Professor Shameek Sinha discusses his research on a new customer portfolio management model that relates a company’s marketing to its long-term survival. In a video abstract published by FNEGE – the French Foundation for Management Education, Shameek Sinha, co-author of the study, shows how long-term viable models can improve companies’ survival through balancing companies’ customer mix.
Shameek Sinha is a Professor of Marketing at EMLV Business School, specializing in Empirical and Analytical Methods and Strategic Decision Making. He teaches courses on Marketing Strategy and Applied Management Sciences. His research focuses on improving consumer and firm decision-making, with a particular emphasis on optimal targeting algorithms by firms and customer response. This video describes current research findings in a paper published by the Journal of the Academy of Marketing Sciences.
Client portfolio management for long-term survival
Usually, customer-relationship models (CRM) look at transaction data basis for a particular company and try to predict the value of a customer over its lifetime. However, these kinds of models are solely dependent on a particular company’s transaction database, and, hence, can’t predict the kind of customer types which get attracted to a particular brand.
In our project, we are able to show that customer portfolio management solves this problem. So, what is customer portfolio management? Usually, customer transaction databases try to predict the number of customers driven by a company’s marketing efforts.
What we do, is try to predict what kind of customer types are attracted by these marketing interventions. To begin with, we work on this model using a transaction database of automobile manufacturers across different companies in the US.
We show that different automobile manufacturers should use different interventions in order to attract their target customer types. For example, we know that, in the US, automobile consumers are getting older over time.
To survive in the long term, companies need to retain older customers and attract new younger customers, a challenge for most companies. For example, companies like Honda or Ford were able to attract younger customers, but through different modalities.
Whereas Honda uses its positioning to target younger customers, Ford focused on more new-age marketing communications through social media and online marketing efforts. Some companies like General Motors have consistently lost younger customers since their customer mix was seriously biased toward all the customers and that has affected their positioning.
A company like Toyota, on the other hand, has been doing both targeting younger customers through their younger brands, and targeting their older customers through their older brands, like Lexus. The idea was not to provide an algorithm by which automotive customers can optimally decide when to target younger customers or when to target older customers. At the same time, we cannot say whether automobile companies should switch from older to younger customers.
Our customer portfolio management model provides a solution where we balance between the younger and the older customers and that’s how these companies will be able to survive in the long run.