(Prof. Dr. Andreas Hackethal, Prof. Dr. Bernd Skiera, Prof. Dr. Oliver Hinz)

Research in layer 3 proceeds from the basic premise that the online environment will further gain in importance for financial service providers and that customer management in such an online environment poses substantial challenges. More and more banking and insurances managers need to deal with technologies that are related to Web 2.0, such as widgets, iPhones, microblogging, wikis, social networks and avatars. At the same time, financial markets value some of the rather young providers of this technology (e.g., Google, Yahoo!) at values that substantially surpass the value of many financial service providers.

The aim of our work is to analyze these technological trends carefully and to evaluate how technology and data intelligence can create value for financial service providers and their customers. We posit that customers should be treated as assets, which requires us to evaluate their current and future values. The measurement of the value of a customer via a customer lifetime analysis and the value of the customer base via the determination of customer equity are particularly useful because they can also be linked to the financial value of a financial service provider. The value of technological trends for financial service providers is best evaluated by linking them to customer metrics, in particular customer profitability and loyalty measures such as customer lifetime, and analyzing how they can enhance the decision support and investor coaching by financial service providers. As good decisions of investors provide particularly strong incentives to stay with a financial service provider, we put substantial emphasis on analyzing factors that influence the quality of those decisions.

Figure 1: Vision of Layer 3 "Customer Management in E-Finance"

Module 1 focuses on investments in customers, in particular those that are related to the Internet and (online) financial advice as well as decision support provided to the consumers.

Module 2 focuses on customer decision making and in particular on individual characteristics that influence customer preferences, beliefs and decisions.

Module 3 focuses on the five key customer metrics for financial service institutions. Multiplying the number of customers with the profit per customer leads to the current (short-term value of) profitability. The consideration of customer lifetimes allows for measuring the long-term values of customers. The two key investment measures are acquisition and retention (including customer development) costs per customer. We develop models to appropriately measure those five customer metrics and analyze the interdependencies among those key metrics. We then identify the effects of investments in customers and customers' decision on those customer metrics.

Module 4 analyzes how to link customer metrics to customer value metrics, such as customer lifetime value or customer equity.

Module 5 links customer value to shareholder value as the key success metric of financial markets. In contrast to most popular discounted cash flow models, we use the five key customer metrics as the building blocks of our shareholder value model.

 

Finished projects (PDF):

Former Cluster 3: 2003, 2004, 2005, 2006, 2007, 2008, 2009

Former Cluster 4: 2003, 2004, 2005, 2006, 2007, 2008, 2009