Measuring and maximizing customer equity: a critical analysis
- 1.9k Downloads
Customer equity, the asset value of customers, can be measured using different aggregate- and disaggregate-level approaches. The authors compare how customer equity is measured and maximized under various approaches. We find that, in the disaggregate-level approach, customer lifetime value is maximized by implementing customer-level strategies such as optimal resource allocation, purchase sequence analysis and balancing acquisition and retention spending. At the aggregate-level, improving the drivers of customer equity maximizes customer equity. A comparison of different aggregate approaches shows that, while an emphasis on retention is a common feature across approaches, conceptual differences in terms of accounting for existing customers and prospects, acquisition, and the projection period exist across the different approaches. The authors propose a hybrid approach, which addresses the issues and challenges in existing approaches and helps firms to measure and manage customer equity.
KeywordsCustomer equity Customer lifetime value Aggregate-level approach Disaggregate-level approach
The authors thank the participants at the New York University Marketing Research Conference and the University of Maryland Marketing Research Conference for their valuable suggestions in an earlier version of this manuscript. The authors thank Renu for copyediting the manuscript. The authors thank the editor and the reviewers for their valuable comments on an earlier version of the manuscript.
- Blattberg, R., & Deighton, J. (1996). Manage marketing by the customer equity test. Harvard Business Review, 74(4), 136–144.Google Scholar
- Blattberg, R., Getz, G., & Thomas, J. S. (2001). Customer equity: Building and managing relationships as valuable assets. Boston, MA: Harvard Business School Press.Google Scholar
- Brady, D. (2000). Why service stinks. Business Week, 23, 118–128 (October).Google Scholar
- Keller, K. L., & Lehmann, D. R. (2003). How do brands create value? Marketing Management, 12(3), 26–31.Google Scholar
- Kumar, V., Venkatesan, R., & Reinartz, W. (2006). Knowing what to sell when to whom? Harvard Business Review, 131–137 (March).Google Scholar
- Lemon, K. N., Rust, R. T., & Zeithaml, V. A. (2001). What drives customer equity? Marketing Management, 10, 20–25 (Spring).Google Scholar
- Reinartz, W. J., & Kumar, V. (2002). The mismanagement of customer loyalty. Harvard Business Review, 1–13 (July).Google Scholar
- Rust, R. T., Zeithaml, V. A., & Lemon, K. N. (2000). Driving customer equity: How customer lifetime value is reshaping corporate strategy. New York: The Free Press.Google Scholar
- Thomas, J. S., Reinartz, W., & Kumar, V. (2004). Getting the most out of all your customer. Harvard Business Review, 1–8 (July–August).Google Scholar