Choice Models and Customer Relationship Management

Abstract

Customer relationship management (CRM) typically involves tracking individual customer behavior over time, and using this knowledge to configure solutions precisely tailored to the customers’ and vendors’ needs. In the context of choice, this implies designing longitudinal models of choice over the breadth of the firm’s products and using them prescriptively to increase the revenues from customers over their lifecycle. Several factors have recently contributed to the rise in the use of CRM in the marketplace:

• A shift in focus in many organizations, towards increasing the share of requirements among their current customers rather than fighting for new customers.

• An explosion in data acquired about customers, through the integration of internal databases and acquisition of external syndicated data.

• Computing power is increasing exponentially.

• Software and tools are being developed to exploit these data and computers, bringing the analytical tools to the decision maker, rather than restricting their access to analysts. In spite of this growth in marketing practice, CRM research in academia remains nascent. This paper provides a framework for CRM research and describes recent advances as well as key research opportunities.

Keywords: customer relationship management, direct marketing