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Customer EquityCustomer Equity
Customer equity is defined as the
total of the discounted lifetime value
of all the firm’s customers
In other words, a firm is only as good
as its customers think it will be the
next time they will do business with
that firm.
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Three Drivers of Customer EquityThree Drivers of Customer Equity
• Value Equity : the customer's objective
evaluation of the firm offerings
• Brand Equity : the customer's subjective
view of the firm and its offerings
• Retention Equity : the customer's view of
the strength of the relationship between
the customer and the firm.
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• Quality :How does the customer
evaluate the quality of the firm's
offerings?
• Price : How attractive is the price?
• Convenience : How convenient is it to
do business with the firm?
Drivers of Value Equity
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• Brand Equity is the customer's subjective
and intangible assessment of the brand,
above and beyond its objectively
perceived value.
• This evaluation is shaped by the firm's
marketing strategy and tactics and is
influenced by the customer through life
experiences and associations with the
brand.
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• Builds awareness and attracts
customers
• Build emotional connections with
customers
• Reminds customers to repurchase
The Role of the Brand in
Building Customer Equity
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• Retention Equity is the tendency of the
customer to stick with the brand, above
and beyond the customer's objective
and subjective assessments of the
brand.
• It focuses on the relationship between
the customer and the' firm, based upon
the actions taken by the firm and by the
customer to establish, build, and
maintain a relationship.
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• Does the customer benefit from relationship
with the firm?
• Does the firm benefit from its relationship
with the customer?
• Does the customer stand to lose if the
relationship is discontinued?
Retention equity considers
questions such as:
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• Loyalty programs (frequent purchase/reward
programs)
• Special recognition and treatment programs
• Affinity (emotional connection) programs
• Community programs
• Knowledge-building programs (learning
relationship or structural bonds)
Drivers of Retention Equity
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Source of Reference:
Roland Rust, Valarie Zeithaml, and Katherine Lemon,
Driving Customer Equity : How Customer Lifetime Value
is Reshaping Corporate Strategy, Free Press
