To Pester or Leave Alone: Lifetime Value Maximization through Optimal Communication Timing

The marketing literature has long acknowledged the importance of a customer’s lifetime value in customer relationship management. More recently, researchers have turned their attention to the links between satisfaction and both customer acquisition and retention strategies. In this paper, we are int...

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Main Authors: Dreze, Xavier, Bonfrer, Andre
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Language:English
Published: Institutional Knowledge at Singapore Management University 2003
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Online Access:https://ink.library.smu.edu.sg/lkcsb_research/1915
https://ink.library.smu.edu.sg/context/lkcsb_research/article/2914/viewcontent/2203paper.pdf
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spelling sg-smu-ink.lkcsb_research-29142018-07-09T07:42:10Z To Pester or Leave Alone: Lifetime Value Maximization through Optimal Communication Timing Dreze, Xavier Bonfrer, Andre The marketing literature has long acknowledged the importance of a customer’s lifetime value in customer relationship management. More recently, researchers have turned their attention to the links between satisfaction and both customer acquisition and retention strategies. In this paper, we are interested in understanding the impact of communication frequency on customer retention and ultimately on lifetime value. We develop a theoretical framework for managing a customer database and addressing the tradeoffs between value extraction and customer retention. An empirical application of this framework is conducted for permission-based email marketing in the entertainment industry. This application recognizes the customization ability underlying one-to-one marketing, and yields decision rules for how a firm should interact with individual customers. We find that inter-communication time has a dramatic impact on customer behavior. It affects both attrition and consumer surplus and thus has a critical impact on the value of a customer database. This impact is asymmetric, thus managers are advised to err on the side of longer rather than shorter inter-communication times. We further find that retention raises the value of a customer database in two ways. First, one can only derive revenue from customers who are active. Second, we demonstrate that the larger a firm’s customer base, the lower its per-customer contact costs. These findings are supported by our empirical analysis. 2003-12-01T08:00:00Z text application/pdf https://ink.library.smu.edu.sg/lkcsb_research/1915 https://ink.library.smu.edu.sg/context/lkcsb_research/article/2914/viewcontent/2203paper.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ Research Collection Lee Kong Chian School Of Business eng Institutional Knowledge at Singapore Management University Marketing
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic Marketing
spellingShingle Marketing
Dreze, Xavier
Bonfrer, Andre
To Pester or Leave Alone: Lifetime Value Maximization through Optimal Communication Timing
description The marketing literature has long acknowledged the importance of a customer’s lifetime value in customer relationship management. More recently, researchers have turned their attention to the links between satisfaction and both customer acquisition and retention strategies. In this paper, we are interested in understanding the impact of communication frequency on customer retention and ultimately on lifetime value. We develop a theoretical framework for managing a customer database and addressing the tradeoffs between value extraction and customer retention. An empirical application of this framework is conducted for permission-based email marketing in the entertainment industry. This application recognizes the customization ability underlying one-to-one marketing, and yields decision rules for how a firm should interact with individual customers. We find that inter-communication time has a dramatic impact on customer behavior. It affects both attrition and consumer surplus and thus has a critical impact on the value of a customer database. This impact is asymmetric, thus managers are advised to err on the side of longer rather than shorter inter-communication times. We further find that retention raises the value of a customer database in two ways. First, one can only derive revenue from customers who are active. Second, we demonstrate that the larger a firm’s customer base, the lower its per-customer contact costs. These findings are supported by our empirical analysis.
format text
author Dreze, Xavier
Bonfrer, Andre
author_facet Dreze, Xavier
Bonfrer, Andre
author_sort Dreze, Xavier
title To Pester or Leave Alone: Lifetime Value Maximization through Optimal Communication Timing
title_short To Pester or Leave Alone: Lifetime Value Maximization through Optimal Communication Timing
title_full To Pester or Leave Alone: Lifetime Value Maximization through Optimal Communication Timing
title_fullStr To Pester or Leave Alone: Lifetime Value Maximization through Optimal Communication Timing
title_full_unstemmed To Pester or Leave Alone: Lifetime Value Maximization through Optimal Communication Timing
title_sort to pester or leave alone: lifetime value maximization through optimal communication timing
publisher Institutional Knowledge at Singapore Management University
publishDate 2003
url https://ink.library.smu.edu.sg/lkcsb_research/1915
https://ink.library.smu.edu.sg/context/lkcsb_research/article/2914/viewcontent/2203paper.pdf
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