How Much Should You Invest in Each Customer Relationship? A Competitive Strategic Approach

Musalem, Andrés; Joshi, Yogesh V.
May 2009
Marketing Science;May/Jun2009, Vol. 28 Issue 3, p555
Academic Journal
We analyze firms' decisions to invest in customer relationship management (CRM) initiatives such as acquisition and retention in a competitive context, a topic largely ignored in past CRM research. We characterize each customer by her intrinsic preference towards each firm, the contribution margin she generates for each firm, and her responsiveness to each firm's retention and acquisition efforts. We show that a firm should invest most heavily in retaining those customers that exhibit moderate responsiveness to its CRM efforts. Further, a firm should most aggressively seek to attract those customers that exhibit moderate responsiveness to their provider's CRM efforts and those that are moderately profitable for their current provider. Investing more in customers that are more responsive does not always lead to higher firm profits, because stronger competition for such customers tends to erode the effects of higher CRM efforts of an individual firm. When firms develop a customer relationship over time to generate higher contribution margin or customer responsiveness, we show that such developments may not always be desirable, because sometimes these future benefits may lead to more intense competition and hence lower profits for both firms.


Related Articles

  • The Influence of Customer Orientation on Customer Relationship in Telecom Services. Junaid-ul-haq; Ijaz, Awais; Mehmood, Saqib // Information Management & Business Review;Oct2011, Vol. 3 Issue 4, p222 

    In this study, an effort has been made to disclose the influence of customer orientation on customer retention. It has also revealed that customer orientation influences on customer satisfaction and customer trust and their ultimate effect on customer Retention. Primary data was collected...

  • Effects of Product Properties on Consumer Preferences and Behaviours: A Study of the Automobile Market in Turkey. Tümer Kabadayı, Ebru; Koçak Alan, Alev; Egemen Özkan, Barış // International Journal of Management;Mar2013 Part 2, Vol. 30 Issue 1 Part 2, p349 

    In this research we used Conjoint Analysis to investigate the factors which affect a consumer’s decision to buy a car. For our research, we used an internet-based poll which was embedded in the server side software and then implemented Conjoint Analysis to evaluate joint effect of...

  • "Uh-oh, Where Is Our Brand Headed?" Exploring the Role of Risk in Brand Change. Sjödin, Henrik // Advances in Consumer Research;2007, Vol. 34, p49 

    A conference paper on consumer responses to brand change is presented, with special focus on brand enthusiasts. It discusses risk perceptions and consumer response to brand change, and explores implications of risk perception recognition and its relationship to the management of brand meaning....

  • A Study on the Impact of Other Customers' Behavior in Hotel on Customer Perceived Service Quality. LI Dongjuan // Tourism Tribune / Lvyou Xuekan;2014, Vol. 29 Issue 4, p48 

    Previous research on customer perceived service quality considers that the object of customer perceived service quality is the service provided by hotel service personnel. However, customer evaluation of the quality of service is not limited to staff service. The customer has an overall concept...

  • Impact of Negative Events on Brand Relationship in Restaurant Services: Experimental Study from the Perspective of Hierarchy of Customers' Interests. ZHANG Meng; XU Xing'an; FU Xiaorong // Tourism Tribune / Lvyou Xuekan;2014, Vol. 29 Issue 4, p69 

    Recently, the negative events of well-known restaurant brands have occurred frequently in the tourism industry, which undoubtedly does harm to restaurant service brands. The effects of negative events on brand relationship ( BR) has aroused widespread concern. However, previous studies have...

  • Can Automated Group Recommender Systems Help Consumers Make Better Choices? Hennig-Thurau, Thorsten; Marchand, André; Marx, Paul // Journal of Marketing;Sep2012, Vol. 76 Issue 5, p89 

    Because hedonic products consist predominantly of experience attributes, often with many available alternatives, choosing the "right" one is a demanding task for consumers. Decision making becomes even more difficult when a group, instead of an individual consumer, will consume the product, as...

  • Still Using Banks The Old, Old Way. Dolliver, Mark // MediaWeek;4/6/2009, Vol. 19 Issue 14, special section p15 

    The article examines a 2008 public opinion poll by Gallup on consumer banking practices. Over half of those polled said they still visited their branch bank at least once a month, more than said they used an automated teller on that schedule. Only about 25 percent said they had done banking...

  • Service Quality and Customer Choice of Mobile Telecommunication Service Providers in Ghana. Agyapong, Ahmed; Kobina, Francis Nkrumah // International Research Journal of Finance & Economics;10/15/2012, Issue 100, p139 

    The competition for customers among telecommunication firms in Ghana is increasingly becoming fierce. This fierce competition raises growing concern among firms of the significance of delivering and managing service quality, which leads to customer satisfaction in the telecommunication industry....

  • ANTECEDENTS AND EFFECT OF COMMITMENT ON THE IMPULSE BUYING BY INTERNET. Ltifi, MOEZ // Journal of Internet Banking & Commerce;Apr2013, Vol. 18 Issue 1, p1 

    The impulse buying is an important phenomenon in consumer behavior and distribution in the context classic and virtual. The growth of services based on communication and information technology (CIT), especially the Internet has changed the way businesses and consumers interact. This article aims...


Read the Article


Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics