Journal of the Academy of Marketing Science

, Volume 35, Issue 2, pp 157–171 | Cite as

Measuring and maximizing customer equity: a critical analysis

Article

Abstract

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.

Keywords

Customer equity Customer lifetime value Aggregate-level approach Disaggregate-level approach 

Notes

Acknowledgements

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.

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Copyright information

© Academy of Marketing Science 2007

Authors and Affiliations

  1. 1.School of Business Administration, Department of MarketingING Center for Financial Services at the University of ConnecticutStorrsUSA
  2. 2.School of Business AdministrationUniversity of ConnecticutStorrsUSA

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