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



Three 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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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.



Drivers of Value Equity
• 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 visit: the firm?


Brand Equity



• 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. visit:


The Role of the Brand in Building Customer Equity
• Builds awareness and attracts customers • Build emotional connections with customers • Reminds customers to repurchase
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Drivers of Brand Equity
• customer brand awareness • customer attitude toward the brand • customer perception of brand ethics



Retention Equity



• 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 14 visit: a relationship.

Retention equity considers questions such as:
• 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?
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Drivers of Retention Equity
• 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)
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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

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