Dead or Alive? A Formal Decision Model for Deciding on Customer Recovery Investments

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Kleindienst, Dominikus ; Waldmann, Daniela:
Dead or Alive? A Formal Decision Model for Deciding on Customer Recovery Investments.
In: Proceedings of the 13th International Conference on Wirtschaftsinformatik (WI). - St. Gallen, Switzerland , 2017

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Abstract

As digitization makes customer migration easier and more attractive, managing customer recovery becomes increasingly important for companies. Thereby, the challenge for organizations is to avoid two error types that can occur with customer relation recovery. First, mistakenly investing in customer relations that are active anyway (“alive” customer relations), or second, mistakenly not investing in migrated customer relations (“dead” customer relations). Consequently, in order to support organizations with such recovery investment decisions, considering the probability if a customer relation is “alive” or “dead” is necessary. Based on this probability, an economically reasonable decision has to be made whether to invest in an individual customer relation’s recovery or not. However, existing literature often neglects the above mentioned probability. Accordingly, based on a comprehensive discussion of related work, we propose a formal decision model on whether to invest in a customer relation’s recovery considering the probability that the customer relation is still “alive” or “dead”. To demonstrate the decision model’s applicability, an illustrative case with a sample calculation is presented.