Measuring the Financial Impact of Word of Mouth Behavior in Estimating Customer Lifetime Value in Banks

Abstract

Word of Mouth behavior is a sophisticated phenomenon in marketing literature, which has attracted the attentions of both researchers and practitioners; over the last decade it has been argued that word of mouth can contribute significantly to a firm's success in a Varity of ways. In this article the authors offer an Integrated approach to understand word of mouth behavior in the context of social network analysis; we discuss the factors influence word of mouth activity from Sender's and receiver's perspective, in addition we empirically investigate the affect of word of mouth behavior and incorporate it in estimating customer lifetime value to avoid underestimating the lifetime value of customer with low direct financial contribution but with high positive word of mouth behavior, or overestimating the lifetime value of customers with high direct financial contribution but with low positive word of mouth behavior. Managerial implications and customer value matrix are discussed.