Customer Equity Management: a brief note

The basic underlying view of Customer Equity Management (CEM) is this: treats a company's customers as a financial asset whose value is to be maximized with a total marketing system (Blattberg, Getz, and Thomas, 2001). To be specific, a company's total customer equity is (a) returns on acquistion + (b) returns on retention + (c) returns on add-on selling across its entire customer portfolio over time.  CEM assimilates customer relationship management and database marketing concepts in its thinking. CEM requires that the organization design be customer-centric.

Blattberg, Getz, and Thomas (2001) identify 4 cornerstones in Customer Equity Management:

1. Customer life cycle management (from prospects -> first-time buyers -> early repeat buyers -> core customers -> core defectors) 
2. Database power exploitation
3. Customer value quantification, notably on computing customer equity value as well as the statistical relations between marketing mix and equity value
4. Customer acquisition, retention, add-on selling mix optimization

There are a number of trends that foster the adoption of Customer Equity Management, e.g. behavior data explosion, disintermediation, warfare for customer loyalty, and channel proliferation, and one-to-one Internet communication, etc. (Blattberg, Getz, and Thomas, 2001). These trends can be grouped into two categories: (a) the advancement of IT as enablers and (b) competitive pressure for more customer-focused marketing efforts.


References

1. Blattberg, R.C, Getz, G. and Thomas, J.S. (2001) Customer Equity, Harvard Business School Press.
2. On Customer Equity: http://www.customerequity.com/ce/indepth.html
3. What drives customer equity: http://www.markenlexikon.com/d_texte/customer_equity_drivers_2001.pdf