title: Modern Regain Management. Profitability, Product Returns, and Customer Acquisition in an Omni-Channel Environment
title: Modernes Kundenrückgewinnungsmanagement. Profitabilität, Produktretouren und Kundengewinnung in einer Omni-Channel Umgebung
Creators: name: Rinkens, Dominik
Publisher: name: Friedrich-Alexander-Universität Erlangen-Nürnberg (FAU)
Year: 0
Subjects: subject: DDC Classification::3 Sozialwissenschaften :: 33 Wirtschaft :: 330 Wirtschaft
subject: DDC Classification::6 Technik, Medizin, angewandte Wissenschaften :: 65 Management, Öffentlichkeitsarbeit :: 658 Allgemeines Management

description: Summary This overview represents a summary of three individual studies conducted within a non-contractual setting in the fashion industry. The main connecting research topic across all pa-pers incorporates profitability (including product returns) and the research goal was to shed light on important business areas of modern consumer goods retailers, e.g., the profitability of new vs. regained customers or the profitability of owned vs. paid digital channels. The summary of paper 1 is as follows: Background: Research from contractual settings predominantly finds that regained custom-ers are more profitable than new customers due to recurring payments over longer periods of time. However, in non-contractual consumer goods industries like the fashion industry cus-tomers can leave at any time and return items they do not like. Thus, excluding product re-turns may omit important parts of the realistic picture of a customer’s actual profitability. Research Objective: The main research objective was to find out whether including product returns in the profitability analysis can challenge the well accepted finding of regained cus-tomers being more profitable than new customers. Setting: The dataset comes from a fashion retailer from the medium price segment and mainly targets middle-aged women in a large European country. It uses a 10-year dataset for over 125,000 customers incorporating product returns. Methods/Design: We use a Seemingly Unrelated Regression Tobit Model for revealing the differences in purchase and return values between customer groups. We run a random effects regression to display the differences in return values between online and offline channels and to illustrate a positive learning effect or bad habit effect. Central Results: In non-contractual settings, regained customers tend to be worth less, not more, than new customers. The return value of customers is higher in online channels than in offline channels. In offline channels there are positive learning effects in return value; in online channels we observe bad habit effects of the return value with increasing numbers of orders. Due to the bad habit effect, regained customers purchase higher amounts before re-turns, but lower amounts after returns in their second compared to their first lifecycle. Practical and Theoretical Implications The commonly accepted finding that regained cus-tomers are more profitable than new customers need not generalize to non-contractual set-tings, thus firms may attribute marketing resources on acquiring new customers. Regained customers tend to be more profitable in their second than in their first lifecycles in their pur-chase value before returns, however, the consideration of product returns reverses this effect. Thus, a failure to account for product returns in non-contractual settings may lead to errone-ous results and to the development of a flawed theory. Lastly, there is a substantial discrep-ancy in the return value of customers between online and offline channels, i.e., the presence of a channel effect. Whereas this result by itself is consistent with the theory, this differentia-tion between channels paves the road for a new phenomenon, the “bad habit effect”. The summary of paper 2 is as follows: Background: Modern retailers can choose between many different channels to acquire cus-tomers. Some channels may be better suited to encourage customers to make their first pur-chase, while other channels may be better suited for establishing long-term relationships. To test which channel is appropriate we analyze customer journeys and their purchase outcome. Research Objective: The main research objective was to analyze the effectiveness of pre-dominantly paid (e.g., display ads) and owned (e.g., internal emails) digital channels on the short- and long-term purchasing behaviors of customers. Setting: The dataset comes from the same fashion retailer as in Paper 1. It contains a total of 907,064 digital customer journeys. Methods/Design: We use a Heckman selection model to evaluate the impact of marketing channels on purchase incidence and purchase outcome. It assumes a probit model for the se-lection stage (purchase decision) and a regression model for the outcome stage (order value and purchase value). Central Results: Predominantly paid (cognitive) and owned (affective) digital channels both lead to customers’ first purchases (except for display ads), but only owned (affective) digital channels positively impact long-term purchase value. Predominantly social channels posi-tively impact the long-term purchase value only if they are owned channels. Customer jour-ney durations greater than 1 h lead to a higher long-term purchase value than shorter custom-er journey durations (less than 1 h). Practical and Theoretical Implications: We advise firms to utilize paid (cognitive) digital channels only for a short-term sales push. This push strategy may be effective for the first purchase decision due to the cognitive visibility effect that these channels have on a custom-er’s information search. Contrary, we explain the finding that only predominantly owned digital channels, lead to a higher long-term purchase value by a higher affective degree; that is, customers generate more positive thoughts and attitudes toward the brand and its products when interacting with the brand. Emotionalizing and involving customers in predominantly owned (affective) digital channels foster and build long-term relationships, leading to a “pull” strategy. Social channels are actively, selectively, and intentionally sought and con-tain less biased information due to social settings and the involvement of others. Thus, higher trust in owned social channels leads customers to a higher long-term purchase value. The summary of paper 3 is as follows: Background: Firms strive to invest in active regain management measures that lead to re-gaining valuable customers within the group of lost customers. However, the crucial question is whether these regaining measures will pay off, i.e., will they influence a customer’s sec-ond lifetime net purchase value positively? Firms would greatly benefit from knowing which customers are valuable in their second lifetime and are thus worth targeting and regaining. Research Objective: The main research objective was to find out if active regain manage-ment measures and a customer´s first lifetime characteristics can indicate second lifetime profitability. Setting: The dataset comes from the same fashion retailer as in Paper 1 and 2 and contains a customer’s full purchasing and return data for over 10 years including 125,000 customers. Methods/Design: A Seemingly Unrelated Regression Tobit Model is used for analyzing the effectiveness of active regain management measures and an OLS regression is used to pre-dict first lifetime characteristics on second lifetime profitability including the moderator age. Central Results: In non-contractual settings, active regain management measures do not change the second lifetime profitability of former lost customers. A customer’s first lifetime net purchase value and age of relationship positively in-fluences second lifetime profitabil-ity, while first lifetime number of orders and return value negatively affects second lifetime profitability. Age plays a significant moderating role in increasing the differences in second life-time net purchase value between younger and older customers with rising first lifetime return value, but decreases with first lifetime age of relationship and number of orders. Practical and Theoretical Implications: Financial resources of inefficient win-back offers should be used for investments in new customer acquisition. The implementation of continu-ous tracking and foreseeing relevant first lifetime characteristics adds to the theoretical re-gain management framework and even reveals opportunities to retain customers before they are lost. The sole focus on youth, reinforce the relevance of elder customers, and call for a deeper understanding of purchasing behavior across age groups. Conclusion The analysis of the profitability of customers and channels already represents a fundamental research topic across the customer literature; however, the presented results extend the scope of profitability analysis and highlights the uniqueness of non-contractual settings in a billion-dollar market like the fashion industry. For instance, we build on current theory by introduc-ing the “bad habit effect,” into marketing literature. For practitioners the presented results not only can directly impact a firm’s financial situation, but they may also help in the devel-opment of future business areas or strategies.