Customer Equity Model Research Articles

Customer Equity Model: Analysis of Online Food Delivery Services in Indonesia

In the context of online food delivery services Gofood, Grab Food, and Shopee Food, this research intends to investigate the idea of customer equity model. Customer equity is a comprehensive indicator that measures the long-term worth of customers and is crucial in helping organizations make strategic decisions. This study intends to offer insights into customer acquisition, retention, and development of strategies for improving the overall performance and profitability of the online food delivery services by studying the customer equity model. The key concepts of value equity, brand equity and relationship equity, and digital journey are examined in this study. With surveys used to gauge consumer views and behaviors, the methodology of this study uses a quantitative research strategy to collect and evaluate data from customers who utilize online food delivery services and this study also analyze using the tool SMART PLS 4.

Comparing alternative approaches to estimate customer equity

PurposeThe purpose of this paper is to explore the differences and similarities between two methods/models for estimating customer equity (CE): one using behavior-based data and one using market-based data.Design/methodology/approachTwo separate analyses of the same market scenario (telecom industry) were conducted, by applying the CE estimation method from Rust et al. (2004) and the CE model from Gupta et al. (2004).FindingsDifferent methods/models can produce similar estimates, which corroborates the defense of an integrated multi-method approach to evaluating CE. In addition, they each provide different benefits. The behavioral data model provides identification of CE drivers and assists in the task of marketing resource allocation, the market-based data model is simple and easy to implement and is recommended in cases when CE is used as a financial indicator.Originality/valueThis paper contributes to the CE literature in the following ways. First, it demonstrates the possibility of obtaining similar estimates of CE using distinct types of data and data collection procedures, and with two different estimation methods/models. Second, it confirms that either model allows firms to compute the expected market capitalization at any given time using customer and financial information. Third, it demonstrates the convergent validity of these two methods/models for estimating CE for either public or private companies, thus legitimizing the comparison of their respective CE values, regardless of the type of source data or estimation formula used.

Cultural Difference of Customer Equity Drivers on Customer Loyalty: A Cross-National Comparison between South Korea and United States

Purpose: Many advanced discount stores could not reach the certain growth level due to cultural differences and their marketing strategies that have failed to adopt in local market environment. The purpose of this study is to find the effects of customer equity drivers on customer loyalty and to examine cultural differences between South Korea and United States.Methodology/Approach: This study sets independent variables of value equity, brand equity and relationship equity from the customer equity model and tests to see how each equity driver affects customers' loyalty through gaining their trust and satisfaction in the discount store industry. We applied structural equation model to test the hypothesis. We conducted a survey on customers who had shopping experiences in discount stores and gathered data from United States and South Korea respectively.Findings: The results show that there are significant differences in the effects of customer drivers on customer loyalty via trust and satisfaction in large retail industries. While Satisfaction had some effects on building their loyalty in Korea, satisfaction had no effect in gaining customers’ loyalty in USA.Research Limitation/implication: The results of this study are highly relevant for managers who must make strategic marketing decisions for different cultures.Originality/Value of paper: This study is the first systematic cross-cultural examinations on how customer equity drivers in discount stores affect customer loyalty between USA and South Korea.

A cross‐national validation of a new retail customer equity model

AbstractThis study aims to examine retail customers of China and Korea with a view to understanding the differences in the effects of customer equity on perceived store loyalty. We built a modified model of retail customer equity incorporating three drivers of retail customer equity (experience equity, brand equity and relationship equity), and further substantiate the relationships among the three equity drivers. For this purpose, we measured the customer equity of large scale discount stores located in China and Korea.The result shows that experience equity and brand equity significantly influence customer loyalty, whereas relationship equity does not. The relationships among the three drivers of customer equity revealed that experience equity significantly affects both brand and relationship equities, but relationship equity does not significantly affect brand equity. Based on country level analysis, on Korean side the experience equity influences relationship equity, brand equity and store loyalty, whereas on Chinese side, experience equity influences relationship equity and brand equity,

Firm valuation from customer equity: When does it work and when does it fail?

