Beyond the Target Customer: Social Effects of CRM Campaigns

67 Pages Posted: 25 Sep 2015 Last revised: 18 Apr 2016

See all articles by Eva Ascarza

Eva Ascarza

Harvard Business School

Peter Ebbes

HEC Paris - Marketing

Oded Netzer

Columbia Business School - Marketing

Matt Danielson

Globys

Date Written: April 16, 2016

Abstract

Customer Relationship Management (CRM) campaigns have traditionally focused on maximizing the profitability of the targeted customers. We demonstrate that, in business settings that are characterized by network externalities, a CRM campaign that is aimed at changing the behavior of specific customers propagates through the social network, thereby also affecting the behavior of non-targeted customers. Using a randomized field experiment involving nearly 6,000 customers of a mobile telecommunications provider, we find that the social connections of targeted customers increase their consumption and are less likely to churn due to a campaign that was neither targeted at them nor offered them any direct incentives. We estimate a social multiplier of 1.28. That is, the effect of the campaign on first-degree connections of targeted customers is 28% of the effect of the campaign on the targeted customers. By further leveraging the randomized experimental design we show that, consistent with a network externality account, the increase in activity among the non-targeted but connected customers is driven by the increase in communication between the targeted customers and their connections, making the local network of the non-targeted customers more valuable. Our findings suggest that in targeting CRM marketing campaigns, firms should consider not only the profitability of the targeted customer, but also the potential spillover of the campaign to non-targeted but connected customers.

Keywords: Customer Relationship Management (CRM), Field experiments, Targeting, Churn, Retention, Mobile

Suggested Citation

Ascarza, Eva and Ebbes, Peter and Netzer, Oded and Danielson, Matt, Beyond the Target Customer: Social Effects of CRM Campaigns (April 16, 2016). HEC Paris Research Paper No. MKG-2015-1111; Columbia Business School Research Paper No. 15-82. Available at SSRN: https://ssrn.com/abstract=2664794 or http://dx.doi.org/10.2139/ssrn.2664794

Eva Ascarza (Contact Author)

Harvard Business School ( email )

Soldiers Field
Boston, MA 02163
United States

HOME PAGE: http://evaascarza.com

Peter Ebbes

HEC Paris - Marketing ( email )

Paris
France

Oded Netzer

Columbia Business School - Marketing ( email )

New York, NY 10027
United States

Matt Danielson

Globys ( email )

United States

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