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
• 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.

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 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 the firm?
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 Brand 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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 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

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 Retention
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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 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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