Answered: What is customer equity?

Principles Of Marketing

17th Edition

ISBN:9780134492513

Author:Kotler, Philip, Armstrong, Gary (gary M.)

Publisher:Kotler, Philip, Armstrong, Gary (gary M.)

Chapter1: Marketing: Creating Customer Value And Engagement

Section: Chapter Questions

Problem 1.1DQ

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What is customer equity?

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Step 1

Customer equity is essential for an organization as it is the lead basis to long-term achievement. It gives a complete picture of the performance of a company. A successful company is one that catches the attention of its customers.

Step 2

The customer equity of a firm is defined as the present value of the gross income generated by the company's customer base over its lifetime. A company with high equity is valued higher than a company with low equity. The factors which drive consumer equity are as follows:

Value Equity: It measures how a customer sees an organization in terms of product quality, price, and convenience. This is equivalent to the concept of “value for money”.
Brand Equity: It measures how the customer feels about the organization. These include brand awareness, brand recall, and a customer's emotional connection with the organization.
Retention Equity: It measures a consumer's tendency to rely on a brand. It can be measured by loyalty programs and their popularity.

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