Moving from customer lifetime value to customer equity

We study the consequence of moving from Customer Lifetime Value maximization to Customer Equity maximization. Customer equity has traditionally been seen as the discounted sum of the lifetime earnings from all current and future customers and thus it has been largely assumed that maximizing customer lifetime value would lead to maximum customer equity. We show that the transition from CLV to CE is not that straightforward. Although the CLV model is appropriate for managing a single non-replaceable customer, the application of a CLV model to the acquisition and valuation of customers as an ongoing concern for the firm leads to sub-optimal customer relationship management and acquisition strategies. This leads the firm following a CLV maximization approach to have a smaller and less profitable customer base than one that follows a CE maximization strategy.

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Customers' judgment of the customer service in appliance sales departments in an emerging economy

Evidence that consumers in emerging economies are more tolerant of ineffective customer service (CS), instigated an investigation into controllable elements of the service offering in a specific context in South Africa, namely, appliances sales departments in retail stores. The research aimed to identify possible shortcomings in CS amidst evidence that consumers are exposed to sophisticated merchandise that they have limited experience and understanding of. The intention was to suggest initiatives to augment the service offering so that it becomes more conducive for informed, responsible buying decisions. Household appliances represent a category of complex, durable and expensive merchandise that require more extensive information search before concluding buying decisions. A survey was done in 2007 through a pre‐tested structured questionnaire. Several branches of five prominent department stores were involved through liaison with industry. A store intercept method was used to recruit respondents: 296 questionnaires were filled in on the spot under supervision. Three sections of the questionnaire are relevant for this report: (1) consumers' satisfaction with CS; (2) a product knowledge test; and (3) demographic information. Factor analysis revealed a reduction of the original five elements of CS in the scale to three distinct elements that were labelled Personnel, Processes and Value for Money, and Product Presentation. The simpler scale suggests a less intricate judgment of CS in the context of this research. Means indicated that consumers were generally satisfied with all elements of CS, i.e. the service offering coincided with their expectations. Analysis of variance indicated no significant differences in the interpretation of any of the elements of CS by gender. A significant inverse relationship between satisfaction with CS and years of experience occurred for respondents with more than 25 years of experience in terms of Personnel (Element 1) and Processes and Value for Money (Element 2). Findings of the product knowledge tests were meant to verify consumers' CS judgments. However, scores were disappointingly low for all appliances across all respondent categories. Consumers' product knowledge could therefore not have supported informed buying decisions, despite prior experience and the opportunity to acquire additional product information during the in‐store encounter. Consumers' positive CS judgments suggest that they not necessarily realize their lack of crucial product knowledge. In the interest of informed and responsible buying decisions that have consequences for proper use and maintenance of appliances in the long term, retail stores that serve a broad customer base are encouraged to attend to in‐store customer assistance during the pre‐purchase phase, notwithstanding positive CS judgments. Non‐formal consumer education by competent, well‐trained salespeople is recommended to encourage evaluative rational product judgments. It is also suggested that store displays are designed to encourage consumers to be more inquisitive during store visits.     

Analyzing systemic customer value in scalable business services

This paper examines complex service offerings and the creation of systemic customer value in such settings. We explore the extent to which customers value systemic offerings as opposed to more separated offerings. We conducted a questionnaire survey within the customer base of two Finnish service companies. We utilized t-tests to find out how systemic offerings and separated offerings differed in terms of perceived customer value along different dimensions. The findings support the claim that systemic offerings are valued more than offerings that are more separated in nature. The results of the study carry practical implications for firms offering complex and integrated service solutions. In addition, analyses of the service-value elements included in the offering and of the related customer value will enable firms to optimize their service provisioning so as to give higher customer value and subsequently enhance their competitive advantage.     

Modelling and Investigating the relationship of after sales service quality with customer satisfaction,retention and loyalty – A case study of home appliances business

After sales services (ASS) are activities that take place after the purchase of the product by customers and are devoted to supporting customers in the use and disposal of goods. ASS can create sustainable relationships with customers and contribute significantly to customer satisfaction. The purpose of this study is to evaluate the ASS quality by measuring the level of customer satisfaction (CS), customer retention (CR) and customer loyalty (CL) through the SERVQUAL dimensions comprising of ASS attributes and also to check which such ASS-based dimensions of SERVQUAL needs to be focused more on improving the quality of ASS with the consideration of firms involved in manufacturing the home appliances. For this purpose research models were proposed to examine the influence of ASS attributes on CS, CR and CL for three different products such as Gas Stove, Water Purifier and Mixer Grinder from the home appliances sector and tested by multiple regression analyses on data collected through the structured survey questionnaire, with a five-point Likert scale. The study has demonstrated the application of multiple regression analysis in studying the influence of ASS attributes on CS, CR and CL, and the results of the study have helped in analysing the performance of the case companies so as to devise suitable strategies in improving CS, CR and CL.     

What influences the relationship between customer satisfaction and repurchase intention? Investigating the effects of adjusted expectations and customer loyalty

This study examines how loyalty influences the relationship between customer satisfaction (CS) and repurchase intention (RPI). Considering the effect of time, the study introduces adjusted expectations, which are expectations updated after consumption experience. The present study investigates the role of adjusted expectations in the CS–RPI link. With structural‐equation analysis, the proposed model was tested in the family‐restaurant setting. The results show that adjusted expectations can mediate the effect of CS on RPI. The results also indicate that processes underlying the CS–RPI link are different between low‐loyalty and high‐loyalty customers. Specifically, the transient route, which reflects the indirect path from CS to RPI via adjusted expectations, has a greater impact for nonloyals than for loyals. On the other hand, the chronic route, which represents the direct path from CS to RPI, has a greater impact for loyals than for nonloyals. CS is found to have no direct influence on RPI for low‐loyalty customers. © 2004 Wiley Periodicals, Inc.     

Public sector corporate branding and customer orientation

The objectives of branding and marketing in the public sector can differ in nature from those in the private sector, to include an improved responsiveness to public needs, rather than an increase in customer numbers. In addition, the customer orientation (a disposition that will influence brand perception) of public services is often questioned. Drawing from prior work in the private sector on the relationships expected between employee and organization customer orientation (hereafter referred to as CO), corporate brand personality, and both employee and customer satisfaction, the authors propose a number of models. These models are tested using structural equation modeling on data from a study of the employees (n = 302) and customers (n = 200) of a public hospital. Corporate brand personality mediates the positive links between employee customer orientation (hereafter referred to as ECO) and satisfaction; ECO influences brand personality, which in turn influences satisfaction. However, while both the needs and enjoyment dimensions of ECO improve customer satisfaction, the former has an unexpected, negative effect on employees. Organization customer orientation (hereafter referred to as OCO) influences customer, but not employee, satisfaction. The paper discusses the implications for managing and researching corporate branding in the public sector.     

基于顾客满意和顾客忠诚关系的市场细分方法研究

There exist different views and opinions on the links between customer satisfaction and loyalty. This paper suggests that the impact of customer satisfaction on loyalty varies across customers. This study choose the cell phone industry in China as an example and segmented customers with a novel method of clusterwise linear regression, based on the association between customer satisfaction and loyalty. Results revealed sample heterogeneity in relation to the two factors. The loyalty of some subgroups is positively related to satisfaction significantly, while that of other clusters is independent of satisfaction. Translated from Nankai Guanli Pinglun 南开管理评论 (Nankai Business Review), 2005, 8(5): 26–30     

Exploring the drivers of customer engagement behaviours in social network brand communities: towards a customer-learning model

Customer learning is regarded as a process that alters either individual cognition or the outcomes of socialisation. Understanding how the learning process works enables a brand firm to identify a customer’s latent needs. Prior studies have primarily focused on effectively positioning brand knowledge in the minds of customers, but that linear learning process does not apply to the interactive and proactive social media setting. Based on the uses and gratifications perspective, this study proposes a customer-learning model and analyses 373 online questionnaires using partial least squares structural equation modelling. The empirical results confirm that learning motivation and collaborative learning are two core components of customer learning that have positive influences on satisfaction, which in turn has a positive influence on customer engagement behaviours (CEBs) and loyalty. In addition, learning motivation is the driver of collaborative learning. Finally, CEBs also have a positive influence on loyalty. This study also concludes that the social network brand community is an informative customer-learning platform that is characterised by interactivity, collaborative learning and co-creation. Theoretical and managerial implications are also discussed.     

