Customer Relationship Management: A Databased Approach
Table of Contents
Data SetsCLV Dataset The data set contains the purchase history of 100 customers for certain hardware, software, and services products during the period 2001 - 2004. The data is organized in such a way that the date of purchase, product purchased, product category, and purchase amounts are given for each customer for each purchase occasion. For instance, customer 1 purchased Desktop PC (hardware category) for $500 during February 2001 (indicated by Feb-01). In addition to the transaction history, the data set also includes information such as number and type of marketing touches, and the contribution margin for each product. This dataset is given in the excel file "CLV_data.xls". Projection of Contribution Margin In order to project contribution margin in a given year, we need to build the model for contribution margin. This is done by doing a linear regression with 'Contribution margin in 2004' as dependent variable and variables like 'tenure till December 2003', 'average contribution margin per year for the period 2001-2003', and 'the average purchase frequency'. This model using the available data showed the following relationship as significant. PredCM2004 = -17 + 0.76 * AvgCM2003 + 4*Tenure0103 + 23*Avg_Purchase_Freq, where
PredCM2004 = Predicted Contribution Margin in 2004 Applying this model, the predicted contribution margin in 2005, 2006, and 2007 can be computed. The values of predicted contribution margins are obtained by simply entering the values for Average CM and Tenure for appropriate time periods in the worksheet "Enter values" in the excel file named "CLV_Cal.xls". Case Studies
CLV CalculatorThe CLV calculator calculates the lifetime value of a customer . You have 2 options to use the CLV Calculator
Presentation Slides
About the AuthorsV. Kumar Dr. V. Kumar (VK) is the Richard and Susan Lenny Distinguished Chair Professor of Marketing, and Executive Director, Center for Excellence in Brand and Customer Management, Robinson College of Business, Georgia State University. He was recently ranked amongst the top 5 marketing scholars worldwide based on his research productivity. Dr. Kumar has been recognized with many teaching and research excellence awards and has published numerous articles in premier journals of marketing such as the Harvard Business Review, Journal of Marketing, Journal of Marketing Research, Marketing Science, and Operations Research. He has won several awards for his research publications in scholarly journals including the Donald R. Lehmann Award twice for the best paper published in the Journal of Marketing/Journal of Marketing Research in a 2-year period and the MSI/Paul H Root Award twice for the Journal of Marketing article contributing to the best practice of marketing.He has co-authored over 100 articles, book chapters and books (titled Managing Customers for Profit, Marketing Research, International Marketing Research, Essentials of Marketing Research, and Customer Relationship Management: A Databased Approach). Dr. Kumar is currently on the editorial review board of several scholarly journals and has lectured on marketing-related topics in various universities and organizations in America, Europe, Australia and Asia. His current research focuses on retailing, international diffusion models, customer relationship management, customer lifetime value analysis, sales and market share forecasting, international marketing research and strategy, marketing resource allocation, sales promotion and interaction orientation. Dr. Kumar is also a consultant to many Fortune 500 firms where he has helped large corporations design suitable marketing strategies to identify the most profitable customers. His work with IBM and P&G has been recognized by INFORMS as award winning entries in the 2006 and 2007 Practice Prize Competition, respectively. Recently, Dr Kumar was conferred with two Lifetime Awards from the American Marketing Association Special Interest Groups for his contributions to the field of Marketing Strategy, and Interorganizational Marketing. Dr Kumar received his Ph.D. from the University of Texas at Austin. Werner J. Reinartz His research interests focuses on the dynamics of the consumer-firm interaction. This interest bridges the areas of customer relationship management, retailing, database marketing, and E-commerce. In particular, Professor Reinartz is interested in empirically modeling marketing phenomena in these areas. His research on measuring and managing the lifetime value of customers has received major academic awards:
His research appeared in academic journals such as the Journal of Marketing, Journal of Marketing Research, Journal of Consumer Research, the Journal of Service Research, in Multivariate Behavioral Research, the Journal of Retailing, and in Marketing Letters. In addition his work appeared in the managerial business press such as for example Harvard Business Review, California Management Review, and European Business Forum. Professor Reinartz has taught on the graduate, Ph.D., and executive level. His teaching portfolio comprises customer relationship management, database marketing, marketing strategy and marketing research. In addition, Professor Reinartz is the progam director for a number of INSEAD clients such as Henkel, Haniel, METRO, and Xerox. He has authored award-winning teaching material, for example the case study, Independer.com, which was the winner in the European Management Foundation (efmd) E-commerce case writing competition 2000. Also, he has co-authored (together with V. Kumar) a textbook on CRM that has been published by John Wiley in 2006. He has consulted with a variety of international corporations on CRM and Direct Response Marketing, such as for example Cora Group (France), Cincom (Europe) Spiegel (USA), IBM (USA), and Comdirect Bank (Germany). Professor Reinartz holds a Ph.D. in Marketing from the University of Houston, USA, an MBA from Henley Management College (UK), and a Dipl.-Ing. in Agricultural Economics from Munich University of Technology (Germany). CRM ApplicationsDo you know how CRM is applied in industry? The links shown below are practical examples of how CRM is being applied across different industries. Please click on the links below for specific examples within that industry Erratum
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