Investigating the Effective Components on Customer Lifetime Value of Dairy Products in Tehran

Document Type : Research Article-en

Authors

F. Vajdi Hokm Abad

H. Rafiee

A.H. Chizari

S. Yazdani

S.S. Hosseini

Department of Agricultural Economics, Faculty of Agriculture and Natural Resources, University of Tehran, Karaj, Iran

https://doi.org/10.22067/jead.2024.89411.1290

Abstract

In contemporary marketing, maintaining and enhancing customer loyalty toward a company's products or services has become a primary focus. Among the factors influencing customer loyalty is ethical marketing, a field of applied ethics related to the principles governing behavior, advertising, and regulation in marketing. Over the past two decades, ethical consumerism has grown in importance due to increasing social and environmental concerns. This study examines the impact of ethical components on Customer Lifetime Value (CLV) for dairy product consumers in Tehran in 2023. A total of 710 questionnaires were completed, and the GWRFM method was employed to extract the necessary information for calculating CLV. The results revealed a high frequency of clusters with low lifetime value. In the subsequent phase, multinomial logit regression was utilized to analyze the effect of ethical components on CLV, highlighting the significant positive impact of adherence to industry regulations and acceptance of social responsibility. Therefore, it is recommended that stakeholders in the dairy industry assure customers of their compliance with regulations and social responsibility to elevate them to higher-value clusters and foster loyalty. By respecting ethical norms, a substantial portion of consumers of cheese, yogurt, and ayran products may transition toward becoming valuable customers in this sector.

Keywords

Customer lifetime value

Ethical marketing

Ethical consumerism

GWRFM

Subjects

• Marketing and Trade of Agriculture Production

---

©2024 The author(s). This is an open access article distributed under Creative Commons Attribution 4.0 International License (CC BY 4.0).

