Customer Value Management Optimizing the Value of the Firm’S Customer Base

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Customer and prospect data analysis should drive customer acquisition, retention, and expansion efforts, say Peter Verhoef and Katherine Lemon. Here, they outline critical lessons and emerging challenges for managers seeking to manage customers for value.

Customer Value Management Optimizing the value of the firm’s customer base

Peter C. Verhoef and Katherine N. Lemon

Marketing Science I n s t i t u t e About the Authors

Peter C. Verhoef is Professor of Marketing at the Department of Market- ing, Faculty of Economics and Business, University of Groningen, The Netherlands, where he is also the research director and founder of the Customer Insights Center. His research interests are customer management, customer loyalty, multichannel issues, marketing strategy, category management, and sustainability. His work has appeared in the Journal of Marketing, Journal of Marketing Research, Marketing Science, Inter- national Journal of Research in Marketing, Marketing Letters, Journal of Consumer Psychology, Journal of the Academy of Marketing Science, and Journal of Retailing. Verhoef’s best article awards include the Donald R. Lehmann Award in 2003 and the Harold M. Maynard Award in 2009. He is currently an editorial board member of the Journal of Marketing, Journal of Marketing Research, Journal of Retailing, Journal of the Academy of Marketing Science, Journal of Service Research, and Journal of Interactive Marketing and an area editor for the International Journal of Research in Marketing. He obtained his Ph.D. in 2001 at the School of Economics, Erasmus University Rotterdam, The Netherlands. He can be reached at [email protected].

Katherine (Kay) Lemon holds the Accenture Professorship at Boston College’s Carroll School of Management. Lemon’s main areas of research expertise are customer management, customer equity, and the dynamics of customer-firm relationships. She has published over 50 articles in journals and books including the Journal of Marketing Research, Journal of Marketing, Marketing Science, Management Science, and the Journal of Service Research. She has received several best article awards, including the Sheth Foundation/Journal of Marketing Award in 2009. She is the editor of the Journal of Service Research, and serves on the editorial boards of the Journal of Marketing, Journal of Marketing Research, Journal of the Academy of Marketing Science, and Journal of Interactive Marketing. She is an Academic Trustee of the Marketing Science Institute. Lemon received her Ph.D. from University of California, Berkeley. Prior to her academic career, she held senior-level marketing positions in high technology and health care. She can be reached at [email protected].

Published by the Marketing Science Institute 1000 Massachusetts Avenue, Cambridge, MA 02138 Printed in the United States of America ISBN-10 0-9823877-5-X ISBN-13 978-0-9823877-4-0

Design by Kennard Design f a s t forward C u s t o m e r V a l u e M a n a g e m e n t

Introduction...... 3

Customer Value Management Process...... 5

Six Lessons on Customer Value Management...... 6 Lesson 1: Use CVM to improve business performance...... 6 Lesson 2: Focus on the customer side of CVM...... 7 Lesson 3: Adopt customer lifetime value as a core metric...... 8 Lesson 4: Invest in strong customer intelligence capabilities...... 9 Lesson 5: Understand the drivers of customer acquisition, retention, and expansion...... 10 Lesson 6: Manage your channels to create customer value...... 11

Future Developments in Customer Value Management...... 13 Development 1: Managing customer engagement...... 13 Development 2: Managing customer networks...... 15 Development 3: Managing the customer experience...... 15

Concluding Thoughts...... 17 References...... 18

Additional References...... 19

Bibliography...... 20

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Introduction

key development in marketing and management practice in the last decade has been the growth of customer relationship management (CRM). Many firms have invested in large customer databases to understand, monitor, and influence customer behavior. One critical aspect of CRM is customer value, the economic value of the customer relationship to the firm. In this report, we focus on Acustomer value management (CVM), which we define as the optimization of the value of a company’s customer base. CVM focuses on the analysis of individual data on prospects and customers. The resulting information is used to acquire and retain customers and to drive customer behavior with marketing strategies such that the value of all current and future customers is optimized. CVM has conceptual roots in relationship marketing, which focuses on measuring constructs, such as commitment and trust, that create successful customer relationships. Traditional relationship marketing research did not consider customer data to be a critical component of relationship marketing efforts. Thus, CVM enriches this framework by focusing on the analysis of customer data and on explicitly seeking data- driven ways to enhance customer value. Advances in technology—enabling firms to build large customer databases with real-time access at customer touch points—and the development of software to analyze these data have accelerated interest in and application of CVM. Capital One, Harrah’s Entertainment, IBM, U.K.-based retailer Tesco, and the Dutch mobile phone operator KPN are among those who have heavily invested in CVM. An increasing number of articles in top marketing journals have also focused on CVM, driven by the availability of large databases with individual-level customer data observable over time. Drawing on research in marketing modeling, marketing strategy, relationship marketing, database marketing, and sales management, researchers have embraced CVM as a distinct and fruitful research domain. Moreover, firms look to academic research for answers to questions such as: • Does CVM create a sustainable competitive advantage and stronger financial performance? • How can firms predict churn? • Which factors are driving the value of customers? • How should firms allocate marketing budgets across customers? • Should firms encourage multichannel behavior? • How does the growing presence of social media and customer communities affect customer management? In the pages that follow, we provide an overview of findings from the extant literature on CVM, discuss key lessons from this literature, and offer our vision of the next developments within CVM. It is our hope that this discussion will begin to answer these questions, and offer managers a new framework for optimizing customer value.

Peter C. Verhoef Katherine N. Lemon University of Groningen Boston College

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Parts of this paper are based on existing work of the two authors: van Doorn, Jenny, Katherine N. Lemon, Vikas Mittal, Stephan Nass, Doreén Pick, Peter Pirner, and Peter C. Verhoef (2010), “Customer Engagement Behavior: Theoretical Foundations and Research Directions.” Journal of Service Research 13 (3), 253–66. Verhoef, Peter C., and Katherine Lemon (2012), “Advances in Customer Value Management.” In Handbook of Research in Relationship Management, eds. Robert M. Morgan, Janet Turner Parish, and George Deitz. Cheltenham, Mass.: Edgar Elgar Publishing, forthcoming. Verhoef, Peter C., Katherine N. Lemon, A. Parasuraman, Anne Roggeveen, Michael Tsiros, and Leonard A. Schlesinger (2009), ”Customer Experience Creation: Determinants, Dynamics and Management Strategies.” Journal of Retailing 85 (1), 31–41.

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Customer Value Management Process

nderstanding and optimizing the value of As the figure below shows, in the CVM process, a firm’s customer base is the core goal customer strategies—including acquisition activities, of CVM. Companies can increase the marketing campaigns, customer service plans, and value of their customer base in a number multichannel management—flow from data analy- Uof ways: by attracting new customers, increasing sis. Ideally, these strategies positively influence customer retention, creating customer expansion, customer acquisition and the behavior of current winning back old customers, terminating unprofit- customers, but they require investment and the able relationships, and effectively allocating resources resulting diversion of firm resources from other among customers. These efforts should occur in a endeavors. Using CVM, activities can be formulated balanced and coordinated manner. For example, so that scarce marketing resources are allocated firms focusing too much on customer retention and effectively. The net end result is that customer life- neglecting customer acquisition will, at some point, time value increases, which translates to increased find that their customer base will become too “old,” firm value (see Verhoef, van Doorn, and Dorotic which may threaten long-term firm performance. [2007] for an extensive discussion).

