Research Article Analysis: The Impact of Customer Relationship Characteristics

on Profitable Lifetime Duration

Research Article Analysis: The Impact of Customer Relationship Characteristics

on Profitable Lifetime Duration

Introduction

The research paper analysis the paper “the impact of customer relationship characteristics on profitable lifetime duration” written by Reinartz and Kumar. This paper provides a brief description of the authors, purpose of the study, methodology used, significance of the study, the implications for future research, as well as offers personal analysis and viewpoint regarding the article and findings.

Discussion

This research was conducted by Werner J. Reinartz and V. Kumar. Werner J. Reinartz is an assistant professor at INSEAD. His expertise and interest is on subjects of retailing, service and customer management, and he was recognized with many academic awards. V. Kumar is the director of the ING Aetna Centre for University of Connecticut, School of Business, Department of Marketing and Financial Services. He has been recognized for his work and contribution in research and teaching, such as international marketing, scanner data analysis and modeling global diffusion.

Since, customer oriented organizations has recognized that the field of customer relationship is dynamic and is changing rapidly. This study examined the impact of characteristics of customer relationship on profitable lifetime duration. The aims of this study were empirically evaluate profitable duration of a lifetime for non-contractual relationship between the firm and customer; suggest and assessment factors that possibly has an effect on the customer's profitable duration of a lifetime; as well as develop managerial implications to build and manage a profitable longer lifetime (Reinartz & Kumar, 2003).

The conceptual framework used in this research focused on constructing profitable lifetime duration of customers. Reinartz and Kumar study was quantitative in nature. They used cohort data sets of three years on a daily basis. The data sets were extracted from U.S. general merchandise catalog retailer to make an empirical estimation. The sample size for Cohort one was about 3692 family units, for Cohort two was about 4323 family units and for Cohort three was about 2491 family units. Hypothesis has been developed to discuss the exact nature of impact of customer relationship characteristics on profitable lifetime duration. The hypothesized factors employed in this study include customer and exchange characteristics of heterogeneity. Moreover, four-step process was employed to measure the profitable customer lifetime duration: Expected contribution margin's NPV (net present value) was calculated, decision regarding the termination of relationship was taken by comparing ...