References

1. Abens, R., & Parcheta, D. (2016). Customer Lifetime Value in the Packaged Goods Industry. In Accountable Marketing(pp. 83-95). Routledge.
2. Adams, R.J. (2002). Retail profitability and sweatshops: a global dilemma. Journal of Retailing and Consumer Services, 9(3), 147-153. https://doi.org/10.1016/S0969-6989(01)00014-5
3. Akhondzadeh-Noughabi, L., Albadvi, A., & Aghdasi, M. (2014). Mining customer dynamics in designing customer segmentation using data mining techniques. Journal of Information Technology Management, 6(1), 1-30. (In Persian).
4. Baeva, D.Y. (2011). Strong brands: how brand strategy and brand communication contribute to build brand equity: the case of navigator (Doctoral dissertation).
5. Bargh, J.A. (1994). The four horsemen of automaticity: Intention, awareness, efficiency, and control as separate issues.
6. Bastos, W., & Levy, S.J. (2012). A history of the concept of branding: practice and theory. Journal of Historical Research in Marketing.
7. Ben-Akiva, M.E., & Lerman, S.R. (1985). Discrete choice analysis: theory and application to travel demand(Vol. 9). MIT press.
8. Bivarani, H., & Azimi, M. (2014). Classification of Sadaret Bank customers based on customer value using decision tree. Productivity Management, 9(33), 116-135. (In Persian)
9. Blocker, C.P., & Flint, D.J. (2007). Customer segments as moving targets: Integrating customer value dynamism into segment instability logic. Industrial Marketing Management, 36(6), 810–822.
10. Buttle, F., & Maklan, S. (2019). Customer relationship management: concepts and technologies. Routledge. https://doi.org/10.4324/9781351016551
11. Crane, A., Matten, D., Glozer, S., & Spence, L.J. (2019). Business ethics: Managing corporate citizenship and sustainability in the age of globalization. Oxford University Press, USA.
12. Chang, C.H. (2011). The influence of corporate environmental ethics on competitive advantage: The mediation role of green innovation. Journal of Business Ethics, 104, 361-370. https://doi.org/1007/s10551-011-0914-x
13. Chang, H.C., & Tsai, H.P. (2011). Group RFM analysis as a novel framework to discover better customer consumption behavior. Expert Systems with Applications, 38(12), 14499-14513. https://doi.org/10.1016/j.eswa.2011.05.034
14. Cooksley, G. (2007). Customer lifetime value models: do they predict actual behaviour?
15. Dickson, P.R., & Ginter, J.L. (1987). Market segmentation, product differentiation, and marketing strategy. Journal of Marketing, 51(2), 1-10.
16. Dunn, J.C. (1974). Well-separated clusters and optimal fuzzy partitions. Journal of Cybernetics, 4(1), 95-104.
17. Estrella-Ramon, A.M., Sanchez-Perez, M., Swinnen, G., & VanHoof, K. (2013). A marketing view of the customer value: Customer lifetime value and customer equity. South African Journal of Business Management, 44(4), 47-64. https://hdl.handle.net/10520/EJC146688
18. Fader, P.S. (2012). Customer centricity: Focus on the right customers for strategic advantage. Wharton Digital Press.
19. Feiz, S., Ghotbabadi, A.R., & Khalifah, Z.B. (2016). Customer Lifetime Value in organizations. Asian Journal of Research in Social Sciences and Humanities, 6(5), 53-58.
20. Ghale, R.D., Karimi, F., & Dinani, H.G. (2021). Identifying and prioritizing dimensions and indicators of customer lifetime value for supplemental health insurance industry. Jundishapur Journal of Health Sciences, 13(4).
21. Glady, N., Baesens, B., & Croux, C. (2009). A modified Pareto/NBD approach for predicting customer lifetime value. Expert Systems with Applications, 36(2), 2062-2071.
22. Gleim, M.R., Smith, J.S., Andrews, D., & Cronin Jr, J.J. (2013). Against the green: A multi-method examination of the barriers to green consumption. Journal of Retailing, 89(1), 44-61. https://doi.org/10.1016/j.jretai.2012.10.001
23. Green, W. (2011), Econometric Analysis, Prentice Hall.
24. Greene, J., & Haidt, J. (2002). How (and where) does moral judgment work?. Trends in Cognitive Sciences, 6(12), 517-523.
25. Gupta, S., Hanssens, D., Hardie, B., Kahn, W., Kumar, V., Lin, N., Ravishanker, N., & Sriram, S. (2006). Modeling customer lifetime value. Journal of Service Research, 9(2), 139-155. https://doi.org/10.1177/1094670506293810
26. Haenlein, M. (2017). How to date your clients in the 21st century: Challenges in managing customer relationships in today’s world. Business Horizons, 60(5), 577-586. https://doi.org/10.1016/j.bushor.2017.06.002
27. Haidt, J. (2007). The new synthesis in moral psychology. Science, 316(5827), 998-1002. https://doi.org/1126/science.1137651
28. He, X., & Li, C. (2016, December). The research and application of customer segmentation on e-commerce websites. In 2016 6^th International Conference on Digital Home (ICDH) (pp. 203-208). IEEE
29. Hausman, J., & McFadden, D. (1984). Specification tests for the multinomial logit model. Econometrica: Journal of the Econometric Society, 1219-1240.
30. Isengildina, O., & Hudson, D. (2001). Factors affecting hedging decisions using evidence from the cotton industry. 22004/ag.econ.18970
31. Jasek, P., Vrana, L., Sperkova, L., Smutny, Z., & Kobulsky, M. (2018). Modeling and application of customer lifetime value in online retail. In Informatics,5(1), 2. MDPI. https://doi.org/3390/informatics5010002
32. Jasek, P., Vrana, L., Sperkova, L., Smutny, Z., & Kobulsky, M. (2019). Comparative analysis of selected probabilistic customer lifetime value models in online shopping. Journal of Business Economics and Management, 20(3), 398-423. https://doi.org/10.3846/jbem.2019.9597
33. Jamali, S., & Navaei, Y.D. (2016). A two-level product recommender for E-commerce sites by using sequential pattern analysis. International Journal of Integrated Engineering, 8(1).
