Customer equity represents an attempt by businesses to measure the worth of all of their customers throughout their lifetimes. A company that establishes a strong customer base and builds a strong relationship with that base is poised to do well in the ultra-competitive modern business world. This approach represents a shift in thinking away from marketing strategies that are focused on the products that a company sells. The three main prongs of the customer equity approach are measuring how much value a customer perceives he receives from a company, assessing how much a company's brand resonates with a customer, and determining how well the company retains customers throughout their lifetime.
In the modern business world, creating a new approach to developing business is a difficult task. Most attempts to try and shine a spotlight on the products or services that a company offers have been tried many times over and may not impress customers anymore. As such, many companies instead start with the customers, developing a relationship first before trying to push their products. The worth of the customer base a company has built to the company represents its customer equity.
Value equity is the first part of the three-tiered approach to customer equity. A customer is likely to return if he feels that a certain product provides him with some sort of value greater than what he can find elsewhere. Some companies may enhance value equity by emphasizing its low prices compared to competitors. Others may instead focus on the reliability of their products, because customers would gain value from having products that last longer.
Brand equity is a part of the customer equity approach that has been emphasized a great deal in the modern business world. With computer applications and technological advances increasing the amount of advertising avenues that a company may pursue, consistency of message is absolutely paramount to breaking through to customers. A customer should know what to expect from a product simply by knowing that a certain company is associated with it.
Retention equity is the final piece of the customer equity puzzle. A customer becomes worth exponentially more to a company if he keeps returning throughout the course of his lifetime. For that reason, it is crucial that companies find ways to not only lure customers, but also to keep them coming back for more. Marketing and promotional strategies that develop strong customer relations can be an efficient and effective way of increasing bottom lines.