Impact of customer experience on loyalty: a multichannel examination

This article examines the relation between the five dimensions of customer experience advocated by Schmitt [1999a. Experiential Marketing. Journal of Marketing Management, 15, 53–67] (cognitive, affective, sensory, behavioural and social) and service provider loyalty. The examination focuses on two different channels, namely branch/agency (physical) and online (Web-based). A total of 484 panellists of a large Canadian polling firm self-administered a Web-based questionnaire regarding banking experience. The exercise was subsequently replicated in the tourism sector. Findings demonstrate that the main dimension impacting loyalty is the affective dimension (negative), thereby contributing handsomely to experiential marketing literature since negative emotions are rarely investigated. Findings also reveal that choice of channel exerts a moderating effect on the different dimensions influencing loyalty and that results vary from one sector to another. The multidimensional, multichannel, multisector approach selected for this study substantiates customer experience as complex and context specific. The authors also suggest practical implications and set out avenues of future research.     

Feasibility of a Responsive Business Scorecard – a pilot study

Several authors have pointed at opportunities to develop the well-established Business Balanced Scorecard into a Scorecard that enables companies to integrate sustainability into their strategy. Recent case studies and research experiences show that social and environmental targets are more widely recognized as strategic drivers for management. However, experiments also show that the traditional Scorecard has its limits when it comes to e.g. stakeholder management and product chain management. The European Corporate Sustainability Framework(ECSF) program distinguishes several ambition levels for Corporate Sustainability/Corporate Responsibility. The traditional Balanced Scorecard is suitable for companies that aim for Compliance-driven CS/CRor for Profit-driven CS/CR, where the financial bottom line is the ultimate indicator for success. More ambitious companies want to balance economic, social and ecological targets in a Community-driven CS/SRor Synergy-driven CS/CR.For ambitious companies, we propose a format of a Responsive Business Scorecard (RBS). The Responsive Scorecard enables companies to score at Profit, People and Planet, at the same time to integrate stakeholder demands into internal programs to improve performance. The RBS includes five Perspectives: Customers&Suppliers, Financiers&Owners, Society&Planet, Internal Process and Employees&Learning.We assessed the practical feasibility of a Responsive Scorecardin food and tourist industries. In the food industry, we analyzed whether existing business priorities of Italian companies can adequately fill a Responsive scorecard.Our conclusion is that traditional topics like finance, customers and employees are readily filled, but that sustainability topics like chain management (suppliers) and environmental performance (planet) need further elaboration. The tourist sector is dominated by Small and Medium Sized Enterprises. We investigated whether existing eco-labels for camping-sites and marinas can be developed into Responsive Scorecards. Our conclusion is that such a sector specific development of a Responsive Scorecard is possible. Further research has to show what is the value added of the new scorecard for companies in the tourist sector.     

The Sustainability of Current Account Deficits and Tourism Receipts in Turkey

Current Account Deficits (CAD) in Turkey have reached significantly high levels in the recent years and discussions around the sustainability of these deficits continue. On the other hand, thanks to its rapid development within the same period, the tourism sector is observed to increase its positive contribution to the current accounts balances. This study is an initiative to highlight the contribution of the tourism sector to the sustainability of the CAD in Turkey. Unit root and Cointegration tests have been used to this end. This approach is applied to the long-run relationship between Exports + Tourism Receipts (X + TR) and Imports + Tourism Expenditures (M + TE) for the period of 1980Q1–2005Q2. We question the weak sustainability hypothesis where the cointegrating vector is (X + TR)_t = a + b(M + TE)_t + η _t . In this vector, if b equals to one and η_t is stationary, then the current account deficits are strongly sustainable, if b is between 0 and 1(0 < b < 1) and η_t is stationary or b = 1 but η_t is non-stationary, then the current account deficits are weakly sustainable and lastly, if there is no cointegration or b = 0, then the current account deficits are unsustainable. The empirical results indicate that CAD in Turkey are unsustainable in spite of the rising shares of tourism receipts in current account balances. Therefore, in Turkey, where exports are exceedingly depended on imports, which makes it not very easy to reduce imports, the only way to ensure that CAD are sustainable is to seek options to further increase the tourism receipts.     