Is customer equity a good proxy for a firm's market value? Using data from Netflix over 10years, I provide evidence that a CLV-based customer equity model tracks market capitalization remarkably well under versatile conditions of stable growth, profit volatility, and even a broad market crash. However, if a firm shifts business model through radical innovation, the customer equity model requires recalibration to continue tracking market capitalization.

Green marketing programs as strategic initiatives in hospitality

Purpose – This paper aims to investigate a guest’s subjective appraisal of a hotel’s green marketing program, or green equity, along with value, brand and relationship equities on guest loyalty. Design/methodology/approach – Study 1 presents three models to explicate the role of a luxury hotel’s green initiatives in influencing guest loyalty. By means of structural equation modeling, one model emerges with the best fit. Study 2 examines how tourists assign economic value to a hotel’s green programs. Findings – Green equity plays a significant role in customers’ overall assessment of a hotel’s marketing programs; however, the effect is weaker when compared with the other indicators, including a hotel’s value proposition, brand image and loyalty programs. Furthermore, the results reveal that tourists are willing to pay a price premium for a hotel’s green marketing programs. Research limitations/implications – The paper links green marketing to the customer equity model and clarifies the impact of green marketing programs on loyalty and profitability. However, the study was conducted among luxury hotel guests and tourists in Macau, a leading gambling destination; thus, these customers might not have been concerned with green marketing initiatives. Practical implications – The results show that green initiatives are beneficial as long as managers include these initiatives in their overall strategic marketing programs that also promote firm value propositions, brand images and reputation. Originality/value – The paper clarifies the role of green marketing programs in hospitality and shows how hotels can benefit from enhanced guest loyalty and decreased operational expenses by implementing green initiatives.

Student Retention: Application of the Customer Equity Model

This study provides an evaluation of the marketing-based customer equity model applied to student retention using measures of student equity and goal orientation. Data gathered from students, combi...

The effects of customer voice on hotel performance

This paper investigates the effects of two critical customer voice variables on hotel performance. Specifically, the research provides a customer equity model in which the influences of both customer satisfaction and complaints are considered. The impact of the customer voice variables on hotel performance is investigated while considering the potential for moderating effects by hotel size and star rating. We use a more robust approach to measure firm performance than is traditionally used in satisfaction-performance studies. Finally the paper reports on the results of these investigations and outlines implications for both theory and practice.

An approach based on the Bass model for analyzing the effects of feature fatigue on customer equity

Integrating more features into one product makes the product more attractive, thereby increasing initial sales; however, once customers start using the high-feature product, they become dissatisfied with the usability problems caused by too many features. This phenomenon is called "feature fatigue". Feature fatigue will lead to dissatisfaction and negative word-of-mouth, which will damage the brand's long-term profit, and ultimately decrease the manufacturer's customer equity. In this paper, we propose an approach based on the Bass model to analyze the effects of feature fatigue on customer equity, helping designers evaluate and alleviate feature fatigue. We integrate product capability, usability, and word-of-mouth effects into the Bass model to analyze customer purchase behavior under different product capability and usability. Then a customer equity model is proposed to calculate customer equity according to customer purchase behavior. A feature fatigue degree is defined and a feature fatigue evaluation method is proposed, providing decision supports for designers to decide what features should be added so as to alleviate feature fatigue. Finally, a case example is illustrated to validate the proposed approach.

The customer equity implications of using incentives in acquisition channels: A nonprofit application

A core objective of customer–company relationship management is the allocation of marketing resources across customer acquisition and retention so as to maximize customer equity (CE). Although extant CE models cover much important ground, the literature continues to overlook two options commonly exercised by managers – the option to change the orientation or degree of focus of a channel on acquisition versus retention and the option to boost acquisition rates by using margin-reducing incentives such as discounts, coupons, gifts or bonuses. The present research addresses these issues by presenting a deterministic model that allows managers to determine whether and when sacrificing margins in acquisition is justified from the perspective of CE maximization. Sensitivity analyses and a real-world application with a large, private nonprofit organization in the United States illustrate the use of the model and its ability to identify an optimal CE greater than that in a competing model.

