Customer equity

Overview

In Deciding the value of a company, it is significant to know how much of value ict customer base is in terms of future revenues. The greater the customer equity (CE), the more future revenue in the lifetime of its customers; This means that it is a company with a higher customer base than the other. As a result, a company with higher customer equity is more important than one without it. It includes customers’ goodwill and extrapolates it over the lifetime of the customers.

The term is a misnomer since the term has nothing to do with the traditional meaning of equity .

There are three drivers to customer equity, all of which refer to the same thing:

1. Value equity : What the customer assesses the value of the product or service provided by the company to be;
2. Brand equity : What the customer assesses the value of the brand is, above its objective value;
3. Retention equity : The tendency of the customer to stick with the brand even when it is more than equal product;

Customer equity strategy

Companies often attempt to gain more customers and increase revenues by improving customer equity. They do this by:

• improving consumer service
• improving the value or desirability of the brand
• improving goodwill
• improving brand popularity
• improving the trust of the customer towards the brand.

References