Impact of acquisition channels on customer equity, The
Customer equity (CE henceforth) is a powerful new paradigm to evaluate the firm's value and to optimally allocate marketing resources. This paper is focused on the relationship between customer acquisition and CE. The authors attempt to answer the following four questions: 1) how should customer acquisition channels be categorized to make them meaningful to managers and academics?; 2) how do we measure the effects of different acquisition channels on the firm's performance?; 3) how do we disentangle short-run effect and long-run effects?, and 4) how should the manager allocate a limited budget among the acquisition channels so as to maximize customer equity? The authors first propose a way of categorizing customer acquisition channels according to their level of contact and intrusiveness. A vector-autoregressive (VAR) model is used to examine the dynamics of acquisition channels and the firm's performance, and an empirical illustration on a surviving Internet company is provided. The results show that each cohort (i.e., customers from different acquisition channels) has different short-run and long-run effects on the firm's performance by the subsequent login and purchasing behavior. Building on previous research on optimal resource allocation, the authors develop a Marketing Decision Support System (MDSS) to help managers allocate the acquisition budget among different channels with the objective of maximizing customer equity. The consequences of naively maximizing the short-term profit and not accounting for differences in the margin contribution of different cohorts are illustrated.
|Date of creation:||02 Aug 2003|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.iese.edu/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kamel Jedidi & Carl F. Mela & Sunil Gupta, 1999. "Managing Advertising and Promotion for Long-Run Profitability," Marketing Science, INFORMS, vol. 18(1), pages 1-22.
- Herr, Paul M & Kardes, Frank R & Kim, John, 1991. " Effects of Word-of-Mouth and Product-Attribute Information on Persuasion: An Accessibility-Diagnosticity Perspective," Journal of Consumer Research, University of Chicago Press, vol. 17(4), pages 454-62, March.
- S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
- Friestad, Marian & Wright, Peter, 1995. " Persuasion Knowledge: Lay People's and Researchers' Beliefs about the Psychology of Advertising," Journal of Consumer Research, University of Chicago Press, vol. 22(1), pages 62-74, June.
- Manski, Charles F & Lerman, Steven R, 1977. "The Estimation of Choice Probabilities from Choice Based Samples," Econometrica, Econometric Society, vol. 45(8), pages 1977-88, November.
- Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
- Leonard M. Lodish & Magid M. Abraham & Jeanne Livelsberger & Beth Lubetkin & Bruce Richardson & Mary Ellen Stevens, 1995. "A Summary of Fifty-Five In-Market Experimental Estimates of the Long-Term Effect of TV Advertising," Marketing Science, INFORMS, vol. 14(3_supplem), pages G133-G140.
- Pesaran, M. H. & Shin, Y., 1997.
"Generalised Impulse Response Analysis in Linear Multivariate Models,"
Cambridge Working Papers in Economics
9710, Faculty of Economics, University of Cambridge.
- Pesaran, H. Hashem & Shin, Yongcheol, 1998. "Generalized impulse response analysis in linear multivariate models," Economics Letters, Elsevier, vol. 58(1), pages 17-29, January.
- Vincent R. Nijs & Marnik G. Dekimpe & Jan-Benedict E.M. Steenkamps & Dominique M. Hanssens, 2001. "The Category-Demand Effects of Price Promotions," Marketing Science, INFORMS, vol. 20(1), pages 1-22, September.
- Brown, Jacqueline Johnson & Reingen, Peter H, 1987. " Social Ties and Word-of-Mouth Referral Behavior," Journal of Consumer Research, University of Chicago Press, vol. 14(3), pages 350-62, December.
- Marnik G. Dekimpe & Dominique M. Hanssens, 1995. "Empirical Generalizations About Market Evolution and Stationarity," Marketing Science, INFORMS, vol. 14(3_supplem), pages G109-G121.
When requesting a correction, please mention this item's handle: RePEc:ebg:iesewp:d-0516. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Noelia Romero)
If references are entirely missing, you can add them using this form.