Segmentation policies using the customer equity model: a study in a Brazilian hypermarket

The objective of this study was to analyse the criteria of priority used to adopt the marketing strategies of quality, price, convenience, brand and relationship, and its adequacy towards the values that are perceived by the customers’ segments of a retailer, using the customer equity model. The methodological procedures consisted of a survey that was directed to the consumers and an analytic hierarchy process (AHP) was applied with the hypermarkets’ managers. The priority criteria for the adoption of marketing policies were based on the value equity, brand equity and retention equity constructs. The results have shown that these policies do not meet the expectations of most of the consumers, who value first the brand, followed by the retention and finally the value equity. In contrast, the managers that were interviewed still have their focus on the price as the main strategic action for the customers’ satisfaction, followed by brand and retention.

Customer Equity Models for Mainland China and Taiwan's Economy Hotels

The economy hotel industry in Mainland China has grown rapidly in the last 20 years. At the same time, Taiwan has aggressively marketed development for the last five years. This work develops a customer equity model for economy hotels and compares model differences for Mainland China and Taiwan. In total, 297 completed questionnaires were collected in Mainland China and 318 in Taiwan. Model testing was conducted through structural equation modeling (SEM). Analytical results reveal that travelers focused more on relationship equity and brand equity in Mainland China, while travelers in Taiwan focused on value equity and brand equity, and that strengthening these will strengthen customer equity. Finally, implications and suggestions for future research are discussed.

Customer equity and market value: Two methods, same results?

Although researchers have developed a variety of methods to model customer equity (CE), producing simple and robust models is a difficult task. Often, researchers have to compromise simplicity in favor of robustness or completeness. This paper empirically investigates two CE-based methods to compute proxies for market value. The models differ substantially in terms of complexity and the type of information they use, but their result is equivalent. Both models use Gupta et al. (2004) CE approach, and use data from the Brazilian Telecom Industry. The results show that CE, under the simpler, static approach, when added to net equity, is a good proxy for market value and reasonably equivalent to Gupta et al.'s (2004) CE under the dynamic approach. While the dynamic approach requires some technical training and substantive customer information that might not be readily available, the static approach is simpler and easier to compute.

Customer Lifetime Value and Customer Equity Models Using Company-reported Summary Data

Customer Lifetime Value and Customer Equity Models Using Company-reported Summary Data

The Influences of Customer Equity Drivers on Customer Equity and Loyalty in the Sports Shoe Industry: Comparing Korea and China

The concept of customer equity brings together customer value management, brand management, and relationship/retention management. However, the model put forth by Rust, Lemon, and Zeithaml (2000) does not include a consideration of the concept of loyalty, as in Vogel, Evanschitzky, and Ramaseshan (2008). In contrast to customer equity, customer loyalty involves an intention to engage in future purchase behavior with the same firm or brand. Its drivers are complex and dynamic, usually changing over time. Although plenty of researchers have studied those factors, the present study follows that of Johnson, Herrmann, and Huber (2006) and Vogel et al. (2008), which suggest that customer equity drivers can also drive customer loyalty. Thus, the present paper sets out to support this conclusion in the sports shoes industry, and to discover the differences in the influence customer equity drivers have on customer loyalty in Korea and China. This is because the product choices of consumers and their preferences for a particular product or brand are generally influenced by complex social factors (Yau, 1994). From 450 respondents in the countries’ capitals who answered the study questionnaire, the Korean sample included 125 university students and 75 fashion industry employees from Seoul, while the Chinese sample included 150 university students and 59 fashion industry employees from Beijing. To test the hypotheses, we first employed structural equation modeling with the maximum likelihood estimation method using the model without moderator. Then, for testing the differences between the two groups, a multi-group analysis with AMOS 7.0 was used to assess the moderating variable effects on the structural model (Byrne, 2001). Our research extends the literature on the outcomes of the three drivers of customer equity: value equity, relationship equity, and brand equity. The survey data of the study were used to examine their effects on customer loyalty, and the effect of customer loyalty on customer equity. The study’s focus on a specific industry, sports shoes, also extends the customer equity research into a different area. Our findings show that the customer equity model can be only partly supported. Relationship equity and brand equity can drive customer equity in the sports shoes industry. Results also show that value equity, relationship equity, and brand equity positively influence customers’ loyalty toward sports shoes brands, whereas customer loyalty has a positive effect on customer equity in that industry. Thus, value equity, relationship equity, and brand equity are not only the drivers of customer equity, but can drive customer loyalty as well. In the sports shoe industry, firms should keep investing in marketing activities targeted toward increasing the perceived equity of value, relationships, and brand. However, different nationalities can show different relationships among the customer equity drivers, customer loyalty and customer equity. Our study, though subject to several limitations, can provide several managerial implications for sports shoe firms. First, findings from testing customer equity in the sports shoe market show that value equity, relationship equity, and brand equity are the drivers of customer loyalty, suggesting that a sports shoes firm must meet customer expectations, create better relationships with customers, and increase the equity of the brands. Second, when managers make decisions about how to enter a new market, or how to improve customer loyalty, cultural and market differences should be considered.

