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1 – 10 of over 6000Beverley R. Lord, Yvonne P. Shanahan and Benjamin M. Nolan
As Lindsay (1994, 1995) encourages validation of existing results, this research replicates Guilding and McManus (2002) in a New Zealand (NZ) context. The usage and perceived…
Abstract
As Lindsay (1994, 1995) encourages validation of existing results, this research replicates Guilding and McManus (2002) in a New Zealand (NZ) context. The usage and perceived merit of customer accounting practices were lower in NZ than in the Australian study. Few of the regressions where customer accounting usage and perceived merit were dependent variables revealed a statistically significant role for competition intensity and market orientation. There was some minor support for the perceived merit of customer accounting being higher in companies experiencing medium levels of competition intensity.
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The concepts of customer lifetime value (CLV) and customer equity (CE).
Abstract
Subject area
The concepts of customer lifetime value (CLV) and customer equity (CE).
Study level/applicability
BA, MBA, MSc courses: customer equity, marketing metrics, marketing plan, marketing research. Because students are asked to complete a customer lifetime value analysis based on a range of financial and non-financial data, students will need at least a modest level of proficiency in dealing with a few basic financial accounting concepts.
Case overview
In Chile, a law passed in 2008 introduced a bidding process to be held every 24 months in the pension industry. The tender mechanism was introduced as part of a reform aimed at reducing the commissions charged by pension fund administrators and at making it easier for new players to enter the market. In early 2009, Daniel Ugarte wondered if it was finally the right time for his firm to enter the pension industry. Ugarte was asked by the board to help chart a direction for the firm. The winning criterion was the lowest management fee (commission) paid by the affiliates. The main focus of the case is a quantitative assignment that asks students to calculate how customer lifetime value (CLV) and customer equity (CE) would be affected by the commission offered.
Expected learning outcomes
These include: understanding the concepts of customer lifetime value (CLV) and customer equity (CE) and the importance of maximizing a customer's lifetime value for the firm by calculating the CLV and the CE based on a combination of financial and non-financial data.
Supplementary materials
Teaching notes are available. Consult the librarian for access.
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Hamzah Al‐Mawali, Yuserrie Zainuddin and Noor Nasir Kader Ali
This paper aims to shed light on the consequences of customer accounting (CA) information usage for strategic purposes on organizational performance.
Abstract
Purpose
This paper aims to shed light on the consequences of customer accounting (CA) information usage for strategic purposes on organizational performance.
Design/methodology/approach
This is an empirical study with data from 106 Jordanian services organizations. Quantitative data were obtained to investigate the relationship between CA information items and organizational performance in the context of Jordan.
Findings
The results show that the level of CA information usage (customer profitability, lifetime customer profitability analysis and valuation of customers as assets) impacts on organizational performance. CA information usage leads to better organizational performance. Also, the findings demonstrate a different effect of CA information items on diverse dimensions of organizational performance.
Originality/value
The findings will help academics and managers to achieve higher organizational performance.
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Suvi Nenonen and Kaj Storbacka
The last two decades have seen a surge of interest in the concept of value in business markets. Furthermore, extant literature suggests that value capture can be conceptualized as…
Abstract
Purpose
The last two decades have seen a surge of interest in the concept of value in business markets. Furthermore, extant literature suggests that value capture can be conceptualized as the return on the firm's customer assets. However, the existing customer asset management literature has a strong bias towards consumer markets. Thus, the purpose of this paper is to create a conceptual framework for managing customer assets for improved value capture in a business market context, and to illustrate the use of the framework empirically.
Design/methodology/approach
The authors approach the topic with conceptual development and a longitudinal case illustration from a globally operating forestry product firm.
Findings
The findings of the study indicate that B2B firms can increase their value capture by dividing their customer base into customer portfolios, which are managed with differentiated customer management concepts targeted to increase the economic profit contribution of each customer portfolio.
Practical implications
The business practitioners in B2B contexts are likely to find the proposed customer portfolio approach to managing the customer assets more approachable than the prevailing customer lifetime models. In order to gain maximum value capture benefits from portfolio-specific customer management concepts, they should be approached cross-functionally instead of limiting them to the domains of marketing and sales.
