The authors present a unified strategic framework that enables competing marketing strategy options to be traded off on the basis of projected financial return, which is operationalized as the change in a firm’s customer equity relative to the incremental expenditure necessary to produce the change. The change in the firm’s customer equity is the change in its current and future customers’ lifetime values, summed across all customers in the industry. Each customer’s lifetime value results from the frequency of category purchases, average quantity of purchase, and brand-switching patterns combined with the firm’s contribution margin. The brand-switching matrix can be estimated from either longitudinal panel data or cross-sectional survey data, using a logit choice model. Firms can analyze drivers that have the greatest impact, compare the drivers’ performance with that of competitors’ drivers, and project return on investment from improvements in the drivers. To demonstrate how the approach can be implemented in a specific corporate setting and to show the methods used to test and validate the model, the authors illustrate a detailed application of the approach by using data from the airline industry. Their framework enables what-if evaluation of marketing return on investment, which can include such criteria as return on quality, return on advertising, return on loyalty programs, and even return on corporate citizenship, given a particular shift in customer perceptions. This enables the firm to focus marketing efforts on strategic initiatives that generate the greatest return.

http://accuraad.nl/wp-content/uploads/2012/09/Return-on-marketing1.pdf

Return on Marketing: Using Customer Equity to Focus Marketing Strategy

Relationship marketing emphasizes the need for maintaining long-term customer relationships. It is beneficial, in general, to serve customers over a longer time, especially in a contractual relationship. However, it is not clear whether some of the findings observed in a contractual setting hold good in noncontractual scenarios: relationships between a seller and a buyer that are not governed by a contract or membership. The authors offer four different propositions in this study and subsequently test each one in a noncontractual context. The four propositions relate to whether (1) there exists a strong positive customer lifetime-profitability relationship, (2) profits increase over time, (3) the costs of serving long-life customers are less, and (4) long-life customers pay higher prices. The authors develop arguments both for and against each of the propositions. The data for this study, obtained from a large catalog retailer, cover a three-year window and are recorded on a daily basis. The empi...

https://www.jstor.org/stable/info/3203475

On the Profitability of Long-Life Customers in a Noncontractual Setting: An Empirical Investigation and Implications for Marketing

The authors develop a framework that incorporates projected profitability of customers in the computation of lifetime duration. Furthermore, the authors identify factors under a manager’s control that explain the variation in the profitable lifetime duration. They also compare other frameworks with the traditional methods such as the recency, frequency, and monetary value framework and past customer value and illustrate the superiority of the proposed framework. Finally, the authors develop several key implications that can be of value to decision makers in managing customer relationships.

The Impact of Customer Relationship Characteristics on Profitable Lifetime Duration

The authors evaluate the usefulness of customer lifetime value (CLV) as a metric for customer selection and marketing resource allocation by developing a dynamic framework that enables managers to maintain or improve customer relationships proactively through marketing contacts across various channels and to maximize CLV simultaneously. The authors show that marketing contacts across various channels influence CLV nonlinearly. Customers who are selected on the basis of their lifetime value provide higher profits in future periods than do customers selected on the basis of several other customer-based metrics. The analyses suggest that there is potential for improved profits when managers design resource allocation rules that maximize CLV. Managers can use the authors’ framework to allocate marketing resources efficiently across customers and channels of communication.

A customer lifetime value framework for customer selection and resource allocation strategy

Most research in customer asset management has focused on specific aspects of the value of the customer to the company. The purpose of this article is to propose an integrated framework, called CUSAMS (customer asset management of services), that enables service organizations (1) to make a comprehensive assessment of the value of their customer assets and (2) to understand the influence of marketing instruments on them. The foundation of the CUSAMS framework is a careful specification of key customer behaviors that reflect the length, depth, and breadth of the customer-service organization relationship: duration, usage, and cross-buying. This framework is the starting point for a set of propositions regarding how marketing instruments influence customer behavior within the relationship, thereby influencing the value of the customer asset. The framework and propositions provide the impetus for a research agenda that identifies critical issues in customer asset management.

/pdf/the-theoretical-underpinnings-of-customer-asset-management-a-22y3bvl6fq.pdf

The Theoretical Underpinnings of Customer Asset Management: A Framework and Propositions for Future Research

https://download.clib.psu.ac.th/datawebclib/e_resource/trial_database/WileyInterScienceCD/pdf/DIR/DIR_2.pdf

Nada I. Nasr

Papers

Customer lifetime value: marketing models and applications

Control techniques and upward flow of information in franchising in distant markets: conceptualization and preliminary evidence