Customer value models in the energy market. Understanding the role of acquisition and retention effects

PhD ceremony: Ms. S.M.J. Lhoëst-Snoeck, 12.45 uur, Academiegebouw, Broerstraat 5, Groningen

Dissertation: Customer value models in the energy market. Understanding the role of acquisition and retention effects

Promotor(s): prof. P.C. Verhoef

Faculty: Economics and Business

In the recently liberalized Dutch energy market, firms invest a lot of money in the acquisition and retention of customers. Acquiring customers can facilitate short run growth, whereas retention can lead to improved customer lifetime value (CLV). A thorough study of customer relations and customer valuation provides firms with valuable insights.

In this thesis we present three studies on these topics. Chapter 2 demonstrates that a CLV model of customers should at least include retention, revenues, costs and credit risk. Through simulations of different marketing actions we show how a combination of value change and the success probability of an action lead to the determination of the most suitable action for each customer. Chapter 3 looks at the effect of acquisition campaigns on existing customers’ relational intentions and customer value. We find that customers who are aware of acquisition campaigns, despite having a higher intention to stay, do not have a significantly different CLV than unaware customers. The inclusion of attractiveness of the offer as an additional explanatory variable, results in a positive effect of attractiveness on both retention intention and CLV. Chapter 4 looks at the interplay between acquisition and retention and examines how retention and acquisition profitability are influenced by marketing communication. Based on our findings we conclude that the return on above-the-line investments is negative, i.e. spending an additional €1 million will not result in a return of this size. Firms may use the findings of this thesis to improve decision making with respect to customer value, customer acquisition and customer retention.