Predicting Customer Potential Value: an application in the insurance industry

For effective Customer Relationship Management (CRM), it is essential to have information on the potential value of customers. Based on the interplay between potential value and realized value, managers can devise customer specific strategies. In this article we introduce a model for predicting the potential value of a current customer. Furthermore, we discuss and apply different modeling strategies for predicting this potential value.marketing models;customer potential;customer relationship management;insurance industry

Predicting Customer Potential Value: an application in the insurance industry

For effective Customer Relationship Management (CRM), it is essential to have information on the potential value of customers. Based on the interplay between potential value and realized value, managers can devise customer specific strategies. In this article we introduce a model for predicting the potential value of a current customer. Furthermore, we discuss and apply d

Estimated Parameters Do Not Get the "Wrong Sign" Due To Collinearity Across Included Variables

Estimation results in linear regression models are sometimes in contrast with what was expected on the basis of a certain set of hypotheses or theory, in the sense that one or more parameters have the "wrong sign". One could be inclined to think that this is due to collinearity across explanatory variables, suggesting one should leave out one or more of the collinear variables. In this note we show that this is not a valid approach. Additionally, we show that "wrong signs" can occur because of correlations between included and omitted variables, so that "wrong signs" may occur if the model is not correctly specified. That is, if we find 'wrong signs" we should start questioning our model choice, not the data.parameter estimation;collinearity;misspecification

The Shape of Utility Functions and Organizational Behavior

Based on measurements with 332 owner-managers, the global shape of the utility function (i.e., S-shaped versus concave or convex over the total range of outcomes) appears to discriminate organizational behavior. Whereas the degree of risk aversion, based on the local shape of the utility function, may be important in explaining owner-manager's trading behavior, the global shape of the utility function appears to drive more structural organizational behavior.utility theory;prospect theory;risk aversion;organizational behavior

Firm Size and Export Intensity

This paper presents a unifying theory, explaining the different relationships between firm size and export intensity that have been found in previous studies. We propose that transaction costs economies and different types of resources induce a moderating effect on the firm size and export intensity relationship. Data on international businesses in the Netherlands are used to test the theoretical framework empirically, and support is found for different industries.International business strategy;export intensity;firms size;transaction costs

Changing Perceptions and Changing Behavior in Customer Relationships

We formulate a theoretical model in which we postulate that if a customers' behavior is perceived as not optimal, customers will adjust this behavior based on their current satisfaction and payment equity. Furthermore, customers will also include new experiences. In our empirical study we particularly investigate customer referrals and the amount of services purchased. Our results show positive effects of current satisfaction and payment equity on referrals, while also changes in satisfaction and payment equity affect customer referrals. With respect to the amount of services purchased, our estimation results reveal a positive significant effect of only changes in satisfaction.satisfaction;customer relationships;dynamic modeling;preference updating

Further Thoughts on CRM

Skepticism and disappointment have replaced the initialenthusiasm about CRM. The disappointing results ofCRM-projects are often related to difficulties thatmanagers encounter in embedding CRM in their strategyand organization structure. In this article we presenta classification scheme on how CRM can be strategicallyembedded in organizations using the value disciplinesof Treacy and Wiersema. We use the findings from threecase studies to illustrate our classification. Based onthese case studies and interviews with managers wedistinguish between strategic and tactical CRM, andderive important issues that managers should considerbefore successfully implementing CRM.customer relationship management;marketing strategy;marketing performance

Modeling Consideration Sets and Brand Choice Using Artificial Neural Networks

The concept of consideration sets makes brand choice a two-step process. House-holds first construct a consideration set which not necessarily includes all available brands and conditional on this set they make a final choice. In this paper we put forward a parametric econometric model for this two-step process, where we take into account that consideration sets usually are not observed. It turns out that our model is an artificial neural network, where the consideration set corresponds with the hidden layer. We discuss representation, parameter estimation and inference.We illustrate our model for the choice between six detergent brands and show that the model improves upon a one-step multinomial logit model, in terms of fit and out-of-sample forecasting.brand choice;consideration set;artificial neural network

The Shape of Utility Functions and Organizational Behavior

Based on measurements with 332 owner-managers, the global shape of the utility function (i.e., S-shaped versus concave or convex over the total range of outcomes) appears to discriminate organizational behavior. Whereas the degree of risk aversion, based on the local shape of the utility function, may be important in explaining owner-manager's trading behavior, the global shape of the utility function appears to drive more structural organizational behavior