Resumen: La venta cruzada es una conocida herramienta de márketing utilizada para vender producto... more Resumen: La venta cruzada es una conocida herramienta de márketing utilizada para vender productos adicionales y así potenciar mayores ingresos y beneficios. Para tomar decisiones de venta óptimas y rentables a largo plazo, es importante actuar con cautela y ...
Marketing affects customer behavior, and customer behavior in turn drives a firm's cash flows... more Marketing affects customer behavior, and customer behavior in turn drives a firm's cash flows and, ultimately, valuation. In this sequence of relationships, a commonly overlooked factor by marketers is the volatility of customers' cash flows. This study links different recurring customer behaviors to the future level and volatility of a customer's cash flows. Empirical analyses of the large customer database of a Fortune 500 retailer reveal that a 1% desired change in the different types of recurring customer behaviors corresponds to a future quarterly 4.61% decrease in the cash flow volatility and $39.42 million increase in the future cash flow level of the firm. Furthermore, firm-initiated marketing is 1.9–3.2 times more effective at managing the future cash flow level and volatility when it is selectively targeted to customers with certain characteristics. Overall, the study enables marketers to manage different customer behaviors that influence customers' future ...
Contents: Introduction: The Evolution of Customer Equity: From an important metric to a way of th... more Contents: Introduction: The Evolution of Customer Equity: From an important metric to a way of thinking and doing business V. Kumar and Denish Shah PART 1: UNDERSTANDING & MEASURING CUSTOMER EQUITY 1. Drivers of Customer Equity Roland T. Rust, James Kim, Yue Dong, Tom J. Kim, and Seoungwoo Lee 2. Aggregate-Level and Individual level Customer Lifetime Value V. Kumar and Anita Pansari 3. Simple Probability Models for Computing CLV and CE Peter S. Fader and Bruce G. S. Hardie 4. Incorporating Dynamics in Customer Lifetime Value Models Michael Lewis 5. The Value of Flexibility: Incorporating the (Real) Option of Firing a Customer Tomorrow into Today's Customer Lifetime Value Michael Haenlein PART II IDENTIFYING KEY DRIVERS TO AUGMENT CUSTOMER EQUITY 6. Managing Customer Loyalty for Maximizing Customer Equity Werner Reinartz and Maik Eisenbeiss 7. Leveraging Product Returns to Maximize Customer Equity J. Andrew Petersen and Eric T. Anderson 8. Word-of-Mouth and Marketing Effects on Customer Equity Dominique M. Hanssens, Julian Villanueva, and Shijin Yoo 9. The Power of Customer Referrals Robert P. Leone and Angeliki Christodoulopoulou PART III: APPLYING THE CUSTOMER EQUITY CONCEPT FOR ENHANCING FIRM PERFORMANCE 10. Customer Acquisition Strategies: A Customer Equity Management Perspective Kay Peters, Peter C. Verhoef, and Manfred Krafft 11. The Chain of Effects from Customer Satisfaction to Customer Profitability: Repairing Broken Connections Timothy L. Keiningham, Lerzan Aksoy, Yuliya A. Komarova, and Mohammad Nejad 12. Customer Lifetime Value Based Resource Allocation Rajkumar Venkatesan 13. Customer Mindset Metrics and Firm Performance Shuba Srinivasan PART IV: STRATEGIC MANAGEMENT OF CUSTOMER EQUITY 14. Risk Considerations in the Management of Customer Equity Ruth N. Bolton and Crina O. Tarasi 15. Co-Managing Brand Equity and Customer Equity Anita Luo, Donald R. Lehmann, Scott A. Neslin. 16. Opportunities and Threats from the Effects of New Technologies on Customer Equity Management Raji Srinivasan 17. Stop Grouping and Start Regulating - A New Approach to Social Media Marketing V. Kumar, Nandini Krishnamoorthy and Gayatri Shukla PART V: IMPLEMENTING CUSTOMER EQUITY IN FIRMS 18. Implementing Marketing Metrics in Organizations: Opportunities and Challenges Donald E. Sexton 19. Interaction Orientation and Complaint Handling: Implications for Building Customer Equity Girish Ramani & George Knox 20. Customer Equity Reporting Thorsten Wiesel and Bernd Skiera Conclusion: The Future of Customer Equity V. Kumar and Gayatri Shukla
Do customers exhibit recurring behaviors beyond repeat purchases? If so, what are those behaviors... more Do customers exhibit recurring behaviors beyond repeat purchases? If so, what are those behaviors, how are they formed, and why should marketers care? The authors apply the theory of habit to customer behavior in the context of a large customer data set of a national retailer. They find that (1) beyond repeat purchases, customers' recurring behavior with respect to returning products, purchasing on promotion, and purchasing low-margin items can be quantified along a continuum of habit strength; (2) marketing has a temporal impact on the formation of different customers' habits; and (3) customers' purchase and promotion habits positively affect firm performance (by $58 million), whereas return and low-margin purchase habits negatively affect firm performance (by $62 million). The findings underscore the need for managers to consider customer habits beyond repeat purchases, take stock of customers' habit measures before implementing policy changes, and leverage the hab...
