A transaction approach to understanding and managing customer equity

Abstract

Customer equity refers to the value of tangible and intangible resources that customers invest in particular retailers. However, the difficulty in identifying or giving weight to customer investments often leads retailers to neglect their customers. Through this neglect, retailers can damage their customer equity and thereby jeopardize their (i.e., the retailers') futures. The purpose of this study is to develop the concept of customer equity from a transactions-based approach and to offer implications for its management by retailers. Specifically, customer equity is conceptualized as the value of resources a customer exchanges for a retailer's explicit or implicit promise for remuneration. As such, the customer retains property rights to these resources. Furthermore, customers make a conscious choice to invest their tangible and intangible resources in a retailer. Accordingly, retailers can improve their likelihood of long-term success by taking more active roles in creating and managing customer equity.