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Institute
Telecommunications companies traditionally offer several tariffs from which their customers can choose the tariff that best suits their preferences. Yet, customers sometimes make choices that are not optimal for them because they do not minimize their bill for a certain usage amount. We show in this paper that companies should be very concerned about choices in which customers pick tariffs that are too small for them because they lead to a significant increase in customers churn. In contrast, this is not the case if customers choose tariffs that are too big for them. The reason is that in particular flat-rates provide customers with the additional benefit that they guarantee a constant bill amount that consumption can be enjoyed more freely because all costs are already accounted for.
FINANCIAL SERVICE PROVIDERS FACE SERIOUS PROBLEMS IF MANY OF THEIR CUSTOMERS LEAVE QUICKLY BECAUSE SUCH CUSTOMERS HAVE LITTLE LONG-TERM VALUE. STILL, CURRENT REPORTING PRIMARILY FOCUSES ON CURRENT PROFITABILITY THAT REPRESENTS THE SHORT-TERM VALUE OF THE CUSTOMERS. THE LONG-TERM VALUE TYPICALLY RECEIVES LITTLE ATTENTION. CUSTOMER EQUITY REPORTING PRESENTS A MEANS TO FOCUS ON THE LONG-TERM VALUE OF THE COMPANY'S CUSTOMERS. IT AVOIDS THE RISK THAT SHORT-TERM PROFITS ARE INCREASED AT THE EXPENSE OF LONG-TERM VALUE CREATION AND ITS CENTRAL METRIC, CUSTOMER EQUITY, SERVES AS AN EARLY WARNING INDICATOR FOR RISK MANAGEMENT SYSTEMS THAT FOCUS ON CUSTOMER LOSS.
Customer equity reporting
(2014)
WHARTON SCHOOL OF BUSINESS AT UNIVERSITY OF PHILADELPHIA HAS JUSTLAUNCHED AN 8-WEEK ONLINE PROGRAM “STRATEGIC VALUE OF CUSTOMER RELATIONSHIPS – ONLINE” TAUGHT BY MARKETING PROFESSOR AND AUTHOR PETER FADER. HE INVITED PROFESSOR SKIERA, DIRECTOR OF THE E-FINANCE LAB, TO PHILADELPHIA TO LEARN ABOUT HIS THOUGHTS ON “CUSTOMER EQUITY REPORTING”. THIS ARTICLE SUMMARIZES SOME OF PROFESSOR FADER’S QUESTIONS AND PROFESSOR SKIERA’S REPLIES.