The extent to which a brand's individual products (relative to competing products) are availa... more The extent to which a brand's individual products (relative to competing products) are available to consumers for purchase in a retail store can critically affect the brand's overall performance. However, store-level product availability information is lost in aggregate market-level data sets and has been ignored by extant demand studies in general, which can create the risk of misinformed managerial decision making. In this research, the authors propose a unique methodology to enable manufacturers to infer retailers’ joint stocking probability of products from aggregate data and, thus, enable consumers’ choices to be contingent on the assortment of products available in retail stores. The application of the proposed framework in the context of an emerging market results in unbiased demand parameter estimates, a significantly better model fit, and richer managerial insights (compared with conventional approaches) pertaining to how brand performance is affected by the (1) dyn...
Resumen: La venta cruzada es una conocida herramienta de márketing utilizada para vender producto... more Resumen: La venta cruzada es una conocida herramienta de márketing utilizada para vender productos adicionales y así potenciar mayores ingresos y beneficios. Para tomar decisiones de venta óptimas y rentables a largo plazo, es importante actuar con cautela y ...
Can a marketer drive the stock price of the firm? Yes, it should be possible. Toward this endeavo... more Can a marketer drive the stock price of the firm? Yes, it should be possible. Toward this endeavor, the authors develop a framework to link customer equity (CE) (as determined by the customer lifetime value metric) to market capitalization (MC) (as determined by the stock price of the firm). The authors test the framework in an empirical field experiment with two Fortune 1000 firms in the business-to-business and business-to-consumer contexts, respectively. The findings show that (1) a CE-based framework can reliably predict the MC of the firm and (2) marketing strategies directed at increasing the CE not only increase the stock price of the firm but also beat market expectations. Furthermore, the results indicate that the relationship between CE and MC is moderated by risk factors in the form of volatility and vulnerability of cash flows from customers. By accounting for these factors, the authors improve the association between CE and MC. The findings broaden the scope and role of...
Conventional wisdom, marketing literature, and cross-selling practices to date are based on the n... more Conventional wisdom, marketing literature, and cross-selling practices to date are based on the notion that customer cross-buying is positively associated with customer profitability. However, this study finds that when certain customers with persistent adverse behavioral traits (e.g., limited spending, excessive revenue reversals, excessive service requests, promotion purchase behavior) engage in cross-buying, they exhibit a downward spiral of unprofitable relationship, with the losses increasing with higher levels of cross-buy. The authors analyze the customer databases of five firms and find that 10%–35% of the firms' customers who cross-buy are unprofitable and account for a significant proportion (39%–88%) of the firms' total loss from its customers. Consequently, the authors present a two-stage framework to enable managers to discern customers who are likely to engage in profitable versus unprofitable cross-buying. Overall, the findings refine the basic understanding o...
Many firms have experienced greater success through implementing relationship marketing strategie... more Many firms have experienced greater success through implementing relationship marketing strategies. This is achieved by gaining knowledge about their own customers through database marketing and about the general marketplace through marketing research. Over time, this has led firms to adopt a general framework which we call the conventional path to profitability. This conventional framework suggests that new product innovation leads to acquisition, acquisition combined with a rich experience leads to satisfaction, satisfaction leads to loyalty and customer retention, and loyalty/retention leads to profitability. However, we show that some of the links in the framework are weak based on both academic research and marketplace realities. Consequently, we reverse the logic of the conventional path to profitability. We introduce a new approach that starts the customer relationship management strategy with customer profitability and the notion that different customers should be rewarded a...
The concept of customer centricity and its benefits have been discussed for more than 50 years. D... more The concept of customer centricity and its benefits have been discussed for more than 50 years. Despite this fact, many firms are still struggling to fully align themselves to the customer-centric paradigm. This article identifies fundamental issues and challenges that typically deter a firm from becoming customer-centric. These are mainly related to the organizational culture, structure, processes, and financial metrics of the firm. To overcome these barriers, the article suggests a path to customer centricity that is driven by a strong leadership commitment, organizational realignment, systems and process support, and revised financial metrics. The article concludes with directions for further research.
