Customer assets and customer equity: Management and measurement issues

Abstract

In spite of the current focus on marketing accountability and the growing body of research into customer equity and customer lifetime value, the finance community has not shown any noticeable interest in these increasingly well established marketing metrics and, in fact, few companies have adopted them. There is a problem here: marketing has failed to find credibility in the very field it intends to address, which is the accountability of marketing and its contribution to shareholder value. A root cause of this failure is the prevailing confusion among marketing academics about the difference between customer assets and customer equity. In this paper, we argue for a clear distinction between the management of customer assets and the measurement of customer equity. We demonstrate the advantages for external stakeholders of including the drivers of and components of customer equity in management commentaries to financial reporting; and show how this could be done using a Customer Equity Scorecard.