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Managing Customer Equity

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Customer 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 Equity Value Equity Brand Equity Retention Equity

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Three Drivers of Customer Equity <ul><li>Value Equity : the customer's objective evaluation of the firm offerings </li></ul><ul><li>Brand Equity : the customer's subjective view of the firm and its offerings </li></ul><ul><li>Retention Equity : the customer's view of the strength of the relationship between the customer and the firm. </li></ul>

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Value Equity

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Value Equity is the customer's objective assessment of the utility of a brand, based on perceptions of what is given up for what is received.

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<ul><li>Quality :How does the customer evaluate the quality of the firm's offerings? </li></ul><ul><li>Price : How attractive is the price? </li></ul><ul><li>Convenience : How convenient is it to do business with the firm? </li></ul>Drivers of Value Equity

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Brand Equity

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<ul><li>Brand Equity is the customer's subjective and intangible assessment of the brand, above and beyond its objectively perceived value. </li></ul><ul><li>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. </li></ul>

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<ul><li>Builds awareness and attracts customers </li></ul><ul><li>Build emotional connections with customers </li></ul><ul><li>Reminds customers to repurchase </li></ul>The Role of the Brand in Building Customer Equity

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<ul><li>customer brand awareness </li></ul><ul><li>customer attitude toward the brand </li></ul><ul><li>customer perception of brand ethics </li></ul>Drivers of Brand Equity

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Retention Equity

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<ul><li>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. </li></ul><ul><li>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. </li></ul>

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<ul><li>Does the customer benefit from relationship with the firm? </li></ul><ul><li>Does the firm benefit from its relationship with the customer? </li></ul><ul><li>Does the customer stand to lose if the relationship is discontinued? </li></ul>Retention equity considers questions such as:

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<ul><li>Loyalty programs (frequent purchase/reward programs) </li></ul><ul><li>Special recognition and treatment programs </li></ul><ul><li>Affinity (emotional connection) programs </li></ul><ul><li>Community programs </li></ul><ul><li>Knowledge-building programs (learning relationship or structural bonds) </li></ul>Drivers of Retention Equity

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If you think this presentation useful, please consider telling others about our site : www.studyMarketing.org Source of Reference: Roland Rust, Valarie Zeithaml, and Katherine Lemon , Driving Customer Equity : How Customer Lifetime Value is Reshaping Corporate Strategy, Free Press