Standard Article

Customer Equity

Part 1. Marketing Strategy

  1. Katherine N. Lemon1,
  2. Loren J. Lemon2

Published Online: 15 DEC 2010

DOI: 10.1002/9781444316568.wiem01002

Wiley International Encyclopedia of Marketing

Wiley International Encyclopedia of Marketing

How to Cite

Lemon, K. N. and Lemon, L. J. 2010. Customer Equity. Wiley International Encyclopedia of Marketing. 1.

Author Information

  1. 1

    Boston College, Chestnut Hill, MA, USA

  2. 2

    KNL Associates, LLP, Lexington, MA, USA

Publication History

  1. Published Online: 15 DEC 2010

Abstract

Customer equity is defined as the total lifetime value of a firm's current and potential customer base. The customer equity (CE) construct can be utilized via both a conceptual framework (CE framework) and a mathematical model (CE model) which will allow a firm to evaluate various marketing initiatives, either conceptually or by a potential-ROI analysis, in order to create, manage, and grow the firm's CE. The CE framework utilizes three primary elements that drive the creation and dynamic growth of CE: value, brand, and relationship. With insights derived from the CE framework and CE model, a firm can tailor its marketing efforts to meet unfulfilled customer expectations, and identify and exploit situations in which the firm has a competitive advantage vis-à-vis its competitors. This allows the firm to make a more disciplined and informed decision on which marketing initiatives to implement and at what levels.

Keywords:

  • customer lifetime value;
  • customer equity;
  • customer management