Werner Reinartz

The Customer Relationship Management Process: Its Measurement and Impact on Performance

An understanding of how to manage relationships with customers effectively has become an important topic for both academicians and practitioners in recent years. However, the existing academic literature and the practical applications of customer relationship management (CRM) strategies do not provide a clear indication of what specifically constitutes CRM processes. In this study, the authors (1) conceptualize a construct of the CRM process and its dimensions, (2) operationalize and validate the construct, and (3) empirically investigate the organizational performance consequences of implementing CRM processes. Their research questions are addressed in two cross-sectional studies across four different industries and three countries. The first key outcome is a theoretically sound CRM process measure that outlines three key stages: initiation, maintenance, and termination. The second key result is that the implementation of CRM processes has a moderately positive association with both perceptual and objective company performance.

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

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 empirical findings observed in this study challenge all the expectations derived from the literature. Long-life customers are not necessarily profitable customers. The authors develop plausible explanations for findings that go against the available evidence in the literature and identify three indicators through discriminant analysis that can help managers focus their efforts on more profitable customers. The authors draw several marketing implications and acknowledge the limitations of the study.

The Impact of Customer Relationship Characteristics on Profitable Lifetime Duration

The authors develop a framework that incorporates projected profitability of customers in the computation of lifetime duration. Furthermore, the authors identify factors under a managers 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.

An Empirical Comparison of the Efficacy of Covariance-Based and Variance-Based SEM

Variance-based SEM, also known under the term partial least squares (PLS) analysis, is an approach that has gained increasing interest among marketing researchers in recent years. During the last 25 years, more than 30 articles have been published in leading marketing journals that have applied this approach instead of the more traditional alternative of covariance-based SEM (CBSEM). However, although an analysis of these previous publications shows that there seems to be at least an implicit agreement about the factors that should drive the choice between PLS analysis and CBSEM, no research has until now empirically compared the performance of these approaches given a set of different conditions. Our study addresses this open question by conducting a large-scale Monte-Carlo simulation. We show that justifying the choice of PLS due to a lack of assumptions regarding indicator distribution and measurement scale is often inappropriate, as CBSEM proves extremely robust with respect to violations of its underlying distributional assumptions. Additionally, CBSEM clearly outperforms PLS in terms of parameter consistency and is preferable in terms of parameter accuracy as long as the sample size exceeds a certain threshold (250 observations). Nevertheless, PLS analysis should be preferred when the emphasis is on prediction and theory development, as the statistical power of PLS is always larger than or equal to that of CBSEM; already, 100 observations can be sufficient to achieve acceptable levels of statistical power given a certain quality of the measurement model.

Balancing Acquisition and Retention Resources to Maximize Customer Profitability

In this research, the authors present a modeling framework for balancing resources between customer acquisition efforts and customer retention efforts. The key question that the framework addresses is, “What is the customer profitability maximizing balance?” In addition, they answer questions about how much marketing spending to allocate to customer acquisition and retention and how to distribute those allocations across communication channels.

Do Intentions Really Predict Behavior? Self-Generated Validity Effects in Survey Research

Studies of the relationship between purchase intentions and purchase behavior have ignored the possibility that the very act of measurement may inflate the association between intentions and behavior, a phenomenon called “self-generated validity.” In this research, the authors develop a latent model of the reactive effects of measurement that is applicable to intentions, attitude, or satisfaction data, and they show that this model can be estimated with a two-stage procedure. In the first stage, the authors use data from surveyed consumers to predict the presurvey latent purchase intentions of both surveyed and nonsurveyed consumers. In the second stage, they compare the strength of the association between the presurvey latent intentions and the postsurvey behavior across both groups. The authors find large and reliable self-generated validity effects across three diverse large-scale field studies. On average, the correlation between latent intentions and purchase behavior is 58% greater among surveyed consumers than it is among similar nonsurveyed consumers. One study also shows that the reactive effect of the measurement of purchase intentions is entirely mediated by self-generated validity and not by social norms, intention modification, or other measurement effects that are independent of presurvey latent intentions.

Customer Engagement as a New Perspective in Customer Management

Since 2000, customer management (CM) research has evolved and has had a significant impact on the marketing discipline. In an increasingly networked society where customers can interact easily with other customers and firms through social networks and other new media, the authors propose that customer engagement is an important new development in CM. Customer engagement is considered as a behavioral manifestation toward the brand or firm that goes beyond transactions. The authors propose a conceptual model of the antecedents, impediments, and firm consequences of customer engagement and relate this model to seven articles appearing in the special issue on customer engagement.

Hybrid Offerings: How Manufacturing Firms Combine Goods and Services Successfully

This article examines key success factors for designing and delivering combinations of goods and services (i.e., hybrid offerings) in business markets. Goods manufacturers, unlike pure service prov...

A Situational Model Development in Hospitality Retailing: The Case of Irish Pubs

The article reviews the evolution from brand-centered marketing to customer-centered marketing and the beginnings of a focus on viewing the customer as an asset. It illustrates the practice by describing the use of a loyalty program to identify and respond to high-potential customers in the market for business-class hotels. Next, it considers seven challenges that impede wider adoption of customer equity management and concludes with a schematic model of customer-centered marketing management.

The impact of internal and external reference prices on brand choice: The moderating role of contextual variables

Abstract The impact of internal reference price discrepancy (between actual price and internal reference price), and external reference price discrepancy (between actual price and external reference price) on brand choice is studied in two different contexts: whether the consumer faces a stockout condition at the time of purchase or not, and whether the consumer is a deal-prone consumer or not. Internal reference price is based on the past prices paid for the brand by the consumer, and external reference price is dependent upon the prices of all brands in the category at the point of purchase. Hypotheses are tested by estimating brand choice models using IRI scanner panel data for two product categories—saltine crackers and baking chips. Results indicate that, in general, the impact of the external reference price discrepancy on brand choice is greater than that of the internal price discrepancy. However, this varies depending upon the contextual conditions. For consumers facing a stockout condition at the time of purchase, and for deal-prone consumers, the impact of the external reference price discrepancy on brand choice is greater than that of the internal reference price discrepancy. However, for consumers not facing a stockout condition, and for non-deal-prone consumers, there is no difference in the impact of the internal and external reference price discrepancy on brand choice. Also, the impact of both the external and internal reference price discrepancy on brand choice is greater for consumers not facing a stockout condition at the time of purchase relative to facing a stockout condition, and for deal-prone consumers than for non-deal-prone consumers. Implications for pricing strategies are discussed for retailers, and limitations and extensions of this study are also provided.