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IN TWO-SIDED MARKETS SUCH AS EXCHANGES, AN INTERMEDIARY BRINGS TOGETHER TWO DISTINCT CUSTOMER POPULATIONS, E.G., BUYERS AND SELLERS. THESE CUSTOMER POPULATIONS INTERACT VIA A PLATFORM PROVIDED BY THE INTERMEDIARY, AND TYPICALLY NETWORK EFFECTS ARE OBSERVABLE IN THESE MARKETS; IF THE NUMBER OF BUYERS IS HIGH, MORE SELLERS ARE ATTRACTED TO THE PLATFORM, AND VICE VERSA. IN SUCH MARKETS IT IS DIFFICULT TO MEASURE THE ECONOMIC SUCCESS OF IT INVESTMENTS. THIS ARTICLE PROPOSES A SOLUTION.
UNDER LAISSEZ-FAIRE REGULATION, REGULATORS CHOOSE NOT TO INTERFERE BECAUSE THEY SEEK TO STIMULATE INNOVATION AND PROTECT ENTERPRISES FROM THE COSTS IMPOSED BY REGULATORY COMPLIANCE. YET, EMPIRICAL EVIDENCE REGARDING THE ABILITY OF LAISSEZ-FAIRE REGULATION TO ENSURE CONSUMER PROTECTION IS LACKING. THIS ARTICLE TESTS EMPIRICALLY WHETHER THE CURRENT LAISSEZ-FAIRE REGULATION OF PRICE ADVERTISING CLAIMS ON THE MOST POPULAR REWARD-BASED CROWDFUNDING PLATFORM, KICKSTARTER, IS SUFFICIENT TO PROTECT CONSUMERS.
IN THE PAST YEARS THE CUSTOMER FEEDBACK METRIC RECOMMENDATION INTENTION HAS GAINED IMPORTANCE, ESPECIALLY DUE TO THE WIDESPREAD CONCEPT NET PROMOTER SCORE (NPS). THE NPS CONCEPT IMPLIES A POSITIVE, NON-LINEAR RELATIONSHIP BETWEEN RECOMMENDATION INTENTION AND CUSTOMER VALUE. THIS ARTICLE INVESTIGATES THE RELATIONSHIP BETWEEN RECOMMENDATION INTENTION OF INDIVIDUAL CUSTOMERS AND THEIR VALUE FOR THE FIRM. THE RESULTS SHOW THAT RECOMMENDATION INTENTION SIGNIFICANTLY INCREASES CONTRIBUTION MARGIN BUT NEITHER RETENTION NOR CUSTOMER VALUE. THE METRIC SATISFACTION HAS A SIGNIFICANT, POSITIVE IMPACT ON CUSTOMER VALUE AND CAN THUS BE USED AS A LEADING INDICATOR. THEREFORE, THE RESULTS DO NOT CONFIRM THE SUPERIORITY OF THE NPS CONCEPT FOR CUSTOMER MANAGEMENT.
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.
THE PRICE-TO-EARNINGS (P/E) RATIO IS ONE OF THE MOST IMPORTANT METRICS FOR VALUING FIRMS. UNFORTUNATELY, INTERPRETATIONS OF HIGH-GROWTH FIRMS’ P/E RATIOS CAN BE CHALLENGING, BECAUSE THEY FREQUENTLY EXHIBIT EITHER EXTREMELY HIGH OR NEGATIVE VALUES. WE SHOW THAT THE USE OF CUSTOMER METRICS ALLOWS FOR BETTER INTERPRETING THESE P/E RATIOS, THAT IMPROVEMENTS IN CUSTOMER METRICS HAVE NON-INTUITIVE AND SURPRISING EFFECTS ON THE P/E RATIO, AND THAT OUR NEW MODEL BETTER PREDICTS FUTURE P/E RATIOS THAN EXISTING MODELS.
DESPITE AMPLE EVIDENCE THAT CUSTOMERS EXHIBIT HIGHER DISCOUNT RATES THAN FIRMS, IT IS NOT CLEAR HOW DIFFERENCES IN DISCOUNT RATES AFFECT OPTIMAL PRICES, PROFITS, AND WELFARE OF COMPLEMENTARY PRODUCTS (WHICH COULD BE GOODS OR SERVICES). WE SHOW FOR COMPLEMENTARY PROUCTS THAT HIGHER DISCOUNT RATES OF CUSTOMERS DO NOT INCREASE PROFIT OR CONSUMER SURPLUS. FIRMS, INCLUDING BANKS, WOULD BE ADVISED TO SEEK TO REDUCE EXCESSIVE DISCOUNT RATES AMONG CONSUMERS.
UNDERSTANDING THE COMPETITIVE ENVIRONMENT FOR DIGITAL CONSUMER ATTENTION IS CRUCIAL FOR BANKS’ STRATEGIC ACTIONS. THEREFORE, BANKS NEED TO DETERMINE THE MARKET THEY COMPETE FOR, THEIR SUCCESS ON THIS MARKET, AND WHO THEY COMPETE WITH FOR CONSUMER ATTENTION. USING ORGANIC SEARCH ENGINE DATA, WE PROPOSE A NEW APPROACH TO (I) DEFINE THE DIGITAL MARKET, (II) IDENTIFY THE PLAYERS IN THE MARKET, (III) ESTIMATE THE DISTRIBUTION OF DIGITAL CONSUMER ATTENTION ACROSS BANKS, AND (IV) UNCOVER THE COMPETITIVE MARKET STRUCTURE FOR THE ONLINE RETAIL BANKING MARKET IN GERMANY.
STUDIES HAVE FOCUSED ON INNOVATIONS IN VARIOUS CONTEXTS BUT LARGELY EXCLUDED FINANCIAL INNOVATIONS, DESPITE THEIR NOTABLE IMPORTANCE. THIS STUDY ANALYZES THE TYPES OF FINANCIAL INNOVATIONS BY MAJOR BANKS AND THEIR PAYOFFS. THE RESULTS INDICATE THAT SECURITY AND CREDIT INSTRUMENTS CONSTITUTE THE MOST COMMON FINANCIAL INNOVATIONS. THE AVERAGE RETURNS TO A FINANCIAL INNOVATION ARE $146 MILLION. IN ADDITION, RADICALNESS AND FINANCIAL RISKINESS INCREASE THE RETURNS, WHEREAS COMPLEXITY DECREASES THEM.