Managing Customer Relationship Activities:



Managing Customer Relationship Activities:

How Multiple Communication Tools Influence Enrollment And Usage Decisions Of Services

February 2004

Working Paper No: RBS-MKT-2004-37

This work cannot be cited without the authors' permission

Patrali Chatterjee and Suman Basuroy

Abstract

Firms are increasingly focusing on improving customer profitability which necessitates balancing acquisition and relationship maintenance costs and revenues generated by each customer. Empirical studies of customer acquisition generally divide a population of prospects into purchasers and non-purchasers, and analyze the reasons for purchase or non-purchase at a point in time. In reality, a purchase decision is not a one-off static decision rather it involves a dynamic process in which a prospective customer progresses through a hierarchy of buyer-readiness stages starting from awareness, interest, offer evaluation, and finally purchase. As firms seek ways to manage their new customer acquisition process, understanding the dynamics of provider and customer interaction during each of the stages of the acquisition process becomes a key priority. In this research, a dynamic model for a service enrollment process is suggested in which prospective consumers move from awareness to purchase (or enrollment as a member). The primary contribution of this research is an understanding of how information presented by the provider using multiple communication vehicles changes consumer’s perception of expected future usage of the service and the value of the offer during the enrollment process. Further we examine the effects of exposure to information on usage and repurchase intention at the end of the first year of membership. The characteristics of the consumer, the service offer and the role of communication tools in conveying the value of the offer are considered important in explaining enrollment behavior and usage of the service after enrollment. The results have managerial implications for the potential impact of communication tools on short-term and long-run (upto at least one year) success of customer acquisition campaigns.

We applied our framework to the customer acquisition process for a membership shopping services firm. Firms selling high-value membership shopping services use a wide variety of advertising media and personalized sales communication tools to target, attract and induce consumers to enroll in their programs. The enrollment process typically involves several steps as companies recognize the benefits of using a multiple-vehicle, multiple stage integrated marketing communication campaign to acquire customers. Since service consumption is highly personal and difficult to comprehend until directly experienced, information provided by the firm using various marketing communication tools (telemarketers, salespeople, direct mail, videos and service demonstration or trial) play an important role in creating expectations of the value of the service.

Analyses of a sample of 1311 households confirmed that a simple classification of consumers as members and non-members was inadequate to understand the enrollment process. Rather a multistage enrollment process in which consumers moved from awareness of the offer to enrollment to usage and re-enrollment intention at the end of the first year was more appropriate. The sets of factors that significantly influenced decisions to stay in the enrollment process, enroll and then to use it and re-enroll or discontinue their membership at the end of the first year were different. The sets of significant factors influencing enrollment decision also differed depending on whether enrollment was defined as a binary variable (enroll vs. drop-out) or as a truncated continuous variable with dropouts having a zero value and enrolled members having different positive values.

................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download