Moving from customer lifetime value to customer equity

We study the consequence of moving from Customer Lifetime Value maximization to Customer Equity maximization. Customer equity has traditionally been seen as the discounted sum of the lifetime earnings from all current and future customers and thus it has been largely assumed that maximizing customer lifetime value would lead to maximum customer equity. We show that the transition from CLV to CE is not that straightforward. Although the CLV model is appropriate for managing a single non-replaceable customer, the application of a CLV model to the acquisition and valuation of customers as an ongoing concern for the firm leads to sub-optimal customer relationship management and acquisition strategies. This leads the firm following a CLV maximization approach to have a smaller and less profitable customer base than one that follows a CE maximization strategy.

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The role of channel quality in customer equity management

Maximization of customer equity is a core objective of customer–company relationship management. We present an extended model of customer equity for determining the optimal allocation of marketing resources across acquisition and retention activities. Focusing on the negative relationship between acquisition and retention, we motivate channel quality as a relevant decision variable, explicate its role in the model, and demonstrate the existence of an optimal value. In addition, rather than making concavity assumptions about acquisition and retention rate response curves, we use the flexible ADBUDG model (Little, JDC, Models and Managers: the Concept of a Decision Calculus. Manag Sci 1970; 16(8): 466–484.), which allows for both S-shaped and strictly-concave relationships, and parameterize it using decision calculus. We show how to estimate and apply the model and then provide sensitivity analyses with respect to changes in the true values of model parameters as well as inaccuracy in managerial inputs. We conclude by comparing our model with extant models and discussing the implications of our research.     

Measuring customer equity and managing the customer asset: an explanatory study in the Australian hotels

Although there are a range of conceptual and theoretical studies about customer equity (CE) measurement and management in the literature, there are few empirical studies where these two concepts are examined together. This paper focuses on the need for a more synthesised approach and addresses calls for more research into this specific area of marketing management. A conceptual framework was developed that synthesises both customer lifetime value and customer relationship management from a customer equity management (CEM) perspective. The framework was used to empirically examine how four CE strategies, together with a firm’s use of the two types of customer data (aggregated and disaggregated), impact on CEM outcomes. Data were collected from 114 hotel managers in Australia and analysed through a decision tree methodology. The results show that hotels are utilising their CE strategies for acquisition purposes more than retention purposes (customer asset management), which overall appears to satisfice more than maximise their hotel’s capacity in achieving effective CE outcomes. The study’s contribution to theory is through empirically testing a framework that combines two discrete theoretical concepts in one study to provide insights to guide future research.     

The impact of brand health on customer equity

This paper aims at studying the interactions between brand and customer assets over the long-term. Through the application of a new behavioural measure called the brand health index (BHI) we examine the impact of brand health on customer equity, and its mediating impact on the advertising-customer equity relationship. Three services industries, department stores, airlines, and banking, were studied from 2001 to 2012. The results show that brand health has a positive impact on customer equity, although the magnitude of the BHI impact varies across different industries. Moreover it was demonstrated that brand health mediates the impact of advertising on customer equity.     

Brand equity in hospital marketing

Health care marketers face unique challenges around the world, due in part to the role the health care field plays in contributing to public welfare. Hospital marketing in Korea is particularly challenging since Korean law prohibits hospitals from running any advertising. As a result, Korean hospitals depend heavily on customer relationship management (CRM). This study identifies five factors that influence the creation of brand equity through successful customer relationships: trust, customer satisfaction, relationship commitment, brand loyalty, and brand awareness. An empirical test of the relationships among these factors suggests that hospitals can be successful in creating image and positive brand equity if they can manage their customer relationships well.     

Constructing a relationship-based brand equity model

The purpose of this study is to develop and test a model in which several aspects of the service encounter including service staff, servicescape, customer similarity, and customer interaction are taken into account simultaneously as antecedents of relationship quality and generation of brand equity. Testing the hypotheses involved two service settings, banks and department stores. The findings demonstrate that serviced staff and customer interaction have significant direct effects on brand equity. Surprisingly, four variables of service encounter have significant indirect effects through relationship quality on brand equity. Based on these findings, the implications for managers and future research are identified.     

Sustainable growth for the self-employed in the retail industry based on customer equity,customer satisfaction,and loyalty

In Korea, traditional retail districts face a serious situation whereby businesses in downtown areas face collapsing as local population declines: resulting in a decrease in self-employed sales and a declining local economy. Traditional retailers use ambiguous accounting and are reluctant to use credit cards, and thus, the overall reliability of their customer data is low. This paper solves this problem by applying the concept of customer equity (CE). We conducted an empirical analysis through questionnaires to identify differences in CE between traditional and new retail formats. The questionnaire consisted of questions related to CE (value equity, brand equity, relation equity), satisfaction, loyalty, and demographic characteristics. CE and satisfaction were measured on a 5-point Likert scale. A total of 400 surveys were completed, resulting in 391 usable returns for analysis in this study. In the regression analysis between CE and customer satisfaction, both old and new retail firms showed statistically significant effects. In the traditional retail industry, value equity and brand equity were statistically significant, while relation equity were not.     

