Reports

The Past, Present, and Future of Customer Management

Elliot Shin Oblander, Sunil Gupta, Carl F. Mela, Russell S. Winer, and Donald R. Lehmann , 2019, 19-133

For over a century, businesses have created, managed, and utilized data on customers to improve customer relations and optimize customer profitability. For decades, researchers have provided frameworks for conceptualizing the value of firm-customer relationships, developed models for understanding customer behavior and response to marketing, established links between customer behavior and firm performance, and proposed policies for optimizing customer management activities.

Here, the authors offer a high-level overview of customer management from industry and academic perspectives.

They trace the origin of customer management to the late 1800s, when U.S. mail order businesses began to collect and maintain customer lists. In the first half of the 20th century, companies continued to refine the rules by which they identified prospective customers and targeted existing customers. In the second half of the 20th century, the commercial adoption of computers and databases enabled more sophisticated record-keeping and statistical analyses to facilitate customer management activities. The 1990s saw significant conceptual and methodological development by both industry consultants and marketing academics.

They discuss how customer management has expanded over the past two decades. In particular, researchers have emphasized customer lifetime value (CLV) and related customer profitability metrics as key measures of company performance. Much work has been devoted to better computing CLV; better modeling its key drivers, namely acquisition and retention; and explicitly linking CLV to firm value. With the rise of online social networks and two-sided marketplaces, researchers have also emphasized looking beyond CLV to quantify the value that customers bring to a company indirectly, such as through social referral.

Promising directions for future research

While researchers have shown that customer value drives firm value, the ways in which marketing actions can influence firm value is still an under-researched question. Additionally, globalization, new technologies, and the increasing automation of consumer decision making have challenged classical customer management paradigms. Customer management researchers and practitioners must leverage novel data sources and modeling tools to keep pace with these changes and create new and profitable ways to provide value to customers. 

Elliot Shin Oblander is a Ph.D. candidate in marketing, Columbia University. Sunil Gupta is Edward W. Carter Professor of Business Administration, Harvard University. Carl F. Mela is T. Austin Finch Foundation Professor of Marketing, Duke University, and MSI Executive Director 2017-19. Russell S. Winer is William Joyce Professor of Marketing, New York University, and MSI Executive Director, 2007-09. Donald R. Lehmann is George E. Warren Professor of Business, Columbia University, and MSI Executive Director, 1993-95 and 2001-03. 

 

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