The Customer Value Management Process

New Customer Acquisition

Customer Current Customer Strategy Behavior

Acquisition Customer Customer activities retention expansion: Customer Customer —Cross-buying Data Marketing Lifetime Firm Value —Use Analysis campaigns Win back Value —Upgrading Customer —Adoption service (Active) Multichannel termination management

Customer Costs

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Six Lessons on Customer Value Management

o provide an actionable deep-dive into cus- L E S S O N 1 tomer value management, we focus on six key lessons. First, we examine the strong Use CVM to improve evidence that implementing customer value business performance Tmanagement has a significant positive impact on business performance. Second, we focus on the Customer value management can improve business importance of assuring that CVM is customer- performance in three ways (see figure): driven and strategic, rather than technology-driven. • By providing a market-based resource for Third, we discuss the use of customer life time sustainable competitive advantage value as a key metric for successfully implementing customer value management and for improving • By increasing a firm’s customer-centric business performance. Fourth, we recommend in- orientation vesting in strong customer intelligence capabilities. • By leading to more accountable marketing Fifth, we examine the importance of understanding the drivers of customer behavior— especially Sustainable competitive advantage customer acquisition, customer retention, and A firm’s customer database and existing customer customer expansion. Finally, we discuss the need to relationships are considered to be important market- manage multiple channels to create and enhance based resources. Customer relationships are hard customer value. to develop and difficult to copy. Research shows that the use of data-based customer acquisition and customer retention improves business performance (Reinartz, Krafft, and Hoyer 2004). For example, Telenor, the seventh-largest mobile opera- Improved tor in the world, reduced overall annual churn by Competitive Advantage 1.8% by focusing retention efforts on a subset of customers. By using customer life cycle management to better-target their marketing messages, they also increased average revenue per user 5–10%. Improved Improved Application Customer Business of CVM Customer-centric orientation Orientation Performance Substantial research shows that firms with a customer-oriented or customer-centric focus tend to have a higher performance than firms without More such a focus. For example, Esurance, a large insur- Accountable ance firm in the U.S., has a team, designated the Marketing “protector” of the customer experience, working to assure that the customer brand experience is consistent across all channels. This team must

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approve all changes that impact the customer expe- efforts. For example, customer intelligence often rience, thus ensuring that the company maintains lacks a formal role within the organization, even a balance between business requirements and though firms expect managers to use customer customer usability. information in their decision making. Barriers in structure, culture, processes, and Marketing accountability finance may make it more difficult for firms to CVM leads to more analytical and fact-based deci- shift from a product-centric to a customer-centric sion making within firms and a stronger focus on business. Structure concerns the internal organiza- ROI of marketing decisions, which also improves tion of and coordination within the firm. It is a firm’s bottom-line results. As a consequence, important that responsibilities of each department marketing becomes more accountable with less are well defined. Culture involves aspects such as waste of marketing spending and more effective the employee level of involvement with customers allocation of the marketing budget over customers and resistance to change. To overcome resistance, and marketing instruments (Kumar 2008; Rust, employees should participate in the change process. Lemon, and Zeithaml 2004). Finally, customer-centricity requires the use and Firms that implement CVM practices with a acceptance of customer-centric metrics, such as focus on reallocation of resources across customers customer profitability, customer lifetime value, based on customer lifetime value analyses improve and customer satisfaction. In general, measurement the value of their customer base and improve leads to execution—“what is measured is what gets shareholder value (Kumar and Shah 2009). done” (Shah et al. 2006). McKinsey consultants Rigby and Ledingham argue that firms successful in implementing CVM have started with small proj- L E S S O N 2 ects, identified an executive champion, understood Focus on the customer side of CVM data limitations, and actively managed expectations (Rigby and Ledingham 2004). An important issue in CVM implementation con- Two firms that have utilized customer-centric cerns the role of technology. Firms frequently focus metrics to change the corporate culture are Hewlett- too heavily on the information technology side of Packard and Akamai. HP used a customer-centric CVM and neglect the customer side. focus to revitalize its failing business computing When firms focus extensively on technological division. Within three years the company had be- specifications of CVM software packages, resources come #1 in customer satisfaction in the B2B market move toward software solutions and consultants, and had the highest PC market share. Specifically, and away from customer value creation. As the HP saw a 13% increase in customer satisfaction focus becomes internal rather than external, the scores after implementing a customer-centric strat- performance potential of CVM is damaged. egy in its technical support center. Technology investments for CVM should The technology company Akamai has a robust benefit customer-centric processes within the customer experience program to ensure that organization. Hence, the question is, How can the employees maintain a customer-oriented focus. technologies best facilitate customer management? Customers are surveyed at customer service touch In this approach CVM technologies are used to points and implementation milestones. Service focus on the acquisition, storage, accessibility, and account owners receive automated notifications evaluation of customer data within the organiza- whenever survey scores are below a certain threshold tion. Research has shown positive effects of these so that they can immediately investigate and resolve information processes on CVM performance any customer concerns. (Jayachandran et al. 2005). Akamai also prominently posts quarterly Net Another problem occurs if the organization is Promoter Scores (percentage of promoters—per- not organized in such a way to match the CVM centage of detractors of survey customers reporting

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their recommendation behavior) throughout the category might cause price sensitivity in other office, and ties the compensation of service manag- insurance categories. In another example, if firms ers to this metric. focus on sales growth of one product using attractive Similarly, the toy manufacturer LEGO has a deals, customers may migrate from other high- strong focus on Net Promoter Scores, with 10% of priced products to the new lower-priced product. employee bonuses tied to this core metric. In this CLV goes beyond product-centric metrics to way, between 2005 and 2009, LEGO increased measure and improve customer value. We distin- its Net Promoter Score by 24%. guish five uses of CLV in firms: • As a metric to steer to a more customer- centric firm culture L E S S O N 3 • As a metric for the evaluation of marketing Adopt customer lifetime value campaigns and investments as a core metric • As a valuation tool of the customer base Customer lifetime value (CLV) is one of the core • As a metric for customer segmentation and customer-centric metrics within CVM. It is usually resource allocation defined as the net present value of all future profits • As an additional marketing metric in the derived from a customer over his or her lifetime customer database. with the firm. Traditionally, firms use product- centric metrics such as market share, defined at In the first application, employees and depart- the product-market level, to measure performance. ments clearly acknowledge that the ultimate objec- For example, a financial services firm might use tive of the organization is to optimize CLV, and a market-share metric for insurance and bank strategies are focused on maximizing CLV. In so accounts as the key indicator of market share. The doing, a long-term perspective on customers is logic is that if firms have larger market shares— guaranteed. The second application of CLV focuses and thus, a larger piece of the total market “pie” merely on increasing the accountability of market- —they can gain economies of scale, have more ing investments. Using the CLV metric, the return market power, and earn higher profits. on investment (ROI) of marketing investments can Using product-centric metrics, however, has be calculated. disadvantages. Managers may be steered to achieve Third, CLV can be used to assess the value of the sales targets in a particular product or service cate- customer base. This application reflects the notion gory, and may use sales promotions that cause only that customers can be considered as important temporary shifts in sales and increase consumer assets who should be financially valued as such price sensitivity and erode customer loyalty. For (Gupta, Lehmann, and Stuart 2004). example, many U.S. car manufacturers, such as The fourth application of CLV is a database General Motors, have used deep sales promotions marketing application. For current customers, CLV in order to keep sales up and have destroyed firm is calculated and, based on that calculation, custom- value in the process (Lehmann and Gupta 2005; ers are segmented. Marketing resources can then be Rust, Zeithaml, and Lemon 2000). allocated to high CLV segments (Venkatesan and Another disadvantage is that product-centric Kumar 2004). metrics only consider one product category, while Similarly, the credit card and financial services customers may buy from multiple categories. If the firm, Capital One, segments and values its cus- interdependence among purchase behaviors across tomers to understand the lifetime value of each product categories is not acknowledged, the overall customer. This deep understanding enables Capital value of a customer to a firm may be depressed. For One to almost “individually service” its customers: example, strong price offers in the health insurance when a customer calls, the firm is able to immedi-

