 A framework for variance analysis of customer equity based on a Markov chain modelKohsuke Matsuoka Journal of Business Research, 2021, vol. 129, issue C, 57-69 Abstract: This study proposes a framework for variance analysis of customer equity (CE) based on a Markov chain model called the Leslie matrix, developed in mathematical biology. Because customer lifetime value represents the net present value of customer derived cashflow, CE can be characterized as a forward-looking measure. Numerous studies have addressed the use of CE for planning. However, few studies have utilized CE for control. When CE is used as a basis for control, variance analysis is indispensable. In the proposed framework, CE variance is divided into three parts: customer payoff variance, customer lifecycle variance, and customer state variance. Thereafter, customer lifecycle variance is further broken down into customer acquisition, retention, and expansion. The aforementioned framework was applied to membership customers of a Japanese resort hotel chain. The results revealed that customer retention was a major cause of CE variance, whereas customer acquisition and expansion had a smaller impact. Keywords: Variance analysis; Customer equity; Backward-looking measure; Forward-looking measure; Markov chain model (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:129:y:2021:i:c:p:57-69 DOI: 10.1016/j.jbusres.2021.02.039 Access Statistics for this article Journal of Business Research is currently edited by A. G. Woodside More articles in Journal of Business Research from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.