Modeling and Maximizing Customer Equity

One of the most efficient criteria for achieving an optimal balance of resources among customer acquisition, retention and expansion efforts is the maximum customer equity. In this article the author proposes a new solution for the customer equity maximization problem. The proposed solution takes into account two elements not considered in the majority of customer equity models in the literature: the customer expansion concept and acquisition, retention and expansion floor rates. The article presents a double-phase model that employs a variation of the Lagrange multiplier method to solve this balancing challenge. Its main contribution consists in providing a more comprehensive framework for optimizing the balance among customer acquisition, retention and expansion investments. The new approach contributes also for improving customer relationship management (CRM) decisions. Additionally, it represents appropriately the complexity of relationships among the customer equity core variables.

Applying customer equity to the convention industry

PurposeThe purpose of this study is to determine the value a convention center provides its customers, the brand the center offers, and the importance of the customer/business relationship. Value, brand, and relationship equity (RE) are components of customer equity (CE).Design/methodology/approachInterviews were conducted with meeting planners related to their experiences with top‐tier convention centers in the USA.FindingsMeeting planners confirmed value equity (VE) as the most important in the customer to business exchange. RE followed with brand equity (BE) as the least important of the three. Meeting planners identified the sub‐drivers of VE as location, quality and price received from the convention center. BE sub‐drivers included: reputation and the awareness of the convention center. RE sub‐drivers included: the interactions, responsiveness, and special treatment received from the convention center personnel. A CE model is presented.Practical implicationsThe application of the CE model to the convention center's strategic planning process can provide a roadmap for increasing CE across value, brand and relationship activities.Originality/valueThis is the first study to identify the drivers and sub‐drivers of CE in the convention industry.

Using customer equity models to improve loyalty and profits

PurposeThe purpose of the paper is to teach the reader how to compile a customer equity model in order to calculate the true profitability of customers. The reader can use the information to make better business decisions across their organization.Design/methodology/approachTransaction data (as much as can be collected) on individual customers is needed to build the customer equity model. An analyst is needed to devise an algorithm and discern the best way to allocate costs. The goal is to build the best representation of profitability for the company. Once a process is in place for assigning revenue and costs to customers, tables must be programmed to calculate profitability. The final step is to take what is learned in the customer equity model and test ideas for retaining best customers and converting unprofitable customers into profitable ones.FindingsIt was found that customer equity models are important tools for describing past behavior, predicting a customer's next‐year profitability, and exploring other variables that factor into marketing decisions.Practical implicationsIdentifies the need for companies to do a more thorough job of identifying their “best” customers, that is, their most profitable customers. Provides direction on putting together a customer equity model that will help companies reach the above‐mentioned findingsOriginality/valueThis paper is valuable to anyone who could benefit by better understanding past behavior of customers, and by predicting a customer's next‐year profitability. The reader can use the information to make better business decisions across their organization.