Customer Equity

Customer equity is the total combined customer lifetime values of all of the company's customers. [1]

Overview

In deciding the value of a company, it is important to know of how much value its customer base is in terms of future revenues. The greater the customer equity (CE), the more future revenue in the lifetime of its clients; this means that a company with a higher customer equity can get more money from its customers on average than another company that is identical in all other characteristics. As a result, a company with higher customer equity is more valuable than one without it. It includes customers' goodwill and extrapolates it over the lifetime of the customers.

The term is a misnomer since the term has nothing to do with the traditional meaning of equity.

There are three drivers to customer equity, all of which refer to three sides of the same thing:

  1. Value equity: What the customer assesses the value of the product or service provided by the company to be;
  2. Brand equity: What the customer assesses the value of the brand is, above its objective value;
  3. Retention equity: The tendency of the customer to stick with the brand even when it is priced higher than an otherwise equal product;

Customer equity strategy

Companies often attempt to gain more customers and increase revenues by improving customer equity. They do this by:

  • improving consumer service
  • improving the value or desirability of the brand
  • improving goodwill
  • improving brand popularity such as by advertisements
  • improving the trust of the customer towards the brand.

References

Literature

  • Rust, Roland T.; Lemon, Katherine N.; Zeithaml, Valarie A.: Return on Marketing: Using Customer Equity to Focus Marketing Strategy, Journal of Marketing 68(1), 2004, 109-127

See also

External links


  This article uses material from the Wikipedia page available here. It is released under the Creative Commons Attribution-Share-Alike License 3.0.

Customer_equity
 



 

Connect with defaultLogic
What We've Done
Led Digital Marketing Efforts of Top 500 e-Retailers.
Worked with Top Brands at Leading Agencies.
Successfully Managed Over $50 million in Digital Ad Spend.
Developed Strategies and Processes that Enabled Brands to Grow During an Economic Downturn.
Taught Advanced Internet Marketing Strategies at the graduate level.


Manage research, learning and skills at defaultLogic. Create an account using LinkedIn or facebook to manage and organize your Digital Marketing and Technology knowledge. defaultLogic works like a shopping cart for information -- helping you to save, discuss and share.

Visit defaultLogic's partner sites below:
PopFlock.com : Music Genres | Musicians | Musical Instruments | Music Industry
NCR Works : Retail Banking | Restaurant Industry | Retail Industry | Hospitality Industry

  Contact Us