Measuring Customer Profitability in Complex Environments

An Interdisciplinary Contingency Framework

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

Customer profitability measurement is an important element in customer relationship management and a lever for enhanced marketing accountability. Two distinct measurement approaches have emerged in the marketing literature: Customer Lifetime Value (CLV) and Customer Profitability Analysis (CPA). Myriad models have been demonstrated within these two approaches across industries. However, limited efforts have been made to explain when sophisticated CLV or CPA models will be most useful. This paper explores the advantages and limitations of sophisticated CLV and CPA models and proposes that the degree of sophistication deployed when implementing customer profitability measurement models is determined by the type of complexity encountered in firms’ customer environments. This gives rise to a contingency framework for customer profitability measurement model selection and five research propositions. Additionally, the framework provides design and implementation guidance for managers seeking to implement customer profitability measurement models for resource allocation purposes.
Original languageEnglish
JournalAcademy of Marketing Science. Journal
Volume40
Issue number3
Pages (from-to)387-401
Number of pages15
ISSN0092-0703
DOIs
Publication statusPublished - 2012

Keywords

  • Marketing Accountability
  • Customer Lifetime Value
  • Customer Profitability Analysis
  • Customer Relationship Management
  • Contingencyn Theory
  • Interdisciplinary
  • Contingency Framework
  • Bahavioral Complexity
  • Service Complexity

Cite this

@article{39a5eca077324de0af271eb33165a83b,
title = "Measuring Customer Profitability in Complex Environments: An Interdisciplinary Contingency Framework",
abstract = "Customer profitability measurement is an important element in customer relationship management and a lever for enhanced marketing accountability. Two distinct measurement approaches have emerged in the marketing literature: Customer Lifetime Value (CLV) and Customer Profitability Analysis (CPA). Myriad models have been demonstrated within these two approaches across industries. However, limited efforts have been made to explain when sophisticated CLV or CPA models will be most useful. This paper explores the advantages and limitations of sophisticated CLV and CPA models and proposes that the degree of sophistication deployed when implementing customer profitability measurement models is determined by the type of complexity encountered in firms’ customer environments. This gives rise to a contingency framework for customer profitability measurement model selection and five research propositions. Additionally, the framework provides design and implementation guidance for managers seeking to implement customer profitability measurement models for resource allocation purposes.",
keywords = "Marketing Accountability, Customer Lifetime Value, Customer Profitability Analysis, Customer Relationship Management, Contingencyn Theory, Interdisciplinary, Contingency Framework, Bahavioral Complexity, Service Complexity",
author = "Morten Holm and V. Kumar and Carsten Rohde",
note = "Published online: 19 June 2011",
year = "2012",
doi = "10.1007/s11747-011-0263-4",
language = "English",
volume = "40",
pages = "387--401",
journal = "Academy of Marketing Science. Journal",
issn = "0092-0703",
publisher = "Springer",
number = "3",

}

Measuring Customer Profitability in Complex Environments : An Interdisciplinary Contingency Framework. / Holm, Morten; Kumar, V.; Rohde, Carsten.

In: Academy of Marketing Science. Journal, Vol. 40, No. 3, 2012, p. 387-401.

Research output: Contribution to journalJournal articleResearchpeer-review

TY - JOUR

T1 - Measuring Customer Profitability in Complex Environments

T2 - An Interdisciplinary Contingency Framework

AU - Holm, Morten

AU - Kumar, V.

AU - Rohde, Carsten

N1 - Published online: 19 June 2011

PY - 2012

Y1 - 2012

N2 - Customer profitability measurement is an important element in customer relationship management and a lever for enhanced marketing accountability. Two distinct measurement approaches have emerged in the marketing literature: Customer Lifetime Value (CLV) and Customer Profitability Analysis (CPA). Myriad models have been demonstrated within these two approaches across industries. However, limited efforts have been made to explain when sophisticated CLV or CPA models will be most useful. This paper explores the advantages and limitations of sophisticated CLV and CPA models and proposes that the degree of sophistication deployed when implementing customer profitability measurement models is determined by the type of complexity encountered in firms’ customer environments. This gives rise to a contingency framework for customer profitability measurement model selection and five research propositions. Additionally, the framework provides design and implementation guidance for managers seeking to implement customer profitability measurement models for resource allocation purposes.

AB - Customer profitability measurement is an important element in customer relationship management and a lever for enhanced marketing accountability. Two distinct measurement approaches have emerged in the marketing literature: Customer Lifetime Value (CLV) and Customer Profitability Analysis (CPA). Myriad models have been demonstrated within these two approaches across industries. However, limited efforts have been made to explain when sophisticated CLV or CPA models will be most useful. This paper explores the advantages and limitations of sophisticated CLV and CPA models and proposes that the degree of sophistication deployed when implementing customer profitability measurement models is determined by the type of complexity encountered in firms’ customer environments. This gives rise to a contingency framework for customer profitability measurement model selection and five research propositions. Additionally, the framework provides design and implementation guidance for managers seeking to implement customer profitability measurement models for resource allocation purposes.

KW - Marketing Accountability

KW - Customer Lifetime Value

KW - Customer Profitability Analysis

KW - Customer Relationship Management

KW - Contingencyn Theory

KW - Interdisciplinary

KW - Contingency Framework

KW - Bahavioral Complexity

KW - Service Complexity

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DO - 10.1007/s11747-011-0263-4

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SP - 387

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JO - Academy of Marketing Science. Journal

JF - Academy of Marketing Science. Journal

SN - 0092-0703

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