A Study On Customer Equity Analysis And Management

For many firms, customers are their most valuable assets. This particular view has triggered important research streams such as direct marketing, service quality, relationship marketing, and database marketing. The customer equity literature appears as an effort to integrate,complement and innovate from previous research streams. Based on the extensive review of customer equity researches appeared in recent years, the objective of this dissertation is to study the the approaches for customer lifetime value (CLV) and customer equity (CE) evaluation, optimization and management, the main contents of the dissertation are as follows:(1) Base on the Pareto/NBD model, I make an empirical study to analyze and predict customer repeat buying behavior under a non-contractual setting. I also propose an MCMC approach for solving the Pareto/NBD model, which makes it feasible to weaken any one of the assumptions the Pareto/NBD based. Further, I propose three extensions to the Pareto/NBD model and derive corresponding formulas. In order to compare the predicting ability of the models, the models are applied into a real direct marketing dataset.(2) I make an extentive review of various research articles that have appeared in the marketing literature dealing with CLV or CE evaluation. It concludes the basic process to measure CLV, and identifies three basic types of valuing models. I also discuss the approach to calculate CLV based on Pareto/NBD, the approach to score and select customers according to their distribution of CLV based on utility theory, and the approach to measure the potential customer equity of the company, and make a case study to show how to apply these approaches in the real world.(3) The dissertation reviews various approaches on CLV optimization. After analyzed the shortcomings facing on current researches, I suggest using the partially observable Markov decision process (POMDP) to describe the dynamic development of customer relationship, and propose a customer retention-defection two states model and a customer relationship multi-states model for CLV optimization. In both models, CLV is regarded as an endogen variable, by maximizing the CLV, the models can get the optimized policies for customer relationship management.(4) I analyze the relationship between customer value and customer equity from both the company and customer prospective. I suggest that the company not only has to drive their customer equity by improving their customer value, brand and relationship with the customers, but also do their best to gain the customer economic value, knowledge value and network value in the meantime. As a conclusion, I propose a customer equity management framework made of both customer value creating and customer value gainning. Further, I also propose a customer equity management process, mainly including four steps: customer value analyses, marketing resource allocation, customer value drivers'improvement and customer value reaping.