Resumen: La venta cruzada es una conocida herramienta de márketing utilizada para vender producto... more Resumen: La venta cruzada es una conocida herramienta de márketing utilizada para vender productos adicionales y así potenciar mayores ingresos y beneficios. Para tomar decisiones de venta óptimas y rentables a largo plazo, es importante actuar con cautela y ...
Marketing affects customer behavior, and customer behavior in turn drives a firm's cash flows... more Marketing affects customer behavior, and customer behavior in turn drives a firm's cash flows and, ultimately, valuation. In this sequence of relationships, a commonly overlooked factor by marketers is the volatility of customers' cash flows. This study links different recurring customer behaviors to the future level and volatility of a customer's cash flows. Empirical analyses of the large customer database of a Fortune 500 retailer reveal that a 1% desired change in the different types of recurring customer behaviors corresponds to a future quarterly 4.61% decrease in the cash flow volatility and $39.42 million increase in the future cash flow level of the firm. Furthermore, firm-initiated marketing is 1.9–3.2 times more effective at managing the future cash flow level and volatility when it is selectively targeted to customers with certain characteristics. Overall, the study enables marketers to manage different customer behaviors that influence customers' future ...
Contents: Introduction: The Evolution of Customer Equity: From an important metric to a way of th... more Contents: Introduction: The Evolution of Customer Equity: From an important metric to a way of thinking and doing business V. Kumar and Denish Shah PART 1: UNDERSTANDING & MEASURING CUSTOMER EQUITY 1. Drivers of Customer Equity Roland T. Rust, James Kim, Yue Dong, Tom J. Kim, and Seoungwoo Lee 2. Aggregate-Level and Individual level Customer Lifetime Value V. Kumar and Anita Pansari 3. Simple Probability Models for Computing CLV and CE Peter S. Fader and Bruce G. S. Hardie 4. Incorporating Dynamics in Customer Lifetime Value Models Michael Lewis 5. The Value of Flexibility: Incorporating the (Real) Option of Firing a Customer Tomorrow into Today's Customer Lifetime Value Michael Haenlein PART II IDENTIFYING KEY DRIVERS TO AUGMENT CUSTOMER EQUITY 6. Managing Customer Loyalty for Maximizing Customer Equity Werner Reinartz and Maik Eisenbeiss 7. Leveraging Product Returns to Maximize Customer Equity J. Andrew Petersen and Eric T. Anderson 8. Word-of-Mouth and Marketing Effects on Customer Equity Dominique M. Hanssens, Julian Villanueva, and Shijin Yoo 9. The Power of Customer Referrals Robert P. Leone and Angeliki Christodoulopoulou PART III: APPLYING THE CUSTOMER EQUITY CONCEPT FOR ENHANCING FIRM PERFORMANCE 10. Customer Acquisition Strategies: A Customer Equity Management Perspective Kay Peters, Peter C. Verhoef, and Manfred Krafft 11. The Chain of Effects from Customer Satisfaction to Customer Profitability: Repairing Broken Connections Timothy L. Keiningham, Lerzan Aksoy, Yuliya A. Komarova, and Mohammad Nejad 12. Customer Lifetime Value Based Resource Allocation Rajkumar Venkatesan 13. Customer Mindset Metrics and Firm Performance Shuba Srinivasan PART IV: STRATEGIC MANAGEMENT OF CUSTOMER EQUITY 14. Risk Considerations in the Management of Customer Equity Ruth N. Bolton and Crina O. Tarasi 15. Co-Managing Brand Equity and Customer Equity Anita Luo, Donald R. Lehmann, Scott A. Neslin. 16. Opportunities and Threats from the Effects of New Technologies on Customer Equity Management Raji Srinivasan 17. Stop Grouping and Start Regulating - A New Approach to Social Media Marketing V. Kumar, Nandini Krishnamoorthy and Gayatri Shukla PART V: IMPLEMENTING CUSTOMER EQUITY IN FIRMS 18. Implementing Marketing Metrics in Organizations: Opportunities and Challenges Donald E. Sexton 19. Interaction Orientation and Complaint Handling: Implications for Building Customer Equity Girish Ramani & George Knox 20. Customer Equity Reporting Thorsten Wiesel and Bernd Skiera Conclusion: The Future of Customer Equity V. Kumar and Gayatri Shukla
Do customers exhibit recurring behaviors beyond repeat purchases? If so, what are those behaviors... more Do customers exhibit recurring behaviors beyond repeat purchases? If so, what are those behaviors, how are they formed, and why should marketers care? The authors apply the theory of habit to customer behavior in the context of a large customer data set of a national retailer. They find that (1) beyond repeat purchases, customers' recurring behavior with respect to returning products, purchasing on promotion, and purchasing low-margin items can be quantified along a continuum of habit strength; (2) marketing has a temporal impact on the formation of different customers' habits; and (3) customers' purchase and promotion habits positively affect firm performance (by $58 million), whereas return and low-margin purchase habits negatively affect firm performance (by $62 million). The findings underscore the need for managers to consider customer habits beyond repeat purchases, take stock of customers' habit measures before implementing policy changes, and leverage the hab...
The extent to which a brand's individual products (relative to competing products) are availa... more The extent to which a brand's individual products (relative to competing products) are available to consumers for purchase in a retail store can critically affect the brand's overall performance. However, store-level product availability information is lost in aggregate market-level data sets and has been ignored by extant demand studies in general, which can create the risk of misinformed managerial decision making. In this research, the authors propose a unique methodology to enable manufacturers to infer retailers’ joint stocking probability of products from aggregate data and, thus, enable consumers’ choices to be contingent on the assortment of products available in retail stores. The application of the proposed framework in the context of an emerging market results in unbiased demand parameter estimates, a significantly better model fit, and richer managerial insights (compared with conventional approaches) pertaining to how brand performance is affected by the (1) dyn...
Resumen: La venta cruzada es una conocida herramienta de márketing utilizada para vender producto... more Resumen: La venta cruzada es una conocida herramienta de márketing utilizada para vender productos adicionales y así potenciar mayores ingresos y beneficios. Para tomar decisiones de venta óptimas y rentables a largo plazo, es importante actuar con cautela y ...
Can a marketer drive the stock price of the firm? Yes, it should be possible. Toward this endeavo... more Can a marketer drive the stock price of the firm? Yes, it should be possible. Toward this endeavor, the authors develop a framework to link customer equity (CE) (as determined by the customer lifetime value metric) to market capitalization (MC) (as determined by the stock price of the firm). The authors test the framework in an empirical field experiment with two Fortune 1000 firms in the business-to-business and business-to-consumer contexts, respectively. The findings show that (1) a CE-based framework can reliably predict the MC of the firm and (2) marketing strategies directed at increasing the CE not only increase the stock price of the firm but also beat market expectations. Furthermore, the results indicate that the relationship between CE and MC is moderated by risk factors in the form of volatility and vulnerability of cash flows from customers. By accounting for these factors, the authors improve the association between CE and MC. The findings broaden the scope and role of...
Conventional wisdom, marketing literature, and cross-selling practices to date are based on the n... more Conventional wisdom, marketing literature, and cross-selling practices to date are based on the notion that customer cross-buying is positively associated with customer profitability. However, this study finds that when certain customers with persistent adverse behavioral traits (e.g., limited spending, excessive revenue reversals, excessive service requests, promotion purchase behavior) engage in cross-buying, they exhibit a downward spiral of unprofitable relationship, with the losses increasing with higher levels of cross-buy. The authors analyze the customer databases of five firms and find that 10%–35% of the firms' customers who cross-buy are unprofitable and account for a significant proportion (39%–88%) of the firms' total loss from its customers. Consequently, the authors present a two-stage framework to enable managers to discern customers who are likely to engage in profitable versus unprofitable cross-buying. Overall, the findings refine the basic understanding o...
Many firms have experienced greater success through implementing relationship marketing strategie... more Many firms have experienced greater success through implementing relationship marketing strategies. This is achieved by gaining knowledge about their own customers through database marketing and about the general marketplace through marketing research. Over time, this has led firms to adopt a general framework which we call the conventional path to profitability. This conventional framework suggests that new product innovation leads to acquisition, acquisition combined with a rich experience leads to satisfaction, satisfaction leads to loyalty and customer retention, and loyalty/retention leads to profitability. However, we show that some of the links in the framework are weak based on both academic research and marketplace realities. Consequently, we reverse the logic of the conventional path to profitability. We introduce a new approach that starts the customer relationship management strategy with customer profitability and the notion that different customers should be rewarded a...
The concept of customer centricity and its benefits have been discussed for more than 50 years. D... more The concept of customer centricity and its benefits have been discussed for more than 50 years. Despite this fact, many firms are still struggling to fully align themselves to the customer-centric paradigm. This article identifies fundamental issues and challenges that typically deter a firm from becoming customer-centric. These are mainly related to the organizational culture, structure, processes, and financial metrics of the firm. To overcome these barriers, the article suggests a path to customer centricity that is driven by a strong leadership commitment, organizational realignment, systems and process support, and revised financial metrics. The article concludes with directions for further research.
Uploads
Papers by Denish Shah