Article ID: | iaor20107405 |
Volume: | 29 |
Issue: | 5 |
Start Page Number: | 895 |
End Page Number: | 908 |
Publication Date: | Sep 2010 |
Journal: | Marketing Science |
Authors: | Allenby Greg M, Dotson Jeffrey P |
Keywords: | customer relationship management |
The ability to demonstrate the impact of marketing action on firm financial performance is crucial for evaluating, justifying, and optimizing the expenditure of a firm's marketing resources. This presents itself as a formidable task when one considers both the variety and potential influence of marketing activity. We propose a hierarchical Bayesian model of simultaneous supply and demand that allows us to formally study the financial impact of a variety of marketing activities, including those that operate on different timescales. The supply-side model provides insight into how the firm allocates resources across its various subunits. We illustrate our approach in a services context by integrating data from three independent studies conducted by a large national bank. Our model allows customer and employee satisfaction to influence firm profitability by moderating the conditional relationship between the bank's operational inputs and its proclivity to produce revenue.