Expanding the Role of Marketing: From Customer Equity to Market Capitalization

Abstract

Can a marketer drive the stock price of the firm? Yes, it should be possible. Toward this endeavor, the authors develop a framework to link customer equity (CE) (as determined by the customer lifetime value metric) to market capitalization (MC) (as determined by the stock price of the firm). The authors test the framework in an empirical field experiment with two Fortune 1000 firms in the business-to-business and business-to-consumer contexts, respectively. The findings show that (1) a CE-based framework can reliably predict the MC of the firm and (2) marketing strategies directed at increasing the CE not only increase the stock price of the firm but also beat market expectations. Furthermore, the results indicate that the relationship between CE and MC is moderated by risk factors in the form of volatility and vulnerability of cash flows from customers. By accounting for these factors, the authors improve the association between CE and MC. The findings broaden the scope and role of marketing while reinforcing the importance of the marketer to any organization.

Good, better, engaged? The effect of company-initiated customer engagement behavior on shareholder value

“…Yet, given sufficient evidence that strategies aiming to influence customer loyalty and customer lifetime value increase performance (e.g., Kumar and Shah 2009;Kumar and Reinartz 2016), it may very well be that these positive performance effects are due to increased transactional customer engagement behavior, rather than non-transactional customer engagement behavior. This extended conceptualization of customer engagement does not allow for disentangling the performance consequences of the measures stimulating transactions from those stimulating non-transactional customer behavior.…”

Successful customer value management: Key lessons and emerging trends

“…In addition, Telenor used customer life-cycle management to provide more targeted marketing messages, which increased average revenue per user by 5%-10%. However, perhaps the most convincing and insightful evidence is provided in published implementations of CVM by V. Kumar and his colleagues (Kumar & Shah, 2009;Kumar, Venkatesan, Bohling, & Beckmann, 2008;Kumar, 2008). Kumar has reported extensively on CVM implementations at a B2B firm that provides high-tech services and a B2C apparel retailer.…”

Managing Complaints to Improve Customer Profitability

“…While prior research has widely investigated the implications of complaint handling in terms of customer attitudes, perceptions and intentions towards the relationship (Gelbrich 2010;Estelami 2003;Tax, Brown, and Chandrashekaran 1998;Goodwin and Ross 1992), studies investigating the financial consequences of complaint handling are limited. This lack of research is particularly remarkable, given the significant amount of resources devoted to complaint-handling activities and the increasing pressure that marketing practitioners face to justify spending valuable firm resources and demonstrate the financial contribution of the marketing function to the bottom line (Kumar and Shah 2009;Rust, Lemon, and Zeithaml 2004). In this research, we help bridge this important gap by providing a framework for understanding the financial implications of complaint handling and by building a direct link between different organizational responses to complaints and customer profitability.…”