Operationally, the calculation can be accomplished by using a spreadsheet program or a dedicated software package. Note, though, that even if ∆CE is negative, the ROI expres- sion still holds.
Implementation Issues
Cross-Sectional Versus Longitudinal Data
Our approach requires the collection of cross-sectional sur- vey data; the approach is similar in style and length to that of a customer satisfaction survey. The survey collects cus-
tomer ratings of each competing brand on each driver. Other necessary customer information can be obtained either from the same survey or from longitudinal panel data, if it is available. The additional information collected about each customer includes the brand purchased most recently, aver- age purchase frequency, and average volume per purchase. The logit model can be calibrated in two ways: (1) by observing the next purchase (from either the panel data or a follow-up survey) or (2) by using purchase intent as a proxy for the probability of each brand being chosen in the next purchase.
Obtaining the Model Input
The implementation of our approach begins with manager interviews and exploratory research to obtain information about the market in which the firm competes and informa- tion about the corporate environment in which strategic decisions are made. From interviews with managers, we identified competing firms and customer segments; chose drivers that correspond to current or potential management initiatives; and obtained the size of the market (total number of customers across all brands) and internal financial infor- mation, such as the discount rate and relevant time horizon. In addition, we estimated contribution margins for all com- petitors. If there was a predictable trend in gross margins for any firm in the industry, we also elicited that trend. From exploratory research, using both secondary sources and focus group interviews, we identified additional drivers, which we reviewed with management to ensure that they were managerially actionable items. On the basis of the combined judgment of management and the researchers, we