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Dynamic customer interdependence

  • Original Empirical Research
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Abstract

In managing today’s customer base, firms need to consider not only interactions with customers but also interactions among customers. Much like the interactions between customers and firms, the interactions among customers are dynamic in nature and thus create a dynamic structure of preference interdependencies between customers. This research proposes a Bayesian spatio-temporal model that simultaneously captures the effects of the interactions between customers and the firm, the static interdependence due to customers’ inherent similarities, and the dynamic interdependence arising from observed interactions among customers. The model is applied to a rich dataset of university alumni donation and event attendance spanning 27 years. The results yield significant static and dynamic interdependence among the group as well as synergistic effects between static and dynamic structures. This research demonstrates that not accounting for such interdependence, when such interdependence exists, would provide a biased view of firms' marketing effectiveness, yield inferior prediction of customer behaviors in group settings, and miss opportunities to develop group marketing strategies.

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Notes

  1. For robustness check of sampling sensitivity, I selected 10 random batches of 500 alumni from the 658 and re-estimated the full model for each batch. Demographic information among the batches is similar and the substantive results hold.

  2. To assess alternative approach to segment customers, I have also estimated 2, 3, 4, and 5-segment latent class models. The model fit and prediction of those models are all inferior to that of the continuous heterogeneity hierarchical Bayesian approach.

  3. In the interest of brevity, this comparison table has eliminated the “Static Model” and the “Contemporaneous Spatial Lag Model” as they have previously been shown to have inferior performance.

  4. I do find that alumni who hold membership to the alumni association (and especially those whose spouses are also alumni) tend of be more active, which offers face validity as they have stronger revealed preference toward the group.

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Authors and Affiliations

  1. College of Business, Colorado State University, Fort Collins, CO, 80523, USA

    Jonathan Z. Zhang

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  1. Jonathan Z. Zhang
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Correspondence to Jonathan Z. Zhang.

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Rajkumar Venkatesan served as Area Editor for this article.

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Zhang, J.Z. Dynamic customer interdependence. J. of the Acad. Mark. Sci. 47, 723–746 (2019). https://doi.org/10.1007/s11747-019-00627-z

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