Fighting churn with rate plan right-sizing: a customer retention strategy for the wireless telecommunications industry

Prior literature suggests that wireless customers have difficulty in predicting their usage requirements and they often subscribe to rate plans that are not financially optimized. However, the benefits of having wireless customers on optimal rate plans are relatively unknown due to limited research in this area. This paper aims to address this knowledge gap and presents a customer retention strategy for the wireless telecommunications industry. The usage and payment records of 1403 Canadian post-paid wireless customers are examined over a 3.7-year study period. Pearson's χ ² test and hazard function graph are used to reveal how customer churn rate is influenced by rate plan suitability. The statistical analysis demonstrates that customers who are using optimal rate plans have lower churn rate than those with non-optimal ones.     

顾客遗憾作用下的重购决策模型

顾客遗憾来源于消费者对不同企业产品或不同购买方案可感知价值的横向对比,遗憾感受程度受到交易情景因素如消费者决策现状、购买行为结果的可逆性以及对已购买产品的满意度的调节,同时会反过来影响顾客满意,最终影响顾客以后的购买行为。因此,它与顾客满意一起构成了影响消费者重购倾向的决定因素,企业在注重顾客保留和培养顾客忠诚时必须将二者同时考虑,做到需求导向和竞争导向的并重。     

THE DOTHAN PRICING MODEL REVISITED

We compute zero‐coupon bond prices in the Dothan model by solving the associated PDE using integral representations of heat kernels and Hartman–Watson distributions. We obtain several integral formulas for the price P(t, T) at time t > 0 of a bond with maturity T > 0 that complete those of the original paper of Dothan, which are shown not to always satisfy the boundary condition P(T, T) = 1 .     

A perceived reliability-based customer satisfaction model in self-service technology

Technical reliability of self-service technologies (SSTs) has been found to be a strong determinant of satisfaction with tech-enabled services. Yet, the interpretation of the factors affecting reliability and its subsequent influences on customer satisfaction (CS) with SSTs is inadequate. The purpose of this investigation has, therefore, been to demarcate a model to fulfill the gap with an empirical examination, and accordingly a model was developed and tested by applying a global structural equation model. The model results of banking SST users specify how the reliability of SSTs is perceived by the users. The findings have reported that the best predictor of perceived reliability (PRe) is perceived security followed by perceived control. Surprisingly, no significant impact of perceived ease of use was found on PRe. The research also attempted to shed light on the influence of PRe on perceived risk, technology trust, and CS in the light of technology-enabled self-service.     

Contextualizing customer organizational citizenship behaviors: The changing nature of value cocreation and customer satisfaction across service settings

This study identified economic, emotional, and relational value as outcomes of customer organizational citizenship behaviors (COCBs; Study 1: in‐depth interviews). Study 2 (filed survey) found that COCBs have the strongest impact on emotional value compared with economic and relational value. Economic, emotional, and relational value also lead to customer satisfaction. Specifically, the findings supported that emotional value asymmetrically influences customer satisfaction, whereas economic and relational value symmetrically and positively influence customer satisfaction. Study 3 (filed survey) demonstrated that emotional value through COCBs has a greater and symmetrical influence on satisfaction in hedonic rather than utilitarian service contexts. However, economic value through COCBs is negatively associated with satisfaction in hedonic contexts, and there is no significant difference in the impact of relational value on satisfaction between service contexts. This study furnishes empirical evidence for the associations among COCBs, value perceptions, and customer satisfaction, along with their dynamic relationship patterns across service contexts.     

The role of channel quality in customer equity management

Maximization of customer equity is a core objective of customer–company relationship management. We present an extended model of customer equity for determining the optimal allocation of marketing resources across acquisition and retention activities. Focusing on the negative relationship between acquisition and retention, we motivate channel quality as a relevant decision variable, explicate its role in the model, and demonstrate the existence of an optimal value. In addition, rather than making concavity assumptions about acquisition and retention rate response curves, we use the flexible ADBUDG model (Little, JDC, Models and Managers: the Concept of a Decision Calculus. Manag Sci 1970; 16(8): 466–484.), which allows for both S-shaped and strictly-concave relationships, and parameterize it using decision calculus. We show how to estimate and apply the model and then provide sensitivity analyses with respect to changes in the true values of model parameters as well as inaccuracy in managerial inputs. We conclude by comparing our model with extant models and discussing the implications of our research.     

Role of multidimensional customer brand engagement on customer behavior for online grocery shopping

This study aims to understand the relationship between environmental consciousness and multidimensional (i.e., cognition, affection, and activation aspects) of customer brand engagement (CBE) in relation to online grocery shopping. It also investigates the moderating effect of customer characteristics on the associations among environmental consciousness, CBE, and behavior intention. 358 Korean respondents took part in this research using an online survey to assess the impacts of multidimensional CBE for online grocery. The outcomes reveal that environmental consciousness positively influences cognition and activation aspects of CBE. Additionally, activation, affection, and cognition aspects of CBE positively affect behavioral intention. Multi-group analysis is performed to identify the difference among customers in low and high customer characteristics. In addition, by demonstrating a role for CBE, this study adds to the existing literature on online grocery. Furthermore, the outcomes of this research provide direction for building marketing strategies for online groceries for marketers and practitioners.     

The impact of customer-specific marketing expenses on customer retention and customer profitability

We study the effects of customer-specific marketing expenses on customer retention and customer profitability in a business-to-business setting. Using data from a company providing hygiene services, we look at the impact of a hitherto unstudied type of expense targeted at individual customer relationships: the offering of free equipment to customers. The data allow tracking the activities performed in more than 4,500 customer relationships over a period of 4 years. Retention rates are higher for customers targeted with free equipment, but this effect results from an interaction with customer size. First-order dynamic panel data analyses show that the impact of targeted marketing expenses on customer dollar profit is positive for large customers, but there is no effect for smaller customers. Thus, targeted marketing expenses seem to be a tool for relationship maintenance rather than customer development: they help in retaining large customers that generate more profit, but they do not seem to work in developing new customers into larger, more profitable ones.     

A generalized framework for estimating customer lifetime value when customer lifetimes are not observed

Measuring customer lifetime value (CLV) in contexts where customer defections are not observed, i.e. noncontractual contexts, has been very challenging for firms. This paper proposes a flexible Markov Chain Monte Carlo (MCMC) based data augmentation framework for forecasting lifetimes and estimating customer lifetime value (CLV) in such contexts. The framework can be used to estimate many different types of CLV models—both existing and new. Models proposed so far for estimating CLV in noncontractual contexts have built-in stringent assumptions with respect to the underlying customer lifetime and purchase behavior. For example, two existing state-of-the-art models for lifetime value estimation in a noncontractual context are the Pareto/NBD and the BG/NBD models. Both of these models are based on fixed underlying assumptions about drivers of CLV that cannot be changed even in situations where the firm believes that these assumptions are violated. The proposed simulation framework—not being a model but an estimation framework—allows the user to use any of the commonly available statistical distributions for the drivers of CLV, and thus the multitude of models that can be estimated using the proposed framework (the Pareto/NBD and the BG/NBD models included) is limited only by the availability of statistical distributions. In addition, the proposed framework allows users to incorporate covariates and correlations across all the drivers of CLV in estimating lifetime values of customers.

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Electronic supplementary material  The online version of this article (doi:) contains supplementary material, which is available to authorized users.