| This research addresses two important challenges facing the developing field of customer equity management. The first challenge pertains to optimal allocation of limited resources across customer acquisition and retention activities when these activities are carried out in the same marketing contact channel. Beginning with the simple observation that acquisition and retention rates tend to be negatively related, a new construct -- channel orientation -- is conceptualized and introduced as a decision variable in a series of customer equity optimization models. While extant models are capable of determining the optimal allocation across acquisition and retention activities, the models we introduce significantly extend this capability by also recognizing managerial flexibility in orienting marketing activities towards acquisition or retention, thereby allowing for optimization of the contact channel itself. The second challenge addressed in this research pertains to optimal selection, orientation, and resourcing of channels in the multichannel environment. We meet this challenge by developing a multichannel model that accommodates potential channel interactions and quantifies their effects on customer equity.;Consistent with our theoretical conceptualization of channel orientation as a critical managerial decision variable in customer equity management, we use the decision calculus approach for model parameterization. This approach engages and leverages the manager in the model development and parameterization processes. We also provide validation for the customer equity models by (1) establishing the theoretical and empirical foundations of each aspect of the model formulations, (2) providing multiple applications of the models to both prototypical data and multi-segment, multichannel data provided by a large US nonprofit organization, (3) conducting sensitivity analyses with respect to environmental uncertainty (i.e., changes in true values of parameters) and managerial uncertainty (i.e., inaccuracy of managerial inputs), and (4) presenting strategic comparisons with extant models. We conclude by identifying the contributions and limitations of the research, as well as outlining promising avenues for future research. |
