Learning from Others: Information Sharing, Uncertainty and Heterogeneity in Customer-Base Valuation
Statistics Department; Faculty Adviser: Peter Fader
The growth of subscription-based commerce has seen a change in the types of data firms report to external shareholders. More than ever before, companies are discussing and disclosing data on the number of customers acquired and lost, customer lifetime value, and more. This has fueled an increasing interest in linking the value of a firm’s customers to the overall value of the firm, with the term customer-based corporate valuation being using to describe such efforts. While a number of researchers in the fields of marketing and accounting have explored this idea, their underlying models of customer acquisition and retention do not adequately reflect the empirical realities associated with these behaviors, and the associated valuation models do not live up to the standards of finance professionals. We develop a framework for valuing subscription-based firms that addresses both issues, and apply it to data from Dish Network and Sirius XM Holdings.
Publications
McCarthy, Daniel M., Peter S. Fader and Bruce G.S. Hardie (2017), “Valuing
Subscription-Based Businesses Using Publicly Disclosed Customer Data,”
Journal of Marketing, 81(1), pp. 17-35.
http://journals.ama.org/doi/abs/10.1509/jm.15.0519?code=amma-site
In the Press:
New research from Wharton is changing the way investors are looking at the valuation of businesses by taking a closer look at the worth of those firms’ customers. Peter Fader and Dan McCarthy are behind this new method that has recently received a lot of attention for the insights it generated about the value of businesses:
“Why Customer Retention Lies at the Heart of Corporate Valuation,” Knowledge at Wharton (February 12, 2018). http://knowledge.wharton.upenn.edu/article/game-changing-method-valuing-companies/
Presentations
“Customer-based Corporate Valuation,” Vienna University of Economics and Business, Vienna, Austria, 2017
“Customer-based Corporate Valuation,” Goethe University, Frankfurt, Germany, 2017
“Customer-based Corporate Valuation,” HEC Paris, Paris, France, 2017
“CLV, Inside and Out,” Presentation at the QVC Headquarters, West Chester, PA, March 2016
“Valuing Subscription-Based Businesses Using Publicly Disclosed Customer Data,” Marketing Modelers Group, New York, NY, January 2016
“Valuing Subscription Businesses Using Publicly Disclosed Customer Data,” MoffettNathanson LLC, New York, NY, November 2015
“CLV, From Inside and Out,” the Baker Retailing Center Advisory Board Meeting, Philadelphia, PA, November 2015
“Customer-Based Corporate Valuation via Data Fusion”, Marketing Science Conference, Baltimore, MD, June 2015