Originality/value
The study contributes to literature on value capture and customer asset management by providing a framework for managing customer assets for increased value capture that is applicable to business markets and circumvents the majority of challenges associated with the customer lifetime value models.
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Yeliz Ekinci, Nimet Uray and Füsun Ülengin
The aim of this study is to develop an applicable and detailed model for customer lifetime value (CLV) and to highlight the most important indicators relevant for a specific…
Abstract
Purpose
The aim of this study is to develop an applicable and detailed model for customer lifetime value (CLV) and to highlight the most important indicators relevant for a specific industry – namely the banking sector.
Design/methodology/approach
This study compares the results of the least square estimation (LSE) and artificial neural network (ANN) in order to select the best performing forecasting tool to predict the potential CLV. The performances of the models are compared by the hit ratio, which is calculated by grouping the customers as “top 20 per cent” and “bottom 80 per cent” profitable.
Findings
Due to its higher performance; LSE based linear regression model is selected. The results are found to be highly competitive compared with the previous studies. This study shows that, beside the indicators mostly used in the literature in measuring CLV, two additional groups, namely monetary value and risk of certain bank services, as well as product/service ownership-related indicators, are also significant factors.
Practical implications
Organisations in the banking sector have to persuade their customers to use certain routine risk-bearing transaction-based services. In addition, the product development strategy has a crucial role to increase the CLV of customers because some of the product-related variables directly increase the value of customers.
Originality/value
The proposed model predicts potential value of current customers rather than measuring current value considered in the majority of previous studies. It eliminates the limitations and drawbacks of the majority of models in the literature through simple and industry-specific method which is based on easily measurable and objective indicators.
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Kessara Kanchanapoom and Jongsawas Chongwatpol
Customer lifetime value (CLV) is one of the key indicators to measure the success or health of an organization. How can an organization assess the organization's customers'…
Abstract
Purpose
Customer lifetime value (CLV) is one of the key indicators to measure the success or health of an organization. How can an organization assess the organization's customers' lifetime value (LTV) and offer relevant strategies to retain prospective and profitable customers? This study offers an integrated view of different methods for calculating CLVs for both loyalty members and non-membership customers.
Design/methodology/approach
This study outlines eleven methods for calculating CLV considering (1) the deterministic aspect of NPV (Net present value) models in both finite and infinite timespans, (2) the geometric pattern and (3) the probabilistic aspect of parameter estimates through simulation modeling along with (4) the migration models for including “the probability that customers will return in the future” as a key input for CLV calculation.
Findings
The CLV models are validated in the context of complementary and alternative medicine (CAM)in the healthcare industry. The results show that understanding CLV can help the organization develop strategies to retain valuable customers while maintaining profit margins.
Originality/value
The integrated CLV models provide an overview of the mathematical estimation of LTVs depending on the nature of the customers and the business circumstances and can be applied to other business settings.
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Malcolm Wright and Erica Riebe
The purpose of this paper is to test whether brand defection shows double‐jeopardy effects, and whether stochastic models provide useful benchmarks of expected brand defection…
Abstract
Purpose
The purpose of this paper is to test whether brand defection shows double‐jeopardy effects, and whether stochastic models provide useful benchmarks of expected brand defection rates.
Design/methodology/approach
The approach takes the form of an empirical study of brand defection in four markets using panel data, comparing the performance of simple OLS models with a stochastic model.
Findings
Brand defection shows double jeopardy. Almost all brand defection in the markets studied could be explained by the category examined and the market share of the focal brand. A stochastic model of choice fits these data well, and provides many further practical and theoretical applications.
Practical implications
The study provides improved benchmarks for brand defection, allowing managers to spot whether their brand is performing better or worse than expected. It also allows better analysis of market structure for subscription services, especially under dynamic conditions, and better estimation of customer lifetime value when defection rates are not known for all brands.
Originality/value
The paper closes a gap in the brand defection literature by showing that a given level of defection is a natural characteristic of any market, subject to within‐market variations dominated by market share. Recent work has overlooked these points, resulting in unrealistic goals for customer defection programmes and inefficient estimates of customer lifetime value. The paper also provides a method of defection analysis that can be deployed by numerate managers and market researchers, and used as a basis for further academic work.
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Julie Hennessy and Evan Meagher
This exercise is one in a series intended to help students learn how to perform financial calculations in marketing contexts.Maru Keitou, a decorated former collegiate softball…
Abstract
This exercise is one in a series intended to help students learn how to perform financial calculations in marketing contexts.
Maru Keitou, a decorated former collegiate softball player with a PhD from Oxford University, ran Maru Batting Center in the Roppongi district of Tokyo's Minato ward. She had a deep knowledge of the game and of her customers, but she lacked a marketing background. She had recently signed up for a hosted customer relationship management service that would allow her to track the cost of acquiring and serving each of her four main customer segments. Using this data, she could determine which segments to target in the upcoming year.
The exercise describes the use of calculations of customer acquisition cost, retention rates, and customer lifetime value in picking between market segments and various options for activities to acquire customers.
Maru Keitou, a decorated former collegiate softball player with a PhD from Oxford University, ran Maru Batting Center in the Roppongi district of Tokyo's Minato ward. She had a deep knowledge of the game and of her customers, but she lacked a marketing background. She had recently signed up for a hosted customer relationship management service that would allow her to track the cost of acquiring and serving each of her four main customer segments. Using this data, she could determine which segments to target in the upcoming year.
The exercise describes the use of calculations of customer acquisition cost, retention rates, and customer lifetime value in picking between market segments and various options for activities to acquire customers.
After completing the exercise, students should be able to:
Calculate customer acquisition cost
Determine customer break-even
Calculate and explain customer lifetime value
Calculate customer acquisition cost
Determine customer break-even
Calculate and explain customer lifetime value
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This study investigates the usage of modern management accounting techniques popularly referred to as “strategic management accounting” (SMA), and the extent to which innovation…
Abstract
Purpose
This study investigates the usage of modern management accounting techniques popularly referred to as “strategic management accounting” (SMA), and the extent to which innovation attributes (namely relative advantage, compatibility, complexity, trialability and observability) determine SMA usage intensity.
Design/methodology/approach
Survey data was obtained through a structured questionnaire from 45 out of 56 publicly listed manufacturing companies on the Mainboard of the Nigerian Stock Exchange. Descriptive statistics, one-way ANOVA, exploratory factor analysis, confirmatory factor analysis and structural equation modelling were used to analyse data.
Findings
Whereas the overall usage rate of SMA as an innovation is generally moderate, there is significant difference in SMA usage intensity across industries in the manufacturing sector due to environmental uncertainty. Compatibility emerged as the strongest determinant of SMA usage intensity, implying that commercial enterprises would intensely apply SMA to remain innovative, to continuously improve and to incorporate strategy in accounting practice in a bid to survive competition. SMA will witness extensive usage if it aligns with the competitive strategies of an organisation.
Research limitations/implications
The attributes of innovation measured treat all SMA techniques as one, but did not measure relative advantage, compatibility, complexity, trialability and observability for each of the techniques. Future studies may consider investigating how innovation attributes specifically affect each SMA technique. The dimension of compatibility investigated in the study lean towards the alignment of SMA with competitive strategies. Taking into account the multidimensionality of compatibility as an innovation attribute, future studies may examine how past experience of implementing new ideas, as well as compatibility of SMA with corporate culture and value system, affect the dissemination and diffusion of management accounting innovations.
Practical implications
The paper proposes that although innovation attributes may partly explain SMA usage, coercive factors such as competition and environmental uncertainty may also be responsible for the decision to adopt innovative management accounting practices. The study therefore calls for a critical appraisal of how coercive institutional factors such as competition, regulation and actions of key stakeholders influence the decision of organisations to adopt an innovation.
Originality/value
This paper contributes to knowledge by challenging existing knowledge and presenting evidence that innovation attributes acclaimed to determine the spread of an innovation may be inapplicable in certain settings due to some environmental challenges. The study also contributes to knowledge by developing a composite scale for measuring innovation attributes specifically adapted to management accounting innovation, which can be used in future studies.
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