Creating Enduring Customer Value

V. Kumar & Werner Reinartz
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Key Takeaways

​​To be successful, firms have to create perceived value for customers via marketing-mix elements. In return, customers generate value for the firms through multiple forms of engagement.

Measuring, managing, and growing customer-generated value is critical for the financial well-being of firms.

Integrating the customer-generated value into real-time marketing decisions results in profitable customer relationships.

This study integrates and synthesizes existing findings in the customer value literature by considering value provided to the customers by firms and value derived by firms from customers. We identify the best practices and highlight future research avenues for creating lasting customer value.




Research

With the understanding that customer value is a dual concept—creating value for the customers and generating value from the customers—firms face the constant challenge of determining the right amount of resources to be spent on customers and products to properly manage the dual sources of value. We explore this knowledge gap, and propose a framework to align these two value sources to generate more insights into the resource allocation challenge. Furthermore, we identify ways of integrating these insights into real-time marketing decisions for building profitable customer relationships.

Method

This is a conceptual article in which we propose an organizing framework to ensure value alignment between customer perceived value and customer generated value. This framework was developed on the basis of an in-depth review of scholarly literature in which we considered the insights generated thus far and the insights that need to be known. When the two value sources are aligned, it leads to the creation of enduring value. Furthermore, the cyclical nature of the framework results in a constant reevaluation and betterment of the firms’ marketing programs and product offerings.


Figure​: Marketing Organization and Firm Performance


Findings

With respect to measuring perceived customer value, we identify measuring overall perceived value, measuring the associated underlying attributes and benefits, and determining the relative weights of the attributes/benefits linked to overall perceived value to be of importance. With respect to measuring customer generated value, we identify customer lifetime value to be most ideal. Furthermore, we observe that firms need to align the two value sources to create net value for the firm.



“Creating Enduring Customer Value,” by V. Kumar & Werner Reinartz



Implications

The findings of this study should be useful to managers in tackling the critical resource allocation challenge. In this regard, the study provides evidence by way of proven strategies and tactics that firms can implement to better manage their resources and improve profitability. This study can also help researchers better understand the body of knowledge in this area. Specifically, the future research directions identified here are expected to broaden the understanding and push the boundaries of knowledge and scholarship. 


Questions for the Classroom

  • With privacy being a major concern, and customers prepared to pay to preserve privacy, can you think of ways how a bank can use this information to create value to and from their customers?

  • In the insurance industry, what drivers of customer profitability would you expect to find?

  • Should we invest in building brand value or customer value, or both?


Article Citation

V. Kumar and Werner Reinartz (2016), “Creating Enduring Customer Value,” Journal of Marketing, 80 (6), 36-68.
doi: http://dx.doi.org/10.1509/jm.15.0414 


V. Kumar (VK) is Regents Professor, Richard and Susan Lenny Distinguished Chair, Professor in Marketing, Executive Director of the Center for Excellence in Brand and Customer Management, and Director of the PhD Program in Marketing, J. Mack Robinson College of Business, Georgia State University; V. Kumar is also honored as the Chang Jiang Scholar, Huazhong University of Science and Technology, China; TIAS Fellow, Texas A&M University, College Station, TX; and ISB Senior Fellow, Indian School of Business. (e-mail: vk@gsu.edu).


Werner Reinartz is Professor of Marketing and Director of the Center of Research in Retailing, University of Cologne (e-mail: werner.reinartz@uni-koeln.de).



The AMA / MSI Special Issue of Journal of Marketing

Volume 80, Issue 6, November 2016

V. Kumar, Kevin Lane Keller, & Katherine N. Lemon

Christine Moorman and George S. Day

V. Kumar and Werner Reinartz

Katherine N. Lemon and Peter C. Verhoef

Michel Wedel and P.K. Kannan

Rajeev Batra and Kevin Lane Keller

Cait Lamberton and Andrew T. Stephen

Dominique M. Hanssens and Koen H. Pauwels​


Author Bio:

 
V. Kumar & Werner Reinartz
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