34. Jandaghi, G., Ghoreishi, S.M., & Ahadi Shoar, S.M. (2017). Investigating the dimensions of social capital and its relation to moral marketing (Case: Sepah Bank Branches of Qom Province). Social Capital Management, 4(3), 309-332. (In Persian).
35. Jiang, X., Bai, R., Wallace, S.W., Kendall, G., & Landa-Silva, D. (2021). Soft clustering-based scenario bundling for a progressive hedging heuristic in stochastic service network design. Computers & Operations Research, 128, 105182.
36. Jones, D.B., & Tadajewski, M. (Eds.). (2016). The Routledge companion to marketing history. Routledge.
37. Kasprova, A. (2020). Customer Lifetime Value for Retail Based on Transactional and Loyalty Card Data.
38. Khanleri, A., & Gorohi, B. (2012). Categorizing and estimating the value of bank customers through customer lifetime value and possible patterns. The 4^th International Conference on Marketing of Banking Services, Tehran, Center for International Broadcasting Conferences. (In Persian)
39. Kim, S-Y., Jung, T.-S., Suh, E.-H., & Hwang, H.-S. (2006). Customer segmentation and strategy devel­opment based on customer lifetime value: A case study. Expert Systems with Applications, 31(1), 101-107.
40. Kumar, V., Pozza, I.D., Petersen, J.A., & Denish Shah, D. (2009). Reversing the logic: The path to profit‌ability through relationship marketing. Journal of Interactive Marketing, 23(2), 147-156. https://doi.org/10.1016/j.intmar.2009.02.003
41. Lavorata, L. (2014). Influence of retailers’ commitment to sustainable development on store image, consumer loyalty and consumer boycotts: Proposal for a model using the theory of planned behavior. Journal of Retailing and Consumer Services, 21(6), 1021-1027. https://doi.org/10.1016/j.jretconser.2014.01.003
42. Scott Long, J. (1997). Regression models for categorical and limited dependent variables. Advanced Quantitative Techniques in the Social Sciences, 7.
43. Modesto, J.C.P. (2020). Marketing Communication Plan-TREE Real Estate Experience (Doctoral dissertation, ISCTE-Instituto Universitario de Lisboa (Portugal)).
44. Monalisa, S. (2018). Klasterisasi Customer Lifetime value dengan Model LRFM Menggunakan Algoritma K-Means. Jurnal Teknologi Informasi dan Ilmu Komputer (JTIIK), 5(2), 247-252. https://doi.org/10.25126/jtiik.201852690
45. Monalisa, S., Nadya, P., & Novita, R. (2019). Analysis for customer lifetime value categorization with RFM model. Procedia Computer Science, 161, 834-840.
46. Moll, J., De Oliveira-Souza, R., Bramati, I.E., & Grafman, J. (2002). Functional networks in emotional moral and nonmoral social judgments. Neuroimage, 16(3), 696-703.
47. Moll, J., Zahn, R., De Oliveira-Souza, R., Krueger, F., & Grafman, J. (2005). The neural basis of human moral cognition. Nature Reviews Neuroscience, 6(10), 799-809.
48. Mosaddegh, A., Albadvi, A., Sepehri, M.M., & Teimourpour, B. (2021). Dynamics of customer segments: A predictor of customer lifetime value. Expert Systems with Applications, 172, 114606. https://doi.org/10.1016/j.eswa.2021.114606
49. Mothersbaugh, D.L., Hawkins, D.I., Kleiser, S.B., Mothersbaugh, L.L., & Watson, C.F. (2020). Consumer behavior: Building marketing strategy. New York, NY, USA: McGraw-Hill Education. 1-260-10004-9
50. Niazian, A. (2018). Examining the moderating role of ethical marketing in the relationship between knowledge sharing and employee-oriented innovation (case study: public hospitals of Ilam province) [Master's thesis, Bakhtar Institute of Higher Education, Ilam]. (In Persian)
51. Pecoraro, M.G., & Uusitalo, O. (2014). Conflicting values of ethical consumption in diverse worlds–A cultural approach. Journal of Consumer Culture, 14(1), 45-65.
52. Rana, J., & Paul, J. (2017). Consumer behavior and purchase intention for organic food: A review and research agenda. Journal of Retailing and Consumer Services, 38, 157-165. https://doi.org/10.1016/j.jretconser.2017.06.004
53. Shaw, D., McMaster, R., & Newholm, T. (2016). Care and commitment in ethical consumption: An exploration of the ‘attitude–behaviour gap’. Journal of Business Ethics, 136, 251-265. https://doi.org/10.1007/s10551-014-2442-y
54. Shiri, A., Dehghani Soltani, M., Soltani Banavandi, A., & Azadi, Y. (2017). The effect of service-orientation on customer's loyalty with mediating role of service quality in hotel industry (A case study: Kerman's Pars Hotel). Journal of Tourism and Development, 6(2), 39-62. (In Persian).
55. Tsarenko, Y., Ferraro, C., Sands, S., & McLeod, C. (2013). Environmentally conscious consumption: The role of retailers and peers as external influences. Journal of Retailing and Consumer Services, 20(3), 302-310. https://doi.org/10.1016/j.jretconser.2013.01.006
56. Winer, R.S. (2001). Customer relationship management: a framework, research directions, and the future. Haas School of Business.
57. Willer, H., & Lernoud, J. (2016). The world of organic agriculture. Statistics and Emerging Trends 2016. Research Institute of Organic Agriculture FiBL and IFOAM Organics International (Accessed 23 October 2017). http://orgprints.org/31151/1/willer-lernoud-2016-world-of-organic.pdf
58. Yeh, I.C., Yang, K.J., & Ting, T.M. (2009). Knowledge discovery on RFM model using Bernoulli sequence. Expert Systems with Applications, 36(3), 5866-5871.
59. Yoseph, F., Ahamed Hassain Malim, N.H., Heikkilä, M., Brezulianu, A., Geman, O., & Paskhal Rostam, N.A. (2020). The impact of big data market segmentation using data mining and clustering techniques. Journal of Intelligent & Fuzzy Systems, 38(5), 6159-6173.
60. Zehir, C., & Narcıkara, E. (2016). E-service quality and e-recovery service quality: Effects on value perceptions and loyalty intentions. Procedia-Social and Behavioral Sciences, 229, 427-443. https://doi.org/10.1016/j.sbspro.2016.07.153