Examining the Relationship Marketing,Marketing Productivity Paradigm

Abstract

The authors examine the relationship marketing research literature and identify three schools of thought regarding relationship marketing. The Inter-organizational, customer relationship, and customer valuation research perspectives are described and representative studies are discussed. The predominant conceptual approaches to marketing productivity in the research literature are identified and described. The shareholder value model of Srivastava, Shervani, and Fahey (1998) is selected as the most useful conceptual framework linking relationship marketing and marketing productivity. The linking constructs of customer equity and brand equity are identified as the critical conceptual connections between relationship marketing and marketing productivity. A research agenda is suggested, covering both conceptual and operational issues for further development of both relationship marketing and marketing productivity.     

Customer satisfaction and brand equity

The study here examines the interaction between shareholder value and customer satisfaction, as well as the impact on a firm's brand equity. Customer satisfaction may have a positive effect on brand equity, except when managers show excessive customer orientation, in which case the effect is negative because of reductions in shareholder value. The empirical analysis uses incomplete panel data pertaining to 69 firms from 11 nations during the period 2002-2005 and supports the theoretical contentions. This result warns of the perverse effect on brand equity of implementing policies focused exclusively on satisfying customers at the expense of shareholders' interests.     

Customer equity management as formative second-order construct

Despite intensive discussions about customer equity, little research addresses how to manage customer equity from a firm's perspective. Recent literature proposes various concepts of customer equity management but does not feature an empirical study that identifies and quantifies activities that aim explicitly to maximize customer equity. In the current study, the authors develop a formative measurement instrument for customer equity management as a second-order construct that indicates how intensively firms orient their customer management toward customer value and equity. The study presents a complete process for conceptualizing and operationalizing a formative second-order construct, including a thorough literature review, intensive qualitative research, and a quantitative study with 92 customer equity managers. On the basis of this process, the authors model customer equity management as a function of three formative dimensions - customer equity analysis, customer equity strategy, and customer equity actions - measured by several formative indicators. The resulting formative operationalization satisfies the criteria for evaluating formative indexes.     

Investigating the antecedents of customer brand engagement and consumer-based brand equity in social media

The current research is concerned with identifying and testing the role of three main predictors: consumer involvement, consumer participation, and self-expressive brand on the customer brand engagement (CBE). The customer brand engagement is treated in the current study as multidimensional constructs comprising three main aspects: cognitive processing (CP), affection (AF), and activation (AC). It was also proposed a direct influence for these three aspects of CBE on consumer-based brand equity (CBBE). Using online surveys, we gathered data from fans/followers of mobile phone service providers, via Facebook fan pages in Jordan. The data were analysed using structural equation modelling. Based on structural equation modelling analyses (SEM), it was supported that CBE aspects were largely predicted by the role of consumer involvement (INV), consumer participation (COP), and self-expressive brand (SEB). However, we find that activation impact one dimension of the CBBE dimensions, namely, brand loyalty. Further, we find that brand awareness/associations affect perceived quality but not brand loyalty. To validate the CBE scale, future studies could investigate the impact of the scale using other social media platforms for different brands. The limited amount of empirical research on CBE was the motivation behind this research. In particular, there is no study that has investigated the main predictors of CBE and its consequences over developing context by proposing and testing the association between the antecedents of CBE with the dimensions of CBE, which in turn affect the dimensions of CBBE.     

Making customer relationship decisions: Analytics v rules of thumb

This article explores how customer management decisions are made in the leading Nordic retail banks and whether these decisions are driven by mainstream analytical approaches to customer lifetime value available through the banks' CRM systems, or by rule of thumb heuristics. The results indicate that the use of managerial heuristics is surprisingly widespread and, counter-intuitively, that rule of thumb heuristic-based decision making frequently outweighs measures such as customer lifetime value with regard to customer management decisions. The implications are considerable because if successful banks are making widespread use of heuristics, managers and academics would benefit from understanding the conditions under which heuristic decision making can be more successful than an analytic approach. This understanding, in turn, may highlight a limitation of CRM systems and point to a more flexible approach to customer management decisions in which experience-based managerial heuristics modify data from formal CRM systems.     

Understanding customer participation in CSR activities: The impact of perceptions of CSR,affective commitment,brand equity,and corporate reputation

This study investigates the mediating role of affective commitment in the link between perceptions of corporate social responsibility (CSR) and the intention to participate in CSR activities. We also examine the moderating role of firms' brand equity and corporate reputation in the relationship between perceived CSR and affective commitment. The data were collected from two online surveys and analyzed using Hayes' PROCESS macro. The results indicate a partial mediating effect of affective commitment and a significant moderating effect of brand equity. However, the moderating effect of corporate reputation is not significant. This study contributes to uncovering the process of enhancing CSR performance.     

