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Commercial due diligence: testing loyalty ownership
Four diagnostic audits to separate firm-owned loyalty from salesperson-owned defection risk before signing.
| Diligence Dimension | Standard Model Assumption | Empirical Finding (Palmatier et al., 2007) | Due Diligence Audit Action |
|---|---|---|---|
| Revenue Portability | Aggregate 90%+ retention means customer relationships belong to the enterprise | The study-specific SOL path to latent risk is b = 0.62 (R² = 0.38); the coefficient is not a customer-level probability | Rep-to-revenue concentration audit: Map the top 20% of revenue to individual rep tenure and relationship age |
| Account Growth Engine | Corporate brand and product line drive organic account expansion | Firm loyalty produces zero sales growth (b = -0.05, ns); growth is driven by reps (b = 0.16) and value (b = 0.24) | Cross-sell origin audit: Review whether new product adoption required rep-led bespoke selling or automated uptake |
| Pricing Power vs Retention | Customers renew because switching costs to another vendor are too high | Firm loyalty supports price premiums (b = 0.18), but personal loyalty provides the primary relationship buffer | Price elasticity interview sample: Test customer sensitivity to price increases versus rep reassignment |
| Integration Restructuring | Consolidating sales teams under an acquirer CRM creates immediate synergy | Disrupting rep alignment destroys the growth engine and triggers latent defection | Multi-threading index: Audit whether accounts have deep relationships with product/engineering teams or single-rep touchpoints |
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Reference & Evidence
Source: Author's synthesis of the cited literature.