Managing Customers as Investments : The Strategic Value of Customers in the Long Run

by Gupta, Sunil; Lehmann, Donald

• ISBN13: 9780131428959
• ISBN10: 0131428950
• Format: Hardcover
• Copyright: 2005-01-01
• Publisher: Wharton School Publishing

Summary

What's a customer really worth? Can you find out, without endlesslycomplex modeling? And once you know, what should you do with thatknowledge?Managing Your Customers as Investmentshas the answers.You'll learn simple ways to get reliable customer value information--ina form you can use. You'll discover how to use it to measure marketingeffectiveness, generate improvements throughout the entire customerrelationship lifecycle, and improve decision-making. Everyone tells youto manage your business around customers. This book gives you the toolsto do it.

Author Biography

Donald R. Lehmann is George E. Warren Professor of Business at the Columbia Business School, Columbia University, New York.

Table of Contents

Acknowledgments	xv
Customers Are Assets	1	(12)
Importance of Customers	2	(1)
The Gap Between Beliefs and Actions	3	(3)
Bridging the Gap	6	(4)
The Plan of the Book	10	(1)
Summary	11	(2)
The Value of a Customer	13	(28)
Customer Lifetime Value	15	(2)
Creating Metrics that Matter	17	(7)
Data Requirements	18	(1)
Complexity	19	(1)
Illusion of Precision	20	(4)
A Simple Approach	24	(3)
How Reasonable are Our Assumptions?	27	(6)
Margin	27	(2)
Retention Rate	29	(2)
Time Horizon	31	(2)
Modifications and Extensions	33	(6)
Margin Growth	33	(4)
Improving Retention	37	(1)
Finite Time Horizon	38	(1)
Summary	39	(2)
Customer-Based Strategy	41	(38)
Traditional Marketing Strategy	42	(1)
Value to the Firm Vs. Value to the Customer	43	(4)
The Two Sides of Customer Value	44	(3)
Key Marketing Metrics	47	(4)
Traditional Metrics	47	(1)
Customer Metrics	48	(3)
Traditional Vs. Customer-Based Strategy: A Case Study	51	(2)
Drivers of Customer Profitability	53	(24)
Customer Acquisition	53	(11)
Customer Margin	64	(6)
Customer Retention	70	(7)
Summary	77	(2)
Customer-Based Valuation	79	(30)
Customer Acquisition Via Firm Acquisition	81	(9)
AT&T's Acquisition of TCI and MediaOne	84	(5)
Acquisitions in the European Utility Industry	89	(1)
From Customer Value to Firm Value	90	(8)
The Rise and Fall of Internet Gurus	92	(1)
The Eyeballs Have It---or Do They?	92	(1)
Customer-Based Valuation	93	(5)
Drivers of Customer and Firm Value	98	(4)
Impact of Marketing Actions on Firm Value	99	(2)
Impact of Marketing and Financial Instruments on Firm Value	101	(1)
Valuing Netflix	102	(4)
Summary	106	(3)
Customer-Based Planning	109	(28)
Step 1: Customer Objectives	110	(5)
The Case of Evergreen Trust	111	(3)
The Case of Lipitor	114	(1)
Step 2: Understanding Sources of Value to Customers	115	(6)
Economic Value	117	(2)
Functional Value	119	(1)
Psychological Value	120	(1)
Step 3: Designing Marketing Programs	121	(10)
Marketing Mix---the 4 Ps	121	(4)
Managing Customer Touchpoints	125	(1)
Loyalty Programs	126	(3)
Database Marketing	129	(2)
Step 4: Customer Metrics for Assessing Effectiveness of Programs	131	(3)
Choosing and Using the Right Metrics	133	(1)
Summary	134	(3)
Customer-Based Organization	137	(30)
Organizational Structure	137	(5)
The Case of L.L. Bean	140	(2)
Incentive Systems	142	(1)
Employee Selection and Training	143	(1)
Customer-Based Costing	144	(5)
New Metrics	149	(1)
Who Needs to Do What: Tasks for Various Parties	150	(6)
Harrah's Entertainment, Inc.: A Winning Hand in a Dicey Business	156	(4)
Common Mistakes in Implementing a Customer-Based Strategy	160	(3)
Concluding Remarks	163	(4)
Appendix A: Estimating Customer Lifetime Value (CLV)	167	(12)
Appendix B: Impact of Retention on Share and Profits	179	(4)
Appendix C: Value of Customer Base	183	(4)
Endnotes	187	(12)
Index	199