What is the meaning of customer equity?
Customer Equity is defined as the total of the discounted lifetime values of the organization’s customer. In short, more loyal the customers, higher is the customer equity.
Customer equity is important as it acts as a marketing system for organizations and companies. Organizations that use it as a marketing system are able to calculate a customer’s asset value, which helps them make sound investment decisions in regard to add-on selling, retention, and acquisition.
How do you use customer equity?
There are several steps to help you improve your company’s customer equity.
- Show your clients that you appreciate them. …
- Be more convenient than your competitors. …
- Be ready to solve problems. …
- Provide customers with unique value propositions. …
- Ensure to provide the best quality.
What are the types of customer equity?
There are three drivers of customer equity—value equity, brand equity, and relationship equity (also known as retention equity). These drivers work independently and together. Within each of these drivers are specific, incisive actions, or levers, the firm can take to enhance its overall customer equity.
How do you build customer equity?
They do this by:
- improving consumer service.
- improving the value or desirability of the brand.
- improving goodwill.
- improving brand popularity such as by advertisements.
- improving the trust of the customer towards the brand.
What do you mean by equity?
Equity represents the value that would be returned to a company’s shareholders if all of the assets were liquidated and all of the company’s debts were paid off. We can also think of equity as a degree of residual ownership in a firm or asset after subtracting all debts associated with that asset.
What does relationship equity mean?
What is Relationship Equity? Equity theory studies the distribution of resources between relational partners. For example, it examines whether what the parties in a relationship get out of a relationship is equal to or greater than what they put into it.
Why do we care about customer equity?
Customer equity helps companies estimate the financial profit they will obtain from their customer base. This data enables them to make sound business decisions for the future. With brand equity calculates, companies can concentrate on factors such as add-on selling.
Focusing on the share of customer helps you increase retention. If someone is happy to buy more from you, it’s likely that this customer will be more loyal. And as the formula shows, better retention means better Customer Lifetime Value.
What is an example of brand equity?
Brand equity has a direct effect on sales volume because consumers gravitate toward products with great reputations. For example, when Apple releases a new product, customers line up around the block to buy it even though it is usually priced higher than similar products from competitors.
What are the four benefits of brand equity?
The four benefits of brand equity are: Less-drastic declines in revenue when the team loses. Ability to charge price premiums. Greater corporate interest.