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ately access the customer’s history and potential and Capital One has achieved growth through a more to generate potential offers for that customer— effective analytical-based targeting of new and based upon the customer’s CLV. current customers. Electronics retailer Best Buy has Linking CLV to other metrics, such as churn, used data analysis to identify its most profitable can also provide valuable insights. For example, a customer segments and has redesigned its stores in telco company found out that churn is highest for an effort to encourage these preferred customers to high CLV segments, providing a clear directive to buy additional products and services. Additionally, customer management. in a recent survey, For- Finally, CLV can be used to supplement other rester reports that 27 marketing metrics in the customer database. Many out of 28 companies firms still use CLV in this way, without fully avail- responded that their use ing themselves of the rich opportunities this metric of customer analytics can provide. Such use also points to a crucial pitfall improved loyalty (Tem- In a Forrester Research survey, with the implementation of CVM. Though firms kin and Belanger 2004). 27 of 28 companies responded that can use many customer-centric metrics, managers The core task of the using customer analytics improved are not often evaluated based on these metrics. For customer intelligence example, in many financial service firms, product (CI) function in organi- customer loyalty. sales is still the leading metric and the one on which zations is collecting, bonuses and incentives are based. The successful storing, and analyzing implementation of CVM requires that firms customer data in order (1) choose the right customer-centric metrics, (2) to acquire customer measure these customer-centric metrics, and (3) insights. The CI function compiles an accurate, use these customer-centric metrics for evaluation. up-to-date, and comprehensive view of the customer. There is sufficient evidence that firms with strong CI capabilities have stronger performance. Prior research shows that the success or failure of L E S S O N 4 CVM depends on the quality of the CI function. Invest in strong customer Our own research shows that firms having strong intelligence capabilities customer intelligence capabilities have a higher firm performance (Hoekstra and Verhoef 2010). The availability of more data on many business The largest mobile phone operator in India, processes will induce more reliance on the analytical Bharti Airtel, uses sophisticated network analysis function and more intelligence-based decision techniques to identify its most influential customers making. Davenport and Harris (2005) argue that —those who, if they defected, would likely influ- firms can gain a competitive advantage through ence their friends to go to another subscriber with strong and effective analytical capabilities. They them. The company has successfully lowered churn view analytics as the process of extensively utilizing by targeting these “influencers” with special pro- data, quantitative analyses, statistical models (both motions and discounts. for explanation and prediction), and fact-based Analyses may include identifying potential management techniques to drive firm decisions customers, predicting response behavior of existing and actions. These analytical capabilities can be customers, calculating the costs of maintaining a used across functions, such as human resources relationship, and making cross-sell predictions. management, logistics, finance, and marketing. Traditional techniques such as RFM (recency, fre- Several firms, such as Anheuser-Busch, Google, quency, monetary value analysis), cross tabulation, Tesco, Wall-Mart, FedEx, and Harrah’s Enter- and CHAID (chi-squared automatic interaction tainment, have adopted strategies that rely heavily detector) may be used, as well as more sophisticated on the analytical function. As mentioned above, techniques such as logistic regression and boosting.

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Beyond analytical skills, the CI-marketing in- of what is given up for what is received. Key drivers terface is critical. CI must understand marketing’s are features and benefits of the product or service, requests for analyses, determine whether marketing overall quality, factors that influence customer is asking the right questions, and rephrase those convenience (such as ease of purchase and ease of questions if necessary. CI use), and all elements of pricing. Brand equity is should be willing and able the customer’s subjective perception of the firm’s to advise marketing based offering, over and above its objectively perceived on the outcomes of their value. Key drivers are all marketing strategies that analyses. Marketing should influence brand awareness and brand perceptions Firms often make the mistake be able to guide the process (e.g., promotion, advertising, sales, and social of only surveying current customers of abstracting customer media), and corporate citizenship efforts. Relation- to determine drivers of acquisition, needs from the available ship equity is the customer’s perception of the customer data by initiat- growth, and retention. customer-firm touch points. Key drivers include ing relevant data queries. customer loyalty programs, all customer-firm direct In order to increase the interactions (such as customer support and website quality of decision mak- interactions), customer communities, and the ing, it is important that knowledge developed by the firm—and the cus- marketing understands tomer—over time. the outcomes of customer database analyses and Firms need to understand the extent to which is able and willing to use these outcomes in its customer behavior is most influenced by value decision making. equity (often the key driver for continuously provided services), brand equity (most often the driver for frequently purchased consumer goods), or L E S S O N 5 relationship equity (typically most critical in

business-to-business contexts). Understand the drivers of Second, it is important to analyze the separate customer acquisition, retention, and distinct drivers of customer behavior for cus- and expansion tomer acquisition, customer growth, and customer retention. When acquiring the customer, brand and Often firms assume that they have adopted a value elements tend to dominate. In the growth customer-centric view merely by actively measur- phase, value is key but the relationship begins to ing and monitoring customer metrics. However, to become important. Finally, when seeking to retain truly succeed in managing customers for maximum customers and protect highly profitable customers value, firms must clearly understand what drives from defecting to competitors, relationship and customer acquisition, customer retention, and value are critical. For consumer products, refreshing customer growth over time. Across many indus- the brand image in later stages of the relationship tries, countries, and contexts, several key insights is also important. have emerged. Understanding what drives customers to the First, it is important to consider both marketing competition is also critical. Firms often make the and broader operational factors in understanding mistake of only surveying and interviewing their key drivers of customer decisions. Rust, Zeithaml, current customers to determine key drivers of and Lemon (2000) identify three key areas the firm acquisition, growth, and retention. However, can influence that may drive customer acquisition understanding why customers do not buy from and retention decisions: value equity, brand equity, your company can be even more informative. The and relationship equity. research methodology employed to evaluate key Value equity is the customer’s objective assess- drivers of customer behavior should include cur- ment of the firm’s offering based upon perceptions rent customers and current non-customers. One