Strategies to offset performance failures: The role of brand equity

In this research, we examine the role of brand equity as a strategy to offset the negative effects of a performance failure. Two independent studies, spanning four industries and involving 669 respondents are employed to investigate this issue. Results suggest that high brand equity leads to more favorable satisfaction evaluations and behavioral intentions than low brand equity. The brand equity effect is identified as a prevailing advantage that spans the entire failure and recovery sequence. This is an important finding because it implies that the advantages of high brand equity theoretically can apply to all failures, not just those for which recovery is attempted. Further inspection, however, reveals that despite the prevailing advantage, high-equity brand failures lead to a more drastic decline in customer evaluations immediately after the failure episode. Managerial implications and future research are addressed.     

The antecedents of customer loyalty: A moderated mediation model of customer relationship management quality and brand image

This study examines the mediating role of customer relationship management (CRM) quality to better explain the effects of service evaluation variables (service quality, customer satisfaction and customer value) on customer loyalty. The study also investigates the moderating effect of brand image on these mediated relationships. The mediating role of CRM quality on the relationship between the service evaluation variables and customer loyalty is supported. Further, it is found that the indirect effect of customer satisfaction on customer loyalty via CRM quality is stronger when perceived brand image is high than when it is low. The results have implications for relationship managers, brand managers and scholars who use service evaluation and relational metrics to predict customer loyalty.     

Managing retailer profitability—one customer at a time!

This study examines how customer lifetime value (CLV) can be computed at individual customer level in a retail setting to maximize profitability. The study finds that maximum positive impact to CLV occurs when the customer cross-purchases, shows multi-channel shopping behavior, stays longer with the firm, buys specific product categories and purchases more frequently with the firm. Interestingly, the CLV follows an inverted U relationship with increase in return of prior purchases. Other interesting findings include a surprisingly low correlation between customer loyalty and future profitability and low correlation between stores’ historic revenues and future profitability. Several implications are suggested for retailers to manage and maximize customer profitability as well as store profitability.     

非流通股与过度股权融资

In the Chinese stock market, the price of exchangeable stock is determined by the discounted future uncertain cash flow, while the price of non-circulating stock depends on per book value. In general, because investors holding non-circulating equity maintain the control power, corporate finance and investment decisions reflect their interests. The pricing mechanism of non-circulating stock violates the basic pricing principle of the capital market. Therefore, corporate finance decisions deviate from the NPV (net present value). As a result, excessive equity financing problems would occur in the listed companies. Translated from Shijie Jingji Wenyuan 世界经济文源 (World Economic Forum), 2004, (4): 41–50     

Marketing mix and customer equity of SPA brands:Cross-cultural perspectives

Globalization has substantially transformed the fashion industry. Firms that conduct innovative marketing campaigns for SPA brands, also known as fast fashion, are operating worldwide. Because SPA brands tend to have short trend cycles, corporate profitability is sensitive to consumers' attitudinal changes. The authors of this study establish a theoretical framework by examining research trends related to customer equity at home and abroad by delving into the current state of global SPA brands, defining customer equity, developing customer equity measurements, and conducting empirical analyses. This study uses structural equation models to analyze corporate marketing activity effects on customer lifetime value through brand attitude. Although earlier studies identify customer equity as driving value equity, brand equity, and relationship equity, the authors introduce social network equity as another driver.     

Investigating the service brand: A customer value perspective

Despite considerable interest in the nature and role of marketing using a service perspective [Vargo S., Lusch R. Evolving to a new dominant logic for marketing. J Mark 2004; 68 (1): 1-17] there is limited research about branding. Research to date tends to be qualitative [e.g., Berry L. Cultivating service brand equity. J Acad Mark Sci 2000; 28: 128-137; de Chernatony L., Segal-Horn S. The criteria for successful services brands. Eur J Mark 2003; 37 (7/8): 1095-1118] rather than quantitative. This research closes this gap by developing and testing a theory of the influence of the service brand on the customer value-loyalty process. The model includes the traditional influence of brand image plus three additional influences that more fully reflect the broader service perspective (company image, employee trust, and company trust). Using survey data of a sample of 552 airline customers, the analysis shows there is a direct influence of all the aspects of the brand on customers' perceptions of value. In addition brand image, company image and employee trust have a mediated influence on customer value through customers' perceptions of service quality. Finally the analysis shows that a service brand does not have a direct influence on customer loyalty but rather its influence is mediated through customer value. This paper concludes with a discussion of the managerial and research implications.     

An empirical study of dynamic customer relationship management

We apply the Gönül and Shi (1998) approach to the analysis of the optimal messaging and pricing policy mix by studying the past transaction patterns between a local supermarket and its consumers. We develop a dynamic customer relationship management model and investigate the relationship between customer utility and purchasing frequency by modifying the return function of the model discussed in Gönül and Shi (1998). In particular, we extend the analysis to consider a messaging and pricing policy mix, and we use a genetic algorithm in our empirical estimation. When applied to some non-seasonal products in a local supermarket, we find that our model is suitable and far superior to the one-stage model commonly used. Our dynamic model gives the optimal marketing mix strategies in different customer states and the results show that the firm could enjoy a 22% increase in profit.