Customer equity: Making marketing strategy financially accountable

  • Ashwin Aravindakshan
  • Roland T. Rust
  • Katherine N. Lemon
  • Valerie A. Zeithaml

Abstract

The article presents an overview of the literature on customer equity and how customer equity provides an opportunity for marketers to make marketing strategy financially accountable. Traditionally, Return on Investment (ROI) models have been used to evaluate the financial expenditures required by the strategies as well as the financial returns gained by them. However in addition to requiring lengthy longitudinal data, these models also have the disadvantage of not evaluating the effect of the strategies on a firm’s customer equity. The dominance of customer-centered thinking over product-centered thinking calls for a shift from product-based strategies to customer-based strategies. Hence, it is important to evaluate a firm’s marketing strategies in terms of the drivers of its customer equity. The article summarizes a unified strategic framework that enables competing marketing strategy options to be traded off on the basis of projected financial return, which is operationalized as the change in a firm’s customer equity relative to the incremental expenditure necessary to produce the change.

Keywords

Customer equity return on marketing brand equity customer value relationship marketing marketing strategy customer lifetime value customer satisfaction measurement 

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Copyright information

© JSSSE 2004

Authors and Affiliations

  • Ashwin Aravindakshan
    • 1
  • Roland T. Rust
    • 1
  • Katherine N. Lemon
    • 2
  • Valerie A. Zeithaml
    • 3
  1. 1.Department of Marketing, R.H. Smith School of BusinessUniversity of MarylandCollege ParkUSA
  2. 2.Marketing DepartmentCarroll School of ManagementChestnut HillUSA
  3. 3.Kenan-Flagler Business SchoolUniversity of North CarolinaChapel HillUSA

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