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Valuing Customer Portfolios under Risk-Return-Aspects : A Model-based Approach and its Application in the Financial Services Industry

Title data

Buhl, Hans Ulrich ; Heinrich, Bernd:
Valuing Customer Portfolios under Risk-Return-Aspects : A Model-based Approach and its Application in the Financial Services Industry.
In: Academy of Marketing Science Review. Vol. 12 (2008) Issue 5 . - pp. 1-32.
ISSN 1526-1794

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Abstract in another language

For identifying and selecting the most profitable customers in terms of the shareholder value, the Customer Lifetime Value (CLV) gained broad attention in marketing literature. However, in this paper, the authors argue that the CLV does not take into account the risk associated with customer relationships and consequently does not conform to the principle of shareholder value. Therefore, a quantitative model based on financial portfolio selection theory is presented that considers the expected CLV of customer segments as well as their risk. The latter includes the correlation among the segments. It is shown how imperfect correlation among segments may be employed to maximize the value of the customer portfolio. Since portfolio selection theory does not allow for the consideration of fixed costs, it is extended by a heuristic method consisting of two algorithms, referred to as “subtract”- and “add”-approach.

Further data

Item Type: Article in a journal
Refereed: Yes
Keywords: customer profitability; customer portfolio;, customer segment valuation; financial services industry
Institutions of the University: Faculties > Faculty of Law, Business and Economics > Department of Business Administration
Research Institutions
Research Institutions > Affiliated Institutes
Research Institutions > Affiliated Institutes > Fraunhofer Project Group Business and Information Systems Engineering
Research Institutions > Affiliated Institutes > FIM Research Center Finance & Information Management
Faculties
Faculties > Faculty of Law, Business and Economics
Result of work at the UBT: No
DDC Subjects: 000 Computer Science, information, general works > 004 Computer science
300 Social sciences > 330 Economics
Date Deposited: 09 Oct 2018 09:32
Last Modified: 22 Jan 2019 08:19
URI: https://eref.uni-bayreuth.de/id/eprint/45990