. Second, the ‘‘relationship customers’’ segment consists of
customers who use DHL to ship their products and documents regularly, but with a lower
volume than the strategic customers segment and also not as sophisticated supply-chain
needs. Finally, the ‘‘direct customers’’ segment ships infrequently with DHL. The customer
segmentation can be represented in the form of the familiar customer pyramid in Figure 1.
These segments are further divided into subsegments based on the kind of service required
(Figure 2). The needs of direct customers and many of the relationship customers often are
fully met by DHL’s basic products. For relationship customers with special needs, DHL also
offers some special programs like direct distribution to its partners, test services and parts
distribution to fulfill these needs. Strategic customers virtually always use customized
solutions, like providing bulk-breaking facilities and planned production support for
precision delivery schedules, and DHL aims to meet their entire express delivery needs.
Customers using DHL’s basic products find it easier to switch as switching costs are low and
all key competitors also offer similar products. In contrast, the switching costs are
significantly higher for customers with special programs, and highest for clients using
customized solutions.
VOL. 1 NO. 1 2011, pp. 1-6, Q Emerald Group Publishing Limited, ISSN 2045-0621 j EMERALD EMERGING MARKETS CASE STUDIES j PAGE 1
 Plate 1 DHL logistics hub in Singapore

Plate 2 DHL logistics

Figure 3 shows some output of DHL’s segmentation analysis for one of its country markets.
The majority of revenue and profits were derived from only 18 percent of the customers, its
relationship customers. The direct customer segment consisted of 75 percent of the total
customer base and contributed only15 percent of revenues and 30 percent of profits. The
strategic customer segment contributed only 6 percent to profits. Similar patterns are
observed for all countries where this analysis was conducted. The verdict seems clear: focus

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PAGE 2 EMERALD EMERGING MARKETS CASE STUDIES VOL. 1 NO. 1 2011
Figure 1 Customer pyramid

Strategic
customers

Relationship
customers

Direct customers

Figure 2 Customer subsegmentation

Strategic Relationship Direct customers

customers customers

Basic products

Special programs

Customized
solutions

on the relationship customers segment for maximum profitability. However, this does not
mean that the other segments are neglected. The strategic customer segment, being the
most loyal, needs deployment of leading edge technology and best practice infrastructure to
maintain their loyalty. as future business potential is high for this group. Extra effort is put into
upgrading those direct customers who have high-volume potential and latent needs for
special-program products.

Loyalty management system: further categorization of segments

To focus service and sales staff on customer retention and development, it was necessary to
get more information about these customers and hence, each of these segments was further
classified into six categories and the data used to take corrective and proactive measures to
enhance customer loyalty.

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VOL. 1 NO. 1 2011 EMERALD EMERGING MARKETS CASE STUDIES PAGE 3
 Figure 3 Segment analysis

100 7 6
20
18
80

60 64

Percentage
65
40 75

20
30
15
0
Segment Revenue Profit

Direct customers Relationship customers Strategic cusomers

Lost
The customer in this category has stopped shipping with DHL, for external reasons like
customer having gone into liquidation, or for internal reasons like service performance failure,
or increase in prices, etc. Once the reason is identified, it is easier to control internal reasons
and reduce customer churn. Sales and service staff then focus on regaining potentially
profitable accounts.

Decreased-performer
This category refers to customers who have shipped considerably less over a given period
compared to a similar period in the past. Again, the reasons for down trading may be external
or internal to DHL. The decreased-performer in each segment triggers an alarm bell to warn
the sales staff of potential impending customer churn.

Maintained
This category is for customers who continue to trade within a given bandwidth of shipment
volume.

Increased-performer
The customer in this category has shipped considerably more over a given period. Again, the
reasons for increased performance may be external or internal. Follow-up work is done to
identify the causes for increase in volumes and particularly whether the up trading is a result
of a DHL initiative. The successful initiatives are further improved to gain better results.

New
This category is for any customer who has shipped for the first time with DHL. Special efforts
are made by the sales staff to make them permanent customers.

Regained
This customer was previously ‘‘lost’’ but has recommenced shipping with DHL recently. The
reasons for this renewed activity may be external (e.g. renewed business activity of a lapsed
customer) or internal (e.g. the shipment was made as a result of reactive measures by DHL to
regain the customer).
The data collected is graphically represented for each segment, as given in Figure 4, and
reported to sales, marketing and customer service departments, and senior management.
This makes it easy to understand the impact of the change in customer base and an increase

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PAGE 4 EMERALD EMERGING MARKETS CASE STUDIES VOL. 1 NO. 1 2011
Figure 4 Direct customers – segment analysis

39%
40 New
Increased
35 Maintained
Decreased
30
Lost
25 Regained

Percentage
20%
18%
20

15
10% 10%
10
3%
5

in the percentage of decreased-performers should immediately causes the sales and

customer service staff to take corrective action.
The classification and the data reported for each customer meant that the sales force was
forewarned about potential customer defections. They could then take corrective actions,
and identify service performance shortcomings and customer dissatisfaction, hence leading
to more proactive measures in the future. The data also made it possible to calculate the
defection rate of customers for each tier of the customer pyramid, and to calculate the lifetime
value of each segment. The change in lifetime value of all customers gives the management
an idea of the revenue and profit implications of its marketing and service initiatives.
The expected increase or decrease in revenue for the month is also calculated and
represented graphically, as shown in Figure 5, giving the impact of the change in the
customer segment portfolio on DHL’s revenues.
Similarly the sales staff can study the reasons for up trading for each customer and tap the
remaining potential for further up trading. This program also helps the company send
targeted communication to the customers based on the classification into each segments,
instead of general communication to all customers thereby making communication cost
effective.

Figure 5 Relationship customers – estimated revenue – impact of changes in account

activity

15,000 New
12,300
Increased
Maintained
10,000
Decreased
4,000 Lost
5,000 Regained
1,200

0
–1,200
–5,000 –4,000
–6,000
–10,000

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 After a short period after implementation, this initiative has already been yielding impressive
results, and further modules were being developed and pilot tested for potential roll-out
(Plate 3).

Plate 3 DHL delivery man

Study questions

1. What do you see as the main challenges in implementing this segmentation in DHL’s
customer database?
Keywords:
2. How would you recommend DHL to address those challenges?
Customer services
management, 3. What are the various possible practical applications of this segmentation methodology by
Market segmentation other functional department (e.g. sales, customer service, etc.)?

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