[go: up one dir, main page]
More Web Proxy on the site http://driver.im/
IDEAS home Printed from https://ideas.repec.org/a/inm/ormksc/v25y2006i6p718-739.html
   My bibliography  Save this article

Customer Metrics and Their Impact on Financial Performance

Author

Listed:
  • Sunil Gupta

    (Harvard Business School, 179 Morgan, Soldiers Field, Boston, Massachusetts 02163)

  • Valarie Zeithaml

    (Kenan-Flagler School of Business, University of North Carolina at Chapel Hill, 4207 McColl, North Carolina 27599)

Abstract
The need to understand the relationships among customer metrics and profitability has never been more critical. These relationships are pivotal to tracking and justifying firms' marketing expenditures, which have come under increasing pressure. The objective of this paper is to integrate existing knowledge and research about the impact of customer metrics on firms' financial performance. We investigate both unobservable or perceptual customer metrics (e.g., customer satisfaction) and observable or behavioral metrics (e.g., customer retention and lifetime value). We begin with an overview of unobservable and observable metrics, showing how they have been measured and modeled in research. We next offer nine empirical generalizations about the linkages between perceptual and behavioral metrics and their impact on financial performance. We conclude the paper with future research challenges.

Suggested Citation

  • Sunil Gupta & Valarie Zeithaml, 2006. "Customer Metrics and Their Impact on Financial Performance," Marketing Science, INFORMS, vol. 25(6), pages 718-739, 11-12.
    • Handle: RePEc:inm:ormksc:v:25:y:2006:i:6:p:718-739
    DOI: 10.1287/mksc.1060.0221
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mksc.1060.0221
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mksc.1060.0221?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Selnes, Fred & Gonhaug, Kjell, 2000. "Effects of Supplier Reliability and Benevolence in Business Marketing," Journal of Business Research, Elsevier, vol. 49(3), pages 259-271, September.
    2. Peter M. Guadagni & John D. C. Little, 1983. "A Logit Model of Brand Choice Calibrated on Scanner Data," Marketing Science, INFORMS, vol. 2(3), pages 203-238.
    3. Dholakia, Utpal M & Morwitz, Vicki G, 2002. "The Scope and Persistence of Mere-Measurement Effects: Evidence from a Field Study of Customer Satisfaction Measurement," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 29(2), pages 159-167, September.
    4. Ittner, CD & Larcker, DF, 1998. "Are nonfinancial measures leading indicators of financial performance? An analysis of customer satisfaction," Journal of Accounting Research, Wiley Blackwell, vol. 36, pages 1-35.
    5. Praveen R. Nayyar, 1995. "Stock market reactions to customer service changes," Strategic Management Journal, Wiley Blackwell, vol. 16(1), pages 39-53.
    6. Ruth N. Bolton, 1998. "A Dynamic Model of the Duration of the Customer's Relationship with a Continuous Service Provider: The Role of Satisfaction," Marketing Science, INFORMS, vol. 17(1), pages 45-65.
    7. Duncan I. Simester & Peng Sun & John N. Tsitsiklis, 2006. "Dynamic Catalog Mailing Policies," Management Science, INFORMS, vol. 52(5), pages 683-696, May.
    8. Raghuram Iyengar & Asim Ansari & Sunil Gupta, 2003. "Leveraging Information Across Categories," Quantitative Marketing and Economics (QME), Springer, vol. 1(4), pages 425-465, December.
    9. Eugene W. Anderson & Mary W. Sullivan, 1993. "The Antecedents and Consequences of Customer Satisfaction for Firms," Marketing Science, INFORMS, vol. 12(2), pages 125-143.
    10. Vikas Mittal & Eugene W. Anderson & Akin Sayrak & Pandu Tadikamalla, 2005. "Dual Emphasis and the Long-Term Financial Impact of Customer Satisfaction," Marketing Science, INFORMS, vol. 24(4), pages 544-555, August.
    11. Gabriel R. Bitran & Susana V. Mondschein, 1996. "Mailing Decisions in the Catalog Sales Industry," Management Science, INFORMS, vol. 42(9), pages 1364-1381, September.
