Link to an interview with Prof. Sunil Gupta of Harvard Business School at http://hbswk.hbs.edu/item/5595.html
The interviewer says: "Business people understand that not all customers are created equal—the 80-20 rule suggests that over time a small percentage of a company's customer base can generate a high percentage of its sales and profit. Models for calculating customer lifetime value are built on just such a premise.
But new research is starting to look at customers whose value is not as readily apparent, and where CLV calculations break down. In a recent working paper, Harvard Business School professor Sunil Gupta calls them "free" customers—think of buyers at an auction. Traditionally auction houses make most of their profit from fees paid by sellers; buyers don't pay fees. So although buyers are a necessary ingredient to the deal—no buyers, no sellers—their value is more difficult to quantify. To the auction house, is one buyer worth four sellers? Is one buyer worth one seller?
The answer is critical for the auction house, which must determine how to allocate marketing and other expenditures between buyers and sellers to attract new business.
As more job seekers sign on to Monster.com, more employers are willing to be paying customers for the firm.
Gupta's work provides a model for determining this value and is related to research being done by colleague Andrei Hagiu and others into the dynamics of multi-sided markets: platforms that serve two or more distinct groups of customers who value each other's participation. Just how that participation is valued is a question Gupta's research begins to answer."
