Katherine N. Lemon

Return on Marketing: Using Customer Equity to Focus Marketing Strategy

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 firms customer equity relative to the incremental expenditure necessary to produce the change. The change in the firms customer equity is the change in its current and future customers’ lifetime values, summed across all customers in the industry. Each customers lifetime value results from the frequency of category purchases, average quantity of purchase, and brand-switching patterns combined with the firms 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.

A DYNAMIC MODEL OF CUSTOMERS' USAGE OF SERVICES : USAGE AS AN ANTECEDENT AND CONSEQUENCE OF SATISFACTION

As firms seek ways to manage customer relationships over the long term, understanding the dynamics of the service provider–customer relationship becomes a key priority. In this article, the authors...

Customer Engagement Behavior: Theoretical Foundations and Research Directions

This article develops and discusses the concept of customer engagement behaviors (CEB), which we define as the customers’ behavioral manifestation toward a brand or firm, beyond purchase, resulting from motivational drivers. CEBs include a vast array of behaviors including word-of-mouth (WOM) activity, recommendations, helping other customers, blogging, writing reviews, and even engaging in legal action. The authors develop a conceptual model of the antecedents and consequences—customer, firm, and societal—of CEBs. The authors suggest that firms can manage CEBs by taking a more integrative and comprehensive approach that acknowledges their evolution and impact over time.

THE THEORETICAL UNDERPINNINGS OF CUSTOMER ASSET MANAGEMENT: A FRAMEWORK AND PROPOSITIONS FOR FUTURE RESEARCH

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.

Dynamic Customer Relationship Management: Incorporating Future Considerations into the Service Retention Decision

The authors examine the influence of customer future-focused considerations, over and above the effects of satisfaction, on the customers decision to discontinue a service relationship. The authors find that expected future use and anticipated regret influence this decision. Understanding and managing these future-focused considerations is critical to successful dynamic customer relationship management.

E-Service and the Consumer

Many Internet applications do not fully utilize the unique nature of the Web, which in its purest form involves interactive, personalized information service. The true nature of the Web, here termed e-service, will be the key to marketing most effectively to the consumer, for it is the logical continuation of a 100-year trend toward information service in the economy. This paper examines the aspects of e-service that are critical in effectively interacting with consumers in interactive, networked information environments like the Internet. It discusses three central changes brought about by the advent of the Internet (true interactivity with the consumer, customer-specific, situational personalization, and the opportunity for real-time adjustments to a firms offering to customers), as well as changes in consumer expectations regarding firm service strategies that flow from these developments. Based upon these changes in technology and consumer expectations, important elements of the e-service experience are defined. The paper concludes by showing how e-service strategies will play a significant role in growing the overall value of the firm. In each of these areas, a set of research questions is proposed that will lead to a stronger understanding of e-service and consumer behavior.

Understanding customer experience throughout the customer journey

Understanding customer experience and the customer journey over time is critical for firms. Customers now interact with firms through myriad touch points in multiple channels and media, and customer experiences are more social in nature. These changes require firms to integrate multiple business functions, and even external partners, in creating and delivering positive customer experiences. In this article, the authors aim to develop a stronger understanding of customer experience and the customer journey in this era of increasingly complex customer behavior. To achieve this goal, they examine existing definitions and conceptualizations of customer experience as a construct and provide a historical perspective of the roots of customer experience within marketing. Next, they attempt to bring together what is currently known about customer experience, customer journeys, and customer experience management. Finally, they identify critical areas for future research on this important topic.

Relating Brandand Customer Perspectives on Marketing Management

What is the difference between brand equity and customer equity? Does the distinction matter? Is there a difference between the firm’s brand asset and customer asset? What are the implications of taking a brand perspective versus a customer perspective when designing and implementing marketing programs? The objective of this article is to examine these two perspectives in depth so that researchers and managers can improve their understanding and use of customer and brand perspectives on marketing. The authors seek to determine the relationship between the two assets and perspectives in terms of similarities and differences. They examine the development of customer and brand perspectives and describe how each adds value to the firm and to the customer. Subsequently, they delineate possible approaches for measuring marketing assets. They discuss key issues researchers and practitioners should consider in managing marketing assets, particularly for multibrand companies. They conclude by suggesting future research directions.

What Is the True Value of a Lost Customer

Customer profitability models have evolved into an important strategic tool for marketers in recent years. Traditional customer profitability models implicitly assume that customers can be valued in isolation from one another and that social interactions can be ignored. The authors show that these conventional models may be inappropriate for markets involving new products or services because they fail to account for the social effects (e.g., word of mouth and imitation) that can influence future customer acquisitions. They show how the impact of a lost customer on the profitability of the firm depends on (a) whether the customer defects to a competing firm or disadopts the technology altogether and (b) when the customer disadopts the technology—distinctions often overlooked in conventional models. The results demonstrate how the value of a lost customer changes throughout the product life cycle, showing that the loss of an early adopter costs the firm much more than the loss of a later adopter.

Quantifying the Ripple: Word-of-Mouth and Advertising Effectiveness

ABSTRACT In this article the authors demonstrate how a customer lifetime value approach can provide a better assessment of advertising effectiveness that takes into account postpurchase behaviors such as word-of-mouth. Although for many advertisers word-of-mouth is viewed as an alternative to advertising, the authors show that it is possible to quantify the way in which word-of-mouth often complements and extends the effects of advertising. The authors provide a simple approach to the measurement of postpurchase word-of-mouth sales effects and demonstrate how firms may be underestimating advertising effectiveness by ignoring such effects. Their approach illustrates how customer lifetime value models can provide an important tool to assess the long-term effects of advertising campaigns.