    12. Morwitz, Vicki G & Johnson, Eric J & Schmittlein, David C, 1993. "Does Measuring Intent Change Behavior?," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 20(1), pages 46-61, June.
    13. David C. Schmittlein & Donald G. Morrison & Richard Colombo, 1987. "Counting Your Customers: Who-Are They and What Will They Do Next?," Management Science, INFORMS, vol. 33(1), pages 1-24, January.
    14. Bernhardt, Kenneth L. & Donthu, Naveen & Kennett, Pamela A., 2000. "A Longitudinal Analysis of Satisfaction and Profitability," Journal of Business Research, Elsevier, vol. 47(2), pages 161-171, February.
    15. Donkers, A.C.D. & Verhoef, P.C. & de Jong, M.G., 2003. "Predicting Customer Lifetime Value in Multi-Service Industries," ERIM Report Series Research in Management ERS-2003-038-MKT, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    16. F. Thomas Juster, 1966. "Consumer Buying Intentions and Purchase Probability: An Experiment in Survey Design," NBER Books, National Bureau of Economic Research, Inc, number just66-2.
    17. Eugene W. Anderson & Claes Fornell & Roland T. Rust, 1997. "Customer Satisfaction, Productivity, and Profitability: Differences Between Goods and Services," Marketing Science, INFORMS, vol. 16(2), pages 129-145.
    18. Wagner A. Kamakura & Bruce S. Kossar & Michel Wedel, 2004. "Identifying Innovators for the Cross-Selling of New Products," Management Science, INFORMS, vol. 50(8), pages 1120-1133, August.
    19. Eric T. Anderson & Duncan I. Simester, 2004. "Long-Run Effects of Promotion Depth on New Versus Established Customers: Three Field Studies," Marketing Science, INFORMS, vol. 23(1), pages 4-20, February.
    20. Rajiv Lal & David Bell, 2003. "The Impact of Frequent Shopper Programs in Grocery Retailing," Quantitative Marketing and Economics (QME), Springer, vol. 1(2), pages 179-202, June.
    21. Füsun Gönül & Meng Ze Shi, 1998. "Optimal Mailing of Catalogs: A New Methodology Using Estimable Structural Dynamic Programming Models," Management Science, INFORMS, vol. 44(9), pages 1249-1262, September.
    22. Michael Lewis, 2005. "Research Note: A Dynamic Programming Approach to Customer Relationship Pricing," Management Science, INFORMS, vol. 51(6), pages 986-994, June.
    23. Manohar U. Kalwani & Alvin J. Silk, 1982. "On the Reliability and Predictive Validity of Purchase Intention Measures," Marketing Science, INFORMS, vol. 1(3), pages 243-286.
    24. Oliver, Richard L, 1993. "Cognitive, Affective, and Attribute BAses of the Satisfaction Response," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 20(3), pages 418-430, December.
    25. David Godes & Dina Mayzlin, 2004. "Using Online Conversations to Study Word-of-Mouth Communication," Marketing Science, INFORMS, vol. 23(4), pages 545-560, June.
    26. Kim, Keysuk & Frazier, Gary L., 1997. "Measurement of distributor commitment in industrial channels of distribution," Journal of Business Research, Elsevier, vol. 40(2), pages 139-154, October.
    27. Steven M. Shugan, 2005. "Brand Loyalty Programs: Are They Shams?," Marketing Science, INFORMS, vol. 24(2), pages 185-193.
    28. David C. Schmittlein & Robert A. Peterson, 1994. "Customer Base Analysis: An Industrial Purchase Process Application," Marketing Science, INFORMS, vol. 13(1), pages 41-67.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Roland T. Rust & Tuck Siong Chung, 2006. "Marketing Models of Service and Relationships," Marketing Science, INFORMS, vol. 25(6), pages 560-580, 11-12.
    2. Andrés Musalem & Yogesh V. Joshi, 2009. "—How Much Should You Invest in Each Customer Relationship? A Competitive Strategic Approach," Marketing Science, INFORMS, vol. 28(3), pages 555-565, 05-06.
    3. Blattberg, Robert C. & Malthouse, Edward C. & Neslin, Scott A., 2009. "Customer Lifetime Value: Empirical Generalizations and Some Conceptual Questions," Journal of Interactive Marketing, Elsevier, vol. 23(2), pages 157-168.
