Database Reference
In-Depth Information
Initially, the returns are minimal or even reducing; thereafter, with increasing inputs of resources,
the returns increase exponentially.
1.2.8.1 Customer as an Asset
In the framework being proposed here, the customer is akin to a financial asset that enterprises
can measure, manage, and maximize like any other asset. Enterprises can use financial valuation
techniques and information about the customers to optimize the acquisition, retention, and cross-
and up-selling of additional products to an enterprise's customers, and that maximizes the value
of the customer relationship throughout its life cycle.
Enterprises that take a customer asset approach differ significantly from those that treat brand
equity as the primary marketing asset. Brand approach focuses on activities that maximize a
brand's total revenues and the greatest possible returns on the brand investment. Rather than
confining attention to singular brands, the customer asset approach focuses on the sum total of
net income stream across all brands and services. Table 1.6 compares the characteristic features of
the marketing mix for the customer equity and brand equity approaches.
Chapter 15, Section 15.4.1 “Time Value of Customers and Shareholder Value” elaborates on
the concept that a company's market valuation/capitalization is truly dependent on the sum total
of the envisaged lifetime value of its current and future customers. The market valuation in turn
determines the company's share price on the stock markets. Patricia Seybold was the first one to
point out that the success in the customer economy will depend on companies managing their
enterprises by and for customer value—they will have to use customer lifetime value as a strategic
table 1.6
Marketing Mix for Customer equity and Brand equity Approaches
Element of the
Marketing Mix
Customer Equity Approach
Brand Equity Approach
Segmentation
Behavioral segmentation
based on the customer base.
Customer characteristics and
benefit segmentation.
Product and
service quality
Creates high customer
retention rate.
Create strong customer
preference.
Product
development
Acquire products to sell to
the installed customer base.
Use brand name to create line
extensions into new areas.
Advertising
Create customer bonding
and affinity.
Create brand image and
position.
Promotions
Create repeat buying and
enhance customer lifetime
value.
Momentarily enhance
perceived value for money;
but this depletes brand equity.
Customer
service
Enhance customer bonding
and affinity.
Enhance brand image.
Channels of
distribution
Direct distribution to
customer.
Multistage distribution system.
