Foundations and Trends® in Marketing > Vol 1 > Issue 1

Customer Equity: Measurement, Management and Research Opportunities

By Julian Villanueva, IESE Business School, Camino del Cerro del Águila, Spain, | Dominique M. Hanssens, UCLA, Anderson School of Management, USA,

Suggested Citation
Julian Villanueva and Dominique M. Hanssens (2007), "Customer Equity: Measurement, Management and Research Opportunities", Foundations and TrendsĀ® in Marketing: Vol. 1: No. 1, pp 1-95.

Publication Date: 22 Mar 2007
© 2007 J. Villanueva and D. M. Hanssens
Customer Equity,  Customer Relationship Management,  Econometric models
Customer equityCRMProduct management

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In this article:
1 Introduction 
2 Models to Compute Customer Equity 
3 Drivers of Customer Equity: The Acquisition Effort 
4 Drivers of Customer Equity: Customer Retention 
5 Drivers of Customer Equity: Add-on Selling 
6 Marketing Customization and Customer Equity Maximization 
7 Conclusions 


Despite the recent academic interest in the study of customer equity (CE henceforth), a comprehensive discussion of the prevailing research issues has not been provided. There is a shift in the interest of managers and researchers from a traditional focus on product management to a more recent focus on customer relationship management (CRM). We believe that research on CE could provide the necessary tools to link CRM to long-term financial performance. In this paper, we (a) discuss the academic and strategic importance of CE, (b) provide an extensive literature review, and (c) prioritize future research. We argue that there are two major agendas for future research in CE. The first is to provide better measures (e.g. the measurement of customer lifetime value), and the second is to identify the strategies that lead to CE maximization. We emphasize modeling approaches that have been used or could be used to tackle the suggested research questions. A special focus is given to statistical models that are capable of incorporating long-run dynamics.

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Table of contents:
Models to Compute Customer Equity
Drivers of Customer Equity: The Acquisition Effort
Drivers of Customer Equity: Customer Retention
Drivers of Customer Equity: Add-on Selling
Marketing Customization and Customer Equity Maximization

Customer Equity

Customer Equity can help management allocate marketing spending for long-term profitability, understand the connection between budgets, metrics and financial performance, provide a customer focused approach for measuring firm value, and improve the productivity of CRM platforms by providing frameworks, tools and metrics. Customer Equity reviews current models, offers a typology, and examines the fundamental question of whether a customer equity orientation can put a firm in a competitive advantage to other firms. The authors review models that can increase customer equity by optimizing each of its drivers - customer acquisition, customer retention, and add-on selling. Customer Equity is important reading for marketing managers, marketing researchers, scholars and students.