Customer Equity: Making Marketing Strategy Financially Accountable
Journal of Systems Science and Systems Engineering, 2004
Traditionally, Return on Investment (ROI) models have been used to evaluate the financial expenditures required by the strategies as well as the financial returns gained by them. However in addition to requiring lengthy longitudinal data, these models also have the disadvantage of not evaluating the effect of the strategies on a firm’s customer equity. The dominance of customer-centered thinking over product-centered thinking calls for a shift from product-based strategies to customer-based strategies. Hence, it is important to evaluate a firm’s marketing strategies in terms of the drivers of its customer equity.
In this article, Assistant Professor Ashwin Aravindakshan and co-authors Roland T. Rust, Katherine N. Lemon and Valarie A. Zeithaml summarize a unified strategic framework that enables competing marketing strategy options to be traded off on the basis of projected financial return, which is operationalized as the change in a firm’s customer equity relative to the incremental expenditure necessary to produce the change.