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such approach is customer equity analysis. This relationship with the firm (strangers or acquain- approach enables a firm to examine the key drivers tances) may provide value to the firm differently of customer acquisition and retention for all com- than customers who have a strong relationship petitors in the marketplace, not just the focal firm. with the firm (friends or partners). Recent research As a result, a firm can determine where it is doing suggests that firms should understand the risk and well and where it is doing poorly, and identify return of the customer portfolios by structuring where to invest its resources for maximum impact. the mix of customers to reduce vulnerability and One firm that examines the key drivers of cus- volatility of cash flows (Tasari, Bolton, Hutt, and tomer perceptions is Dunkin’ Donuts. Dunkin’ Walker 2011; Dhar and Glazer 2003). The key constantly assesses both customer satisfaction and insight is that firms should seek out a diverse port- consumer perception. On the customer side, they folio of customers that will maximize value and utilize a guest satisfaction survey program that minimize risk, and that these diverse customers collects feedback from a guest’s most recent visit. may also have different needs and distinct drivers This helps them ensure that they deliver on what of purchase behavior. customers experience on a day-to-day basis—for Finally, the goal should be to develop a customer example, order accuracy, restaurant cleanliness, dashboard to enable the firm to link key drivers crew friendliness—which ultimately leads to satis- to key metrics. The real power of customer value faction and repurchase. management lies in the ability to link marketing Fourth, customer segmentation is key. Clearly, inputs (specific strategies and tactics) to customer not all customers care about the same attributes of responses and, ultimately, to firm performance a product or service experience. Occasional leisure (Pauwels et al. 2009). travelers on an airline have very different drivers of acquisition, growth, and retention than frequent business travelers. Once appropriately segmented L E S S O N 6 (by value, behavior, demographics, and/or psycho- graphics), key driver analysis can be a helpful tool Manage your channels to create to determine where to invest to grow the value of customer value each segment and, when paired with CLV analysis, to determine on which segments to focus. Customers can utilize multiple channels to search, Further, it is insufficient to have a national read purchase, and receive after-sales services for firm on what consumers think about a brand, because it offerings. Today, sales channels include the store, is almost impossible to develop specific marketing the Web, catalogs, sales forces, third-party agencies, actions based upon information that broad. In this call centers, and so on. New channels, such as regard, Dunkin’ Donuts tracks consumer sentiment mobile or smart phones (and new social media, on a designated market area (DMA) level, and looks such as social networking sites, e.g. Facebook, at brand and value attributes in two ways: (1) how LinkedIn, Foursquare), continue to create new consumer perception differs by visitation frequency challenges and opportunities. Forrester forecasts (frequent customers, infrequent customers, and that by 2014, as much as 8% of retail sales likely non-customers) and (2) how consumers in a spe- will occur online and 53% will be enabled by a cific market perceive Dunkin’ Donuts relative to website. Firms are now challenged to manage their key competitors. customers across all channels to create customer Fifth, it is critical to examine the mix of cus- value (Neslin and Shankar 2009; Techcrunch tomer segments and the mix of customers at 2010; Wilson, Street, and Bruce 2008). different stages in their lifecycle with the firm. It is frequently assumed that providing more Johnson and Selnes (2004) note that firms should channels can create a stronger customer experience. maximize their customer lifetime portfolio value However, more channels may also create more by understanding how customers early on in their complexity. Although empirical research consist-

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ently shows that multichannel customers are more and potentially disloyalty (Konus, Trampe and profitable, it is unclear whether this link is causal. Verhoef 2010). Clearly, it is important for firms Do heavy users and more brand-loyal customers to understand not only how multichannel efforts tend to use multiple channels, or does multiple- influence firm profitability, but also how they channel use enhance customer experiences and influence customer perceptions and responses result in higher volume and profitability? Does over time. this effect remain when multichannel is the market Second, firms should consider how they can standard? Moreover, although multichannel cus- optimally allocate resources over customer seg- tomers may be more profitable, they might also ments and channels. Currently, most channel become less loyal. combinations arise from current channel usage Two general insights regarding multichannel patterns, which do not necessarily reflect the customer value management have emerged. First, objective of optimizing customer lifetime value migrating customers to other channels can be and/or the customer experience. A simple example beneficial, but can also have detrimental effects. of appropriate resource allocation is consistency Research finds that customers who have been of information across all channels. The insurer migrated to the online banking channel become Esurance tries to release any changes or new infor- more profitable, controlling for selection effects. mation to all channels at the same time to ensure a However, in a catalog context, customers migrated consistent customer experience. Because customers to online channels tend to become less loyal than often start quotes online but purchase over the those who continue to use the catalog channel phone, the company recognizes that it is critical (Ansari, Mela, and Neslin 2008). Further, forcing for its sales agents to have the same functionality customers into a specific channel (e.g., for cost rea- and information as its customers, so there are no sons) can create customer reactance, dissatisfaction, lapses in service or support.

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Future Developments in Customer Value Management

ew technologies and changes in increasingly pursuing strategies that encourage customer expectations, experiences, non-transactional behavior. For example, leisure and behavior require that executives firms pro-actively ask recent customers to provide look to the future. In the discussion ratings on independent-comparison websites. Nthat follows, we focus on three developments that Recently, Lay’s Potato Chips held a contest for firms should monitor. customers to develop a new chip flavor. The winner receives 1% of the turnover of the resulting new product. Firms also understand the potential D E V E LO P M E N T 1 negative consequences of non-transactional behavior if not managed properly. The term “customer Managing customer engagement engagement” has emerged as an important new trend within CVM, reflecting these changes. In an increasingly networked society, non- In our view, customer engagement behaviors transactional customer behavior is likely to go beyond transactions, and may be specifically become more important. Moreover, firms are defined as a customer’s behavioral manifestations that

The Customer Behavior Management Process

E n g a g e m e n t L e a d e r sh i p

Action Direction INTERNAL EXTERNAL

Customer Leverage Stimulate Identification Evaluation (Re-)action engagement + potential Mitigate evaluation – and Neutralize 1 2 3 translate

Maintaining e F F i c i e n c y

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have a brand or firm focus, beyond purchase, resulting encourages customers to provide ideas and sug- from motivational drivers. Customer engagement gestions on its “Your Ideas” website at www. behaviors (CEBs) include many behaviors such thefordstory.com. Other ways to encourage CEBs as word-of-mouth, blogging, providing customer are giving rewards and providing social incentives ratings, etc. The CEB management process entails to customers. identifying, evaluating, and (re-)acting to key Even negative customer feedback, when man- behaviors (see figure) (van Doorn et al. 2010). aged properly, can be used to create value for the For firms, the key challenge is to identify the firm. This particularly holds for customer com- different forms, actors, places, and content of CEB, plaints. In some cases, however, negative forms of and to understand its potential effect. For some CEB might require external actions and reactions types of CEBs such as WOM, online reviews, and from a firm. This specifically holds for negative recommendations, existing research suggests how feedback posted on blogs, etc. One famous example to assess their extent and impact. CEBs can be is a video posted on YouTube by country singer evaluated based on their valence, quantity, and Dave Carroll, “United Breaks Guitars.” This video, the channel utilized, as well as short and long-term which now has millions of views since being posted effects. Yet, while some CEB manifestations are in May 2009, can potentially have detrimental very visible to the firm, others, such as complain- effects on the United brand (www.unitedbreaks- ing on negative service experiences to friends and guitars.com). Such negative CEB can also have a colleagues, may not be. drastic financial impact. Translating CEBs into financial metrics can While much is known on how to react to service also improve decision making about the customer failures, less is known about how firms should react base, especially the engaged customer base. The to public allegations. Some firms also participate in value of customer engagement behavior can be communities (in which customers post comments quantified into different components including on firms) in order to proactively provide directed customer influence value, feedback to customers and to get directly in touch customer referral value, with publicly complaining customers (e.g., www. and customer knowledge planetfeedback.com). value (Kumar et al. 2010). Recent research on customer retaliation suggests CEB management three strategies firms should consider to reduce and Even negative customer feedback, efforts should leverage the to manage negative CEB: (1) track online and pub- potential benefit or threat lic acts of retaliation to identify potential retaliators when managed properly, can be of a CEB internally and before the issue escalates, (2) measure customer used to create value for the firm. externally. Internally, the perceptions of betrayal following a service recovery content of relevant CEBs attempt to head off any potential retaliation, and (such as suggestions) must (3) most importantly, understand the normative be made available to the expectations of customers and work to consistently right persons inside the meet these expectations, especially in response to firm so they can use it a service failure. For example, Gatorade actively appropriately, such as to generate new product monitors mentions of its products on social media ideas. Firms should also nurture and harness the sites, answering questions and tracking the pulse of positive potential of CEB by fostering processes its customers. Similarly, Starbucks is very active on and venues to stimulate it. Externally, a central social networking sites, engaging with customers opportunity to stimulate CEB is to give engaged and correcting any incorrect information that it customers a site or forum to express their ideas spots, such as the frequently posted misinformation and thoughts. For example, Microsoft uses the that Starbucks does not support U.S. troops. expertise of its users to advise other software owners on the Microsoft Answers website. Ford now

