Friday, February 1, 2013

Evaluating Customer Relationships: Current and Future Challenges

SINGH Siddharth S., JAIN Dipak C.
Read the working paper
INSEAD Working Paper 2013/26/MKT

Customer relationship management (CRM) has been a cornerstone of marketing for sustainable profitability for many years.CRM means leveraging databases of customers to increase profitability. These databases primarily contained information on customers and their past customer-firm interactions to a varying degree (e.g. just purchases and promotions, or purchases and returns). The variables tracked were commonly used to evaluate customers (i.e. customer lifetime value), and analyze customer behavior for customer management strategy (e.g. customer acquisition, retention, upselling, and cross selling). All this aimed at increasing the value of the customer base over time. While consensus is yet to develop regarding customer purchase behavior over lifetime with the firm, technological changes have brought in more complexities. In this chapter, we first discuss the extant literature on customer purchase behavior over lifetime with the firm and present our new research; we then discuss the commonly accepted framework for measuring customer lifetime value, and present a new framework that is better suited in our current environment.