By understanding the customer asset and managing customers as strategic assets, the firm can increase shareholder value. ‘Customer Equity’ is the overall value of the firm’s current customers and the firm’s prospective customers.
This implies that marketing investments must be made in customer equity. Return on marketing investments is becoming increasingly important for making decisions. The returns can be assessed in terms of customer loyalty.
Customer Equity is the composite of Value Equity or the value received by the customer against sacrifices made, Relationship Equity or the social and customisation bonds formed between the provider and the customer, and Brand Equity, the additional value endowed on the underlying product by the customer as a consequence of the branding effort.
This research examines the value of investments made in each of the three constituents of Customer Equity from the standpoint of returns in terms of Customer Loyalty in the context of Retail Stores. The study examines the relationship between Customer Equity and each of its three dimensions with Customer loyalty. The study provides justification in making marketing investments based on potential returns.
The findings have important implications for traditional retailing services under threat from electronic retail formats.
Keywords: Customer Equity, Value Equity, Relationship
Equity, Brand Equity, Brand Loyalty
The ability to acquire, manage and model customer information is a key asset. Marketers are now organising marketing efforts around customers rather
than products. The product focussed approach leads to development of brand equity. The customer focussed approach leads to customer equity.
Customer Equity Management is a comprehensive approach which focuses on increasing the lifetime value of the customer by managing customer relationships as a strategic asset.