    4. G. Tomas M. Hult & Forrest V. Morgeson III & Udit Sharma & Claes Fornell, 2022. "Customer satisfaction and international business: A multidisciplinary review and avenues for research," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 53(8), pages 1695-1733, October.
    5. Wagner Kamakura & Carl Mela & Asim Ansari & Anand Bodapati & Pete Fader & Raghuram Iyengar & Prasad Naik & Scott Neslin & Baohong Sun & Peter Verhoef & Michel Wedel & Ron Wilcox, 2005. "Choice Models and Customer Relationship Management," Marketing Letters, Springer, vol. 16(3), pages 279-291, December.
    6. Mercedes Esteban-Bravo & Jose M. Vidal-Sanz & Gökhan Yildirim, 2014. "Valuing Customer Portfolios with Endogenous Mass and Direct Marketing Interventions Using a Stochastic Dynamic Programming Decomposition," Marketing Science, INFORMS, vol. 33(5), pages 621-640, September.
    7. Füsun F. Gönül & Frenkel Ter Hofstede, 2006. "How to Compute Optimal Catalog Mailing Decisions," Marketing Science, INFORMS, vol. 25(1), pages 65-74, 01-02.
    8. Verhoef, Peter C. & Venkatesan, Rajkumar & McAlister, Leigh & Malthouse, Edward C. & Krafft, Manfred & Ganesan, Shankar, 2010. "CRM in Data-Rich Multichannel Retailing Environments: A Review and Future Research Directions," Journal of Interactive Marketing, Elsevier, vol. 24(2), pages 121-137.
    9. Roland T. Rust & Peter C. Verhoef, 2005. "Optimizing the Marketing Interventions Mix in Intermediate-Term CRM," Marketing Science, INFORMS, vol. 24(3), pages 477-489, December.
    10. Roland T. Rust & Ming-Hui Huang, 2014. "The Service Revolution and the Transformation of Marketing Science," Marketing Science, INFORMS, vol. 33(2), pages 206-221, March.
    11. Bolton, R.N. & Lemo, K.N. & Verhoef, P.C., 2002. "The Theoretical Underpinnings of Customer Asset Management," ERIM Report Series Research in Management ERS-2002-80-MKT, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    12. Gupta, Sunil, 2009. "Customer-Based Valuation," Journal of Interactive Marketing, Elsevier, vol. 23(2), pages 169-178.
    13. Philipp Afèche & Mojtaba Araghi & Opher Baron, 2017. "Customer Acquisition, Retention, and Service Access Quality: Optimal Advertising, Capacity Level, and Capacity Allocation," Manufacturing & Service Operations Management, INFORMS, vol. 19(4), pages 674-691, October.
    14. Steven M. Shugan, 2006. "Editorial: Fifty Years of," Marketing Science, INFORMS, vol. 25(6), pages 551-555, 11-12.
    15. Jolley, Bill & Mizerski, Richard & Olaru, Doina, 2006. "How habit and satisfaction affects player retention for online gambling," Journal of Business Research, Elsevier, vol. 59(6), pages 770-777, June.
    16. Giuliano Tirenni & Abderrahim Labbi & Cesar Berrospi & André Elisseeff & Timir Bhose & Kari Pauro & Seppo Pöyhönen, 2007. "—Customer Equity and Lifetime Management (CELM) Finnair Case Study," Marketing Science, INFORMS, vol. 26(4), pages 553-565, 07-08.
    17. Ryoo, Juyoun & Jeon, Jin Q. & Lee, Cheolwoo, 2016. "Do marketing activities enhance firm value? Evidence from M&A transactions," European Management Journal, Elsevier, vol. 34(3), pages 243-257.
    18. Teck-Hua Ho & Young-Hoon Park & Yong-Pin Zhou, 2006. "Incorporating Satisfaction into Customer Value Analysis: Optimal Investment in Lifetime Value," Marketing Science, INFORMS, vol. 25(3), pages 260-277, 05-06.
    19. repec:ipg:wpaper:2014-416 is not listed on IDEAS
    20. Ming-Hui Huang & Roland T. Rust, 2017. "Technology-driven service strategy," Journal of the Academy of Marketing Science, Springer, vol. 45(6), pages 906-924, November.
    21. Filipe, Sandra & Marques, Susana Henriques & Salgueiro, Maria de Fátima, 2017. "Customers' relationship with their grocery store: Direct and moderating effects from store format and loyalty programs," Journal of Retailing and Consumer Services, Elsevier, vol. 37(C), pages 78-88.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormksc:v:25:y:2006:i:6:p:718-739. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.