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D E V E LO P M E N T 2 example, customers in a specific geographic area might face more problems with mobile phone cov- Managing customer networks erage. This suggests that firms should also carefully analyze why specific patterns in a network occur. In the last decade Internet usage has increased enormously and managers need to understand and analyze the role of networks in the decision-making D E V E LO P M E N T 3 process of consumers. Customer management researchers aim to quantify the effects of networks Managing the customer experience on customer adoption decisions. Certain customers may be more valuable then assumed, as they are Firms around the globe have embraced the concept critical in influencing other customers to adopt of customer experience management, with many new services or buy new product offerings. Using incorporating the notion into their mission state- network analyses, firms may be able to detect cus- ments. For example, Valero Energy Corporation tomers with high social influence. This may also is committed to ensuring a positive experience for dramatically reduce marketing costs. If firms are customers by focusing on convenience, value, and able to target the influencers within the database, quality. Dell focuses on delivering the best customer the new offering may spread automatically within experience in the markets the firm serves. Similarly, the rest of the customer base without the need for the success of Starbucks has been attributed to extensive marketing campaigns (Libai et al. 2010). creating a distinctive customer experience for their We need to know more about how both the customers (i.e., making coffee drinking a real network and marketing tactics influence customers social experience). in their adoption decisions. These analyses may We suggest that the customer experience con- use databases in which a network can be detected struct is holistic in nature and involves the customer’s through either using geographic proximity data cognitive, affective, emotional, social, and physical (e.g., census data or zip codes) or through having responses to a firm. This experience is created not detailed records on interactions between customers only by those elements which firms can control (e.g., through call records in telecom). (e.g., service interface, price), but also by elements Interestingly, social influence also plays a role in that are outside of the firm’s control (e.g., influence retention decisions. In work on customer networks, of others). Additionally, the customer experience Nitzan and Libai (2010) show that the defection of encompasses the total experience, including search, a network neighbor (an individual closely connected purchase, consumption, and after-sale phases, and to a customer in a network) increases a customer’s may involve multiple channels (Verhoef et al. 2009). hazard of defecting. A single exposure to a defecting Researchers in CVM have mainly considered the neighbor is associated with an increase in the focal cognitive aspects of the customer experience, such as customer’s hazard of defecting as much as 150%, satisfaction, price perceptions, and value perceptions. or by 80% when tie strength and similarity are Firms also aim to influence other more emotional controlled for. and affective attitudes to create customer loyalty, Jointly, these research findings point to the fact and this topic has gained some attention in the that customer networks should gain a stronger em- literature. Other studies have provided evidence phasis within customer management. The finding for the existence of positive and negative (service) that networks are also relevant in customer defection consumption emotions. Positive emotions include implies that firms should not only manage retention hope, happiness, joy, and surprise, while negative at the individual customer level, but should also emotions include anger, depression, and guilt. In- consider the network of potential defectors. Net- terestingly, insights from psychological research on work effects may arise due to word-of-mouth, but love have been used to show that intimacy and pas- other underlying phenomena may be at work. For sion are also important for creating loyal customers

15 Marketing Science I n s t i t u t e

in some industries. In sum, existing research suggest is interested in the experience-based concepts that emotional and affective components of the being employed by the firm. More importantly, customer-firm relationship are important drivers if experience-based firms aim to continue their of customer loyalty and thus customer lifetime growth, they may attract other market segments value (Yim, Tse, and Wa Chan 2008). beyond the experiential customer, which may Current research does not provide much insight require other business models. For example, while in how to manage the multifaceted construct of Starbucks initially focused on the experiential con- customer experiences and the extent to which sumption of coffee, they also attracted customers the consequences of a strong emotional customer looking for benefits such as delivery speed. To experience endure. Moreover, firms need to under- serve these customers, different service processes stand how they can sustain a strong experience over affecting the prior-designed experience were time. Observations in practice suggest that experi- required. Hence, an important research question ence-based strategies can create growth. However, is whether changes in the designed experience an important question that has yet to be answered may alienate core customer groups, and the is how firms using an experience-based strategy extent to which the social environment and can keep growing. There might be limits to such need for compatibility management are also growth, especially if only a specific market segment strategic considerations.

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Concluding Thoughts

It is an exciting time for customer value management. New models and the extensive availability of data make it relatively easy to implement the six key lessons described here: • CVM can and does improve business performance. • All CVM initiatives should be customer-driven rather than IT-driven. • To succeed in implementing CVM, firms should adopt customer lifetime value as a core metric. • Firms should invest in strong customer intelligence capabilities; these will be critical over the next few decades. • It is critical to understand the drivers of customer acquisition, customer retention, and customer expansion. • Multichannel management is key to creating customer value. However, maximizing the value of customers alone will not be enough moving forward. New technological and societal developments urge firms to move further. Understanding how to motivate customer engagement and to monitor and manage customer engagement behaviors will become essential. Analyzing, managing, and influencing customer networks will be a necessary skill in the future. Finally, broadening and deepening our understanding and appreciation of the customer experience—and learning to manage all aspects of the customer experience over time—will be a continuing challenge so that the value of all current and future customers is optimized.

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Additional References Business practice examples are derived from the following sources:

Anderson, Elana (2007), “Reinventing Marketing for Customer Gallaugher, John (2010), Information Systems: A Manager’s Guide Centricity.” Forrester Research (17 March). http://www.forrester.com/ to Harnessing Technology, Edition 1.1. Irvington, N.Y.: Flatworld rb/Research/reinventing_marketing_for_ customer_centricity/q/id/ Knowledge. 42209/t/2. Hanias, Georgia (2007), “CLM CASE STUDY: Agillic and Telenor Anonymous (2010), “Untangling the Social Web.” The Economist SONOFON.” Return on Behavior Magazine, http://www.returnonbe- Online, 2 September, http://www.economist.com/node/16910031. haviormagazine.com/articles-of-interest/clm-case-study-agillic-and- telenor-sonofon.html. Ansari, Asim, Carl Mela, and Scott A. Neslin (2008), “Customer Channel Migration.” Journal of Marketing Research 45 (1), 60–76. Kumar, V. (2008), Managing Customers for Profit: Strategies to Increase Profits and Build Loyalty. Philadelphia, Penn.: Wharton Ask, Julie A. (2009), “Case Study: E*Trade Leverages Mobile to Offer School Publishing. Customers More Convenient Services.” Forrester Research (27 May). http://www.forrester.com/rb/ Research/case_study_etrade_leverages_ Michelli, Joseph (2007), The Starbucks Experience: 5 Principles for mobile_to_offer/q/id/54567/t/2. Turning Ordinary Into Extraordinary. New York, N.Y.: McGraw Hill. Ayres, Chris (2009), “Revenge Is Best Served Cold – on YouTube.” Mitchell, Chad (2009), “Case Study: Customer Centricity Drives The Times Online (22 July), http://www.timesonline.co.uk/tol/com- Esurance’s Business Strategy.” Forrester Research (23 March). ment/columnists/chris_ayres/ article6722407.ece. Net Promoter London Conference Blog (2007), http://netpromoter.ty- Badgett, Melody, Maureen Stancik Boyce, and Herb Kleinberger pepad.com/npc_london_2007/2007/07/paul-marsden-bu.html. (2007), Turning Shoppers into Advocates: The Customer Focused Retail Peppers & Rogers Group (2008), Case Study: Hewlett Packard, Enterprise. Armonk, N.Y.: IBM Institute for Business Value. “The ROI of Customer Care.” http://www.peppersandrogersgroup. Bauerlein, Valerie (2010), “Gatorade’s Mission: Sell More Drinks.” com/documentdownload.aspx?doc_id=31301. Wall Street Journal Online (13 September), http://online.wsj.com/arti- Rotz, Tim (2010), Akamai Technologies, personal interview, cle/SB10001424052748703466704575489673244784924.html September 23. ?mod=wsj_share_twitter. Tapscott, Don, and Anthony D. Williams (2006), Wikinomics: How Mass Burns, Megan (2010), “Measuring Customer Experiences at LEGO.” Collaboration Changes Everything. New York, N.Y.: Penguin Group. Forrester Research (8 January), http://www.forrester.com/rb/Research/ measuring_customer_experiences_at_lego/q/id/55814/t/2. Techcrunch (2010), http://techcrunch.com/2010/03/08/forrester-fore- cast-online-retail-sales-will-grow-to-250-billion-by-2014/ (Forrester). Chevalier, J.A., and Dina Mayzlin (2006), “The Effect of Word of Mouth on Sales: Online Book Reviews.” Journal of Marketing Research Temkin, Bruce D., and Nicole Belanger (2004), “Customer Analytics 43 (3), 345–54. Helps Boost Loyalty.” Forrester Research (26 March). http://www.forrester.com/rb/Research/customer_analytics_help_boost_loyalty/q/ Choi, Jeonghye, Sam K. Hui, and David R. Bell (2010), “Spatio- id/34190/t/2. Temporal Analysis of Imitation Behavior.” Journal of Marketing Research 47 (1), 1–15. Vittal, Suresh (2008), “Optimizing Customer Retention Programs.” Forrester Research (20 October). http://www.forrester.com/rb/Re- Davenport, Thomas H., and Jeanne G. Harris (2005), Competing search/optimizing_customer_retention_programs/q/id/44400/t/2. on Analytics: The New Science of Winning. Boston, Mass.: Harvard Business School Press. Wilson, Charles (2010), Dunkin’ Brands, personal interview, September 25. Doubleclick (2004), Retail Details: Best Practices in Multichannel Integration. New York, N.Y.: DoubleClick Inc.

19 Marketing Science I n s t i t u t e

Bibiliography (by section)

Introduction and CVM Process Mitchell, Chad (2009), “Case Study: Customer Centricity Drives Esurance’s Business Strategy.” Forrester Research (23 March). Bolton, Ruth N., Katherine N. Lemon, and Peter C. Verhoef (2004), “The Theoretical Underpinnings of Customer Asset Management: O’Sullivan, Don, and Andrew V. Abela (2007), “Marketing Performance A Framework and Propositions for Future Research.” Journal of the Measurement Ability and Firm Performance.” Journal of Marketing 71 Academy of Marketing Science 32 (3), 271–93. (April), 79–83. Boulding, William, Richard Staelin, Michael Ehret, and Wesley J. Ramani, Girish, and V. Kumar (2008), “Interaction Orientation and Johnston (2005), “A Customer Relationship Management Roadmap: Firm Performance.” Journal of Marketing 72 (1), 27–45. What Is Known, Potential Pitfalls, and Where to Go.” Journal of Reinartz, Werner, Manfred Krafft, and Wayne Hoyer (2004), “The Marketing 69 (4), 155–66. CRM Process: Its Measurement and Impact on Performance.” Journal Gupta, Sunil, Donald R. Lehmann, and Jennifer A. Stuart (2004), of Marketing Research 41 (3), 293–305. “Valuing Customers.” Journal of Marketing Research 41 (1), 7–18. Rust, Roland T., Katherine N. Lemon, and Valarie A. Zeithaml (2004), Kumar, V., and Werner J. Reinartz (2005), Customer Relationship Man- “Return on Marketing: Using Customer Equity to Focus Marketing agement: A Databased Approach. Chichester, U.K.: John Wiley & Sons. Strategy.” Journal of Marketing 68 (1), 109–27. Morgan, R. M., and Hunt, S. D. (1994), “The Commitment-Trust Srinivasan, Subhash, and Dominique M. Hanssens (2009), “Marketing Theory of Relationship Marketing.” Journal of Marketing 58 (3), and Firm Value.” Journal of Marketing Research 46 (3), 293–312. 20–38. Srivastava, Rajendra, Tasadduq A. Shervani, and Liam Fahey (1998), Reinartz, Werner, Manfred Krafft, and Wayne Hoyer (2004), “The “Market-Based Assets and Shareholder Value: A Framework for Analysis.” CRM Process: Its Measurement and Impact on Performance.” Journal Journal of Marketing 62 (1), 2–18. of Marketing Research 41 (3), 293–305. Venkatesan, Rajkumar, and V. Kumar (2004), “A Customer Lifetime Venkatesan, Rajkumar, and V. Kumar (2004), “A Customer Lifetime Value Framework for Customer Selection and Resource Allocation Value Framework for Customer Selection and Resource Allocation Strategy.” Journal of Marketing 68 (4), 106–25. Strategy.” Journal of Marketing 68 (4), 106–25. Vittal, Suresh (2008), “Optimizing Customer Retention Programs.” Verhoef, Peter C., Werner Reinartz, and Manfred Krafft (2010), “Cus- Forrester Research (20 October). http://www.forrester.com/rb/Re- tomer Engagement as a New Perspective in Customer Management.” search/optimizing_customer_retention_programs/q/id/44400/t/2. Journal of Service Research 13 (3), 247–52. Verhoef, Peter C., Jenny van Doorn, and Matilda Dorotic (2007), “Customer Value Management: An Overview and Research Agenda.” Lesson 2: Marketing — Journal of Research and Management 2, 51–68. Focus on the customer side of CVM Anderson, Elana (2007), “Reinventing Marketing for Customer Centricity.” Forrester Research (17 March). http://www.forrester.com/ Lesson 1: rb/Research/reinventing_marketing_for_ customer_centricity/q/id/ Use CVM to improve business performance 42209/t/2. Hanias, Georgia (2007), “CLM CASE STUDY: Agillic and Telenor Ask, Julie A. (2009), “Case Study: E*Trade Leverages Mobile to Offer SONOFON.” Return on Behavior Magazine, http://www.returnonbe- Customers More Convenient Services.” Forrester Research (27 May), haviormagazine.com/articles-of-interest/clm-case-study-agillic-and- http://www.forrester.com/rb/ Research/case_study_etrade_leverages_ telenor-sonofon.html. mobile_to_offer/q/id/54567/t/2. Jayachandran, Satish, Subhash Sharma, Peter Kaufman, and Pushkala Becker, Jan U., Goetz Greve, and Sönke Albers (2009), “The Impact Raman (2005), “The Role of Relational Information Processes and of Technological and Organizational Implementation of CRM on Technology Use in Customer Relationship Management.” Journal Customer Acquisition, Maintenance, and Retention.” International of Marketing 69 (4), 177–92. Journal of Research in Marketing 26 (3), 207–15. Kirca, Ahmet, Satish Jayachandran, and William O. Bearden (2005), Bouma, Jelle (2009), Why Participation Works: The Role of Employee “Market Orientation: A Meta-Analytic Review and Assessment of Its Involvement in the Implementation of the Customer Relationship Manage- Antecedents and Impact on Performance.” Journal of Marketing 69 (2), ment Type of Organizational Change. Groningen, The Netherlands: 24–41. SOM Research School.

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Burns, Megan (2010), “Measuring Customer Experiences at LEGO.” Rust, Roland T., Katherine N. Lemon, and Valarie A. Zeithaml Forrester Research (8 January), http://www.forrester.com/rb/Research/ (2004), “Return on Marketing: Using Customer Equity to Focus measuring_customer_experiences _at_lego/q/id/55814/t/2. Marketing Strategy.” Journal of Marketing 68 (1), 109–27. Jayachandran, Satish, Subhash Sharma, Peter Kaufman, and Pushkala Szymanski, D.M., S.G. Bharadwaj, and P.R. Varadarajan (1993), Raman (2005), “The Role of Relational Information Processes and “Standardization Versus Adaptation of International Marketing Strat- Technology Use in Customer Relationship Management.” Journal egy: An Empirical Investigation.” Journal of Marketing 57 (4), 1–17. of Marketing 69 (4), 177–92. Venkatesan, Rajkumar, V. Kumar, and Timothy Bohling (2007), Net Promoter London Conference Blog (2007), http://netpromoter.ty- “Optimal Customer Relationship Management Using Bayesian pepad.com/npc_london_2007/2007/07/paul-marsden-bu.html. Decision Theory: An Application for Customer Selection.” Journal of Marketing Research 44 (4), 579–94. Payne, Adrian, and Pennie Frow (2005), “A Strategic Framework for Customer Relationship Management.” Journal of Marketing 69 (4), 167–76. Lesson 4: Peppers & Rogers Group (2008), “Case Study: Hewlett Packard, The Invest in strong customer intelligence capabilities ROI of Customer Care.” http://www.peppersandrogersgroup.com/documentdownload.aspx?doc_id=31301. Anonymous (2010), “Untangling the Social Web.” The Economist Online (2 September), http://www.economist.com/node/16910031. Reinartz, Werner, Manfred Krafft, and Wayne Hoyer (2004), “The CRM Process: Its Measurement and Impact on Performance.” Journal Davenport, Thomas H., and Jeanne G. Harris (2005), Competing of Marketing Research 41 (3), 293–305. on Analytics: The New Science of Winning. Boston, Mass.: Harvard Business School Press. Rigby, Darrel K., and Dianne Ledingham (2004), “CRM Done Right.” Hoekstra, Janny C., and Peter C. Verhoef (2010), “Customer Harvard Business Review 82 (11), 118–29. Intelligence-Marketing Interface: Influences on Firm Performance.” Rigby, Darrel K., Frederick F. Reichheld, and Phil Schefter (2002), Groningen, The Netherlands: University of Groningen, Working paper. “Avoid the Four Perils of CRM.” Harvard Business Review 80 (2), Jayachandran, Satish, Subhash Sharma, Peter Kaufman, and Pushkala 5–11. Raman (2005), “The Role of Relational Information Processes and Rotz, Tim (2010), Akamai Technologies, personal interview, Technology Use in Customer Relationship Management.” Journal September 23. of Marketing 69 (4), 177–92. Shah, Denish, Roland T. Rust, A. Parasuraman, Richard Staelin, Kumar, V. (2008), Managing Customers for Profit: Strategies to and George S. Day (2006), “The Path to Customer Centricity.” Increase Profits and Build Loyalty. Philadelphia, Penn.: Wharton Journal of Service Research 9(2), 113–24. School Publishing. Treacy, Michael, and Fred Wiersema (1993), “Customer Intimacy Kumar, V., and Werner J. Reinartz (2005), Customer Relationship Man- and Other Value Disciplines.” Harvard Business Review 71 (1), 84–93. agement: A Databased Approach. Chichester, U.K.: John Wiley & Sons. Verhoef, Peter C., and Fred Langerak (2002), “Eleven Misconceptions Neslin, Scott A., Dhruv Grewal, Robert Leghorn, Venkatesh Shankar, about Customer Relationship Management.” Business Strategy Review Marije L. Teerling, Jacquelyn S. Thomas, and Peter C. Verhoef (2006), 13 (4), 70–6. “Challenges and Opportunities in Multichannel Customer Manage- ment.” Journal of Service Research 9 (2), 95–112. Reinartz, Werner, Manfred Krafft, and Wayne Hoyer (2004), “The Lesson 3: CRM Process: Its Measurement and Impact on Performance.” Journal Adopt customer lifetime value as a core metric of Marketing Research 41 (3), 293–305. Gupta, Sunil, and Donald R. Lehmann (2005), Managing Customers as Tapscott, Don, and Anthony D. Williams (2006), Wikinomics: How Investments: The Strategic Value of Customers in the Long Run. Philadel- Mass Collaboration Changes Everything. New York, N.Y.: Penguin Group. phia, Penn.: Wharton School Publishing. Temkin, Bruce D., and Nicole Belanger (2004), “Customer Analytics Nijs, Vincent R., Marnik G. Dekimpe, Jan-Benedict E. M. Steenkamp, Helps Boost Loyalty.” Forrester Research (26 March). http://www.for- and Dominique M. Hanssens (2001), “The Category-Demand Effects rester.com/rb/Research/customer_analytics_help_boost_loyalty/q/ of Price Promotions.” Marketing Science 20 (1), 1–22. id/34190/t/2. Pauwels, Koen, Jorge Silva-Risso, Shuba Srinivasan, and Dominique Van Nierop, Erjen, Dennis Fok, and Philip Hans Franses (2008), M. Hanssens (2004), “New Products, Sales Promotions, and Firm “Interaction Between Shelf Layout and Marketing Effectiveness and Value: The Case of the Automobile Industry.” Journal of Marketing Its Impact on Optimizing Shelf Arrangements.” Marketing Science 27 68 (4), 142–56. (6), 1065–82.

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Venkatesan, Rajkumar, and V. Kumar (2004), “A Customer Lifetime Pauwels, Koen, Tim Ambler, Bruce H. Clark, Pat LaPointe, David Value Framework for Customer Selection and Resource Allocation Reibstein, Bernd Skiera, Berend Wierenga, and Thorsten Wiesel Strategy.” Journal of Marketing 68 (4), 106–25. (2009), “Dashboards as a Service: Why, What, How, and What Research Is Needed.” Journal of Service Research 12 (2), 175–89.

Lesson 5: Shankar, Venkatesh, and Sridhar Balasubramanian (2009), “Mobile Marketing: Synthesis and Prognosis.” Journal of Interactive Marketing Understand the drivers of customer acquisition, 23 (2), 118–29. retention, and expansion Shankar, Venkatesh, and Tarun Kushwaha (2008), “An Empirical Bolton, Ruth N., Katherine N. Lemon, and Peter C. Verhoef (2004), Analysis of Cross-Channel Effects in Multichannel Environment.” “The Theoretical Underpinnings of Customer Asset Management: College Station, Tex.: Texas A&M University, Working paper. A Framework and Propositions for Future Research.” Journal of the Academy of Marketing Science 32 (3), 271–93. Techcrunch (2010), http://techcrunch.com/2010/03/08/forrester-fore- cast-online-retail-sales-will-grow-to-250-billion-by-2014/ (Forrester). Rust, Roland T., Katherine N. Lemon, and Valarie A. Zeithaml (2004), “Return on Marketing: Using Customer Equity to Focus Marketing Thomas, J.S., and U.Y. Sullivan (2005), “Managing Marketing Strategy.” Journal of Marketing 68 (1), 109–27. Communications with Multichannel Customers.” Journal of Marketing 69 (4), 239–51. Rust, Roland T., Valarie A. Zeithaml, and Katherine N. Lemon (2000), Driving Customer Equity: How Customer Lifetime Value Is Reshaping Wilson, H., R. Street, and L. Bruce (2008), The Multichannel Challenge Corporate Strategy. New York, N.Y.: The Free Press. Integrating Customer Experiences for Profit. Amsterdam, The Netherlands: Butterworth Heinemann. Wilson, Charles (2010), Dunkin’ Brands, personal interview, September 25. Development 1: Managing customer engagement Lesson 6: Ayres, Chris (2009), “Revenge is best served cold — on YouTube.” Manage your channels to create customer value The Times Online (22 July), http://www.timesonline.co.uk/tol/com- Ansari, Asim, Carl Mela, and Scott A. Neslin (2008), “Customer ment/columnists/chris_ayres/ article6722407.ece. Channel Migration.” Journal of Marketing Research 45 (1), 60–76. Bauerlein, Valerie (2010), “Gatorade’s Mission: Sell More Drinks.“ Doubleclick (2004), Retail Details: Best Practices in Multichannel Wall Street Journal Online (13 September), http://online.wsj.com/arti- Integration. New York, N.Y.: DoubleClick Inc. cle/SB10001424052748703466704575489673244784924.html ?mod=wsj_share_twitter. Gensler, Sonja, Peter S.H Leeflang, and Bernd Skiera (2010), “How Should a Firm Utilize Its Online Channel to Manage Customer Rela- Gallaugher, John (2010), Information Systems: A Manager’s Guide to Har- tionships?” Groningen, The Netherlands: University of Groningen, nessing Technology, Edition 1.1. Irvington, N.Y.: Flatworld Knowledge. Working paper. Grégoire, Yany, and Robert J. Fisher (2008), “Customer Betrayal and Hennig-Thurau, Thorsten, Edward C. Malthouse, Christian Friege, Retaliation: When Your Best Customers Become Your Worst Enemies.” Sonja Gensler, Lara Lobschat, Arvind Rangaswamy, and Bernd Skiera Journal of the Academy of Marketing Science 36, 247–61. (2010), “The Impact of New Media on Customer Relationships.” Kumar, V., Lerzan Aksoy, Bas Donkers, Rajkumar Venkatesan, Thorsten Journal of Service Research 13 (3), 311–30. Wiesel, and Sebastian Tillemans (2010), “Undervalued or Overvalued Konus, Umut, Debra Trampe, and Peter C. Verhoef (2009), Customers: Capturing Total Customer Engagement Value.” Journal of “Customer Responses to Forced Channel Migration.” Groningen, Service Research 13 (3), 297–310. The Netherlands: University of Groningen, Working paper. Kushwaha, Tarun, Venkatesh Shankar, and J.Z. Huang (2010), “A Kumar, V., and Rajkumar Venkatesan (2005), “Who Are the Customer-Channel Segment Decomposition Approach to Optimal Multichannel Shoppers and How Do They Perform? Correlates of Marketing Effort Allocation.” Chapel Hill, N.C.: University of North Multichannel Shopping Behavior.” Journal of Interactive Marketing Carolina, Working paper. 19 (2), 44–62. Thompson, Mark (2005), “Structural and Epistemic Parameters in Mitchell, Chad (2009), “Case Study: Customer Centricity Drives Communities of Practice.” Organization Science 16 (2), 151–64. Esurance’s Business Strategy.” Forrester Research (23 March). van Doorn, Jenny, Katherine N. Lemon, Vikas Mittal, Stephan Nass, Neslin, Scott, and Venkatesh Shankar (2009), “Key Issues in Multi- Doreén Pick, Peter Pirner, and Peter C. Verhoef (2010), “Customer channel Customer Management: Current Knowledge and Future Engagement Behavior: Theoretical Foundations and Research Direc- Directions.” Journal of Interactive Marketing 23 (1), 70–81. tions.” Journal of Service Research 13 (3), 253–66.

22 f a s t forward C u s t o m e r V a l u e M a n a g e m e n t

Development 2: Rust, Roland T., and Richard L. Oliver (2000), “Should We Delight the Managing customer networks Customer?” Journal of the Academy of Marketing Science 28 (1), 86–94. Bass, Frank (1969), “A New Product Growth for Model Consumer Verhoef, Peter C., Katherine N. Lemon, A. Parasuraman, Anne Rog- Durables.” Management Science 15 (5), 215–27. geveen, Michael Tsiros, and Leonard A. Schlesinger (2009), “Customer Experience Creation: Determinants, Dynamics and Management Chevalier, J.A., and Dina Mayzlin (2006), “The Effect of Word of Strategies.” Journal of Retailing 85 (1), 31–41. Mouth on Sales: Online Book Reviews.” Journal of Marketing Research 43 (3), 345–54. Yim, Chi Kin, David K. Tse, and Kimmy Wa Chan (2008), “Strength- ening Customer Loyalty Through Intimacy and Passion: Roles of Choi, Jeonghye, Sam K. Hui, and David R. Bell (2010), “Spatio- Customer-Firm Affection and Customer Staff Relationships in Services.” Temporal Analysis of Imitation Behavior.” Journal of Marketing Journal of Marketing Research 45 (6), 741–56. Research 47 (1), 1–15. Hill, S., F. Provost, and C. Volinsky (2006), “Network-based Market- ing: Identifying Likely Adopters via Consumer Networks.” Statistical Science 21(2), 256–76. Libai, Barak, Ruth Bolton, Marnix S. Bügel, Ko de Ruyter, Oliver Götz, Hans Risselada, and Andrew T. Stephen (2010), “Customer- to-Customer Interactions: Broadening the Scope of Word of Mouth Research.” Journal of Service Research 13 (3), 267–82. Nitzan, Irit, and Barak Libai (2010), “Social Effects on Customer Retention.” Cambridge, Mass.: Marketing Science Institute Report No. 10–107. Van den Bulte, Christophe, and Stefan H.K. Wuyts (2007), Social Networks and Marketing. Cambridge Mass.: Marketing Science Institute.

Development 3: Managing the customer experience Badgett, Melody, Maureen Stancik Boyce, and Herb Kleinberger (2007), Turning Shoppers into Advocates: The Customer Focused Retail Enterprise. Armonk, N.Y.: IBM Institute for Business Value. Bougie, Roger, Rik Pieters, and Marcel Zeelenberg (2003), “Angry Customers Don’t Come Back, They Get Back: The Experience and Behavioral Implications of Anger and Dissatisfaction in Services.” Journal of the Academy of Marketing Science 31 (4), 377–93. Brakus, J. Joško, Bernd H. Schmitt, and Lia Zarantonello (2009), “Brand Experience: What Is It? How Is It Measured? Does It Affect Loyalty?” Journal of Marketing 73 (3), 52–68. Bügel, Marnix S., Peter C. Verhoef, and Abraham P. Buunk (2011), “The Role of Intimacy in Customer-to-Firm Relationships during the Customer Lifecycle.” Journal of Retailing and Consumer Services forthcoming. Michelli, Joseph (2007), The Starbucks Experience: 5 Principles for Turning Ordinary Into Extraordinary. New York, N.Y.: McGraw Hill. Nyer, Raidh (2007), “The Effect of Consumption Emotions on Satisfaction, and Word-of-Mouth Communications.” Psychology & Marketing 24 (12), 1085–108. Oliver, Richard L., Roland T. Rust, and Sajeev Varki (1997), “Customer Delight, Foundations, Findings, and Managerial Insight.” Journal of Retailing 73 (3), 311–36.

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