Lerzan Aksoy

Undervalued or Overvalued Customers: Capturing Total Customer Engagement Value

Customers can interact with and create value for firms in a variety of ways. This article proposes that assessing the value of customers based solely upon their transactions with a firm may not be sufficient, and valuing this engagement correctly is crucial in avoiding undervaluation and overvaluation of customers. We propose four components of a customer’s engagement value (CEV) with a firm. The first component is customer lifetime value (the customer’s purchase behavior), the second is customer referral value (as it relates to incentivized referral of new customers), the third is customer influencer value (which includes the customer’s behavior to influence other customers, that is increasing acquisition, retention, and share of wallet through word of mouth of existing customers as well as prospects), and the fourth is customer knowledge value (the value added to the firm by feedback from the customer). CEV provides a comprehensive framework that can ultimately lead to more efficient marketing strategies that enable higher long-term contribution from the customer. Metrics to measure CEV, future research propositions regarding relationships between the four components of CEV are proposed and marketing strategies that can leverage these relationships suggested.

The Long Term Stock Market Valuation of Customer Satisfaction

Firm valuation has been an important domain of interest for finance. However, most financial models do not include customer-related metrics in this process. Studies in marketing have found that one particular customer metric, customer satisfaction, improves the ability to predict future cash flows, long-term financial measures, stock performance, and shareholder value. However, most of these studies predominantly employ models that are not directly used in finance practice. This article extends existing literature by examining the impact of customer satisfaction on firm valuation by employing multiples and risk-adjusted abnormal return models borrowed directly from the practice of finance. Data include 3600 firm-quarter observations from the American Customer Satisfaction Index, COMPUSTAT, and Center for Research in Securities Prices databases from 1996 to 2006. The results indicate that a portfolio of stocks consisting of firms with high levels and positive changes in customer satisfaction will outperform the other three possible portfolio combinations (low levels and negative changes, low levels and positive changes, and high levels and negative changes in customer satisfaction) along with Standard & Poors 500. Initially, the stock market undervalues positive satisfaction information, but the market adjusts in the long run.

Does customer satisfaction lead to profitability

Purpose – Many researches have proposed a virtuous chain of effects from improved customer satisfaction to profits. In particular, satisfaction is thought to improve share‐of‐spending, which in turn leads to higher customer revenue and customer profitability. This paper aims to examine these proposed linkages using data from the institutional securities industry.Design/methodology/approach – The data used in the analyses were collected as part of an ongoing telephone satisfaction survey of 81 clients of an institutional securities firm across two continents (North America and Europe). Mediation analysis was used to test the hypothesized effects.Findings – Customer revenue was found to correlate negatively with customer profitability for unprofitable customers, and positively for profitable customers.Research limitations/implications – One of the limitations of this research is that it tests the propositions within a single industry. Future research should attempt to replicate these findings in other conte...

Should Recommendation Agents Think Like People

Electronic recommendation agents have the potential to increase the level of service provided by firms operating in the online environment. Recommendation agents assist consumers in making product decisions by generating rank-ordered alternative lists based on consumer preferences. However, many of the online agents currently in use rank options in different ways than the consumers they are designed to help. Two experiments examine the role of similarity between an electronic agent and a consumer, in terms of actual similarity of attribute weights and perceived similarity of decision strategies, on the quality of consumer choices. Results indicate that it helps consumers to use a recommendation agent that thinks like them, either in terms of attribute weights or decision strategies. When agents are completely dissimilar, consumers may be no better, and sometimes worse off, using an agent’s ordered list than if they simply used a randomly ordered list of options.

Actual Purchase as a Proxy for Share of Wallet

Share of wallet is a concept that is growing in popularity among satisfaction researchers. There is no empirical research, however, examining the relationship between satisfaction, retention, and share of wallet. This is largely the result of the inherent difficulty collecting true share of wallet information in most business categories. If the impact of satisfaction on share of wallet is the same as satisfaction on retention, then managers can simply substitute more easily obtainable retention data. Therefore, this research examines the appropriateness of using actual purchase as a proxy for the more difficult to attain share of wallet in two distinct industries, Class 8 trucks and pharmaceuticals. The findings indicate that the top performance attributes in terms of predictive ability are the same and in the same order for each outcome, suggesting that for some firms, actual purchase may represent an acceptable proxy for share of wallet when deriving opportunities for service improvement.

How do you measure what you can't define?

Purpose – This research aims to provide a synthesis of the normative prescriptions from the scientific literature as it relates to customer loyalty tracking and an evaluation of how close practice comes to these prescriptions. It offers a description of the landscape for how and why aspects of loyalty measurement and management converge and/or diverge.Design/methodology/approach – Data is gathered through in‐depth telephone interviews with 92 senior level marketing managers across a variety of industries.Findings – The overwhelming majority of firms view customer loyalty as a top strategic priority but only one in four has a formal definition of customer loyalty. Customer satisfaction and likelihood to recommend are the two most tracked measures. The findings also demonstrate that few firms are relatively sophisticated in their analytics capabilities and only half examine how loyalty influences business outcomes.Research limitations/implications – The current study uses single respondent per firm.Practica...

Data‐driven services marketing in a connected world

Purpose – The purpose of this paper is to provide insights into the benefits of data-driven services marketing and provide a conceptual framework for how to link traditional and new sources of customer data and their metrics. Linking data and metrics to strategic and tactical business insights and integrating a variety of metrics into a forward-looking dashboard to measure marketing ROI and guide future marketing spend is explored. Design/methodology/approach – A detailed synthesis of the literature is conducted and contemporary sources of marketing data are categorized into traditional, digital and neurophysiological. The benefits and drawbacks of each data type are described and advantages of integrating different sources of data are proposed. Findings – The findings point to the importance and untapped potential of data in its ability to inform tactical and strategic marketing decisions. Future challenges, including top management support, ethical considerations and developing data and analytic capabilities, are discussed. Practical implications – The results demonstrate the need for executive service marketing dashboards that include key metrics that are service-relevant, complementary and forward-looking, with proven linkages to business outcomes. Originality/value – This paper provides a synthesis of data-driven services marketing and the value of traditional and contemporary metrics. Since the true potential of data-driven service management in a connected world is still largely unexplored, this paper also delineates fruitful avenues for future research

The Relationship of Employee Perceptions of Organizational Climate to Business-Unit Outcomes: An MPLS Approach

There has been an extensive exploration of how organizational climate is related to various business outcomes, but these studies have generally examined outcomes separately or developed univariate measures that combine outcomes. These approaches fail to (a) accommodate the multivariate character of important business results and (b) facilitate the firms need to achieve success on several dimensions. This research proposes a methodological approach new to the service domain to address these issues. Using data from a large, multinational retail grocery superstore based in continental Western Europe, this study illustrates how multivariate partial least squares (MPLS) models can be used. MPLS provides three interpretable factors of climate—Overall Organizational Climate, Self-Efficacy Versus Leaders Efficacy, and Personal Empowerment Versus Management Facilitation —that are important predictors of three business outcomes: employee retention, customer satisfaction, and scaled revenue. The use of the MPLS approach in other services domains is also explored.

Call Center Satisfaction and Customer Retention in a Co-Branded Service Context

Purpose – This paper aims to examine call center satisfaction in an escalated call center context where callers are organization members of the primary/leveraged brand and have purchased additional co‐branded services as part of their membership. It also aims to examine the relationship between call center satisfaction and actual retention of both the co‐branded service offered and the primary brand (call center operated by the membership organization).Design/methodology/approach – The survey data used in the analyses involve a sample size of 88 respondents, all members of a large, national nonprofit organization in the USA. Factor analysis and logistic regression were used to test the propositions.Findings – The results indicate that caller satisfaction has four dimensions similar to those found in SERVQUAL. Although call center satisfaction dimensions are not significant for co‐branded service retention, the empathy dimension is most important to primary/leveraged brand retention.Research limitations/im...

Service Failure Severity, Customer Satisfaction, and Market Share An Examination of the Airline Industry

The generally accepted view among managers and researchers is that the greater the severity of a service failure, the greater the resulting impact on customer satisfaction and business outcomes, such as lost customers and revenue. The research used to defend this viewpoint, however, does not typically address the severity of service failures, like those that result in injury or death (i.e., product-harm crises). This research addresses this issue by examining both minor incidents (i.e., failures that do not result in physical harm) and major incidents (i.e., failures that result in injury or death) in the U.S. airline industry, and the corresponding impact on the customer satisfaction and market share of the firms affected. Our results indicate that minor incidents are more strongly (negatively) related to future market share than are major incidents. Moreover, our findings indicate that only minor incidents are significantly linked to customer satisfaction. We argue that these findings occur for two reasons: First, most customers believe major incidents to be low probability events that are less salient when compared to more probable failures. Second, consumers impacted by major incidents most likely defect and are therefore not captured in future customer satisfaction surveys. Consequently, managers can delude themselves that things have “returned to normal” after a major incident when relying on customer satisfaction scores alone.