Driving Customer Equity: How Customer Lifetime Value is Reshaping Corporate Strategy

Driving Customer Equity

Driving Customer Equity: How Customer Lifetime Value is Reshaping Corporate Strategy

Roland T. Rust, University of MarylandValarie A. Zeithaml, University of North CarolinaKatherine N. Lemon, Boston College

Winner 2002 Berry-AMA Book Prize for the Best Book in Marketing

This award is given to exceptional marketing books that have set the standard for excellence and that were published within the previous three years.

2000, The Free Press

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Technical Details (Journal Article)

*Rust, Roland T., Katherine N. Lemon and Valarie A. Zeithaml (2004), "Return on Marketing: Using Customer Equity to Focus Marketing Strategy," Journal of Marketing, 68 (1), 109-127.

* Robert D. Buzzell Best Paper Award, 2003, awarded for an earlier version of the paper, entitled, "Driving Customer Equity: Linking Customer Lifetime Value to Strategic Marketing Decisions." Previously known as the MSI Best Paper Award, the Buzzell Award is awarded by the Marketing Science Institute to honor papers that have made a significant contribution to marketing practice and thought. It also serves to signal the kind of writing and research that is of lasting value to corporate marketing executives.

Endorsers

"Customer equity is the key concept around which we have distinguished Harrah's Entertainment as a customer relationship driven company in a product centric industry. The ideas in this book have paid big dividends for us."- Gary W. Loveman, Chief Operating Officer, Harrah's Entertainment, Inc.

"Rethink your brand management and investment strategies with an eye towards lifetime customer value and unlock the potential that your customers truly represent."- David Shoenfeld, Senior VP, Worldwide Marketing, FedEx

"Puts the focus of strategic thinking back on the customer."- David Findlay, CEO, DuPont Flooring Systems

"Read this book before your competitors do. It will help you get a handle on customer value and loyalty equity as must-know metrics in the new economy."-Don Peppers & Martha Rogers, Partners, Peppers and Rogers GroupAuthors of "Enterprise One to One" and "The One to One Manager"

"Driving Customer Equity is exciting to read-- business owners and managers in all industries can quickly apply these brilliant insights and practical examples to make key decisions to increase the value of their businesses."- Lance Rosenzweig, CEO, PeopleSupport.com

Abstract

If business success is based on customer relationships, then why is strategy still based on products? Driving Customer Equity shows how strategy and metrics based on Customer Equity- the total lifetime value of a firm's customers- