Measuring and maximizing customer equity: a critical analysis |
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| Authors: | V Kumar Morris George |
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| Institution: | (1) School of Business Administration, Department of Marketing, ING Center for Financial Services at the University of Connecticut, Storrs, CT 06269-1041, USA;(2) School of Business Administration, University of Connecticut, Storrs, CT, USA |
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| 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.
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| Keywords: | Customer equity Customer lifetime value Aggregate-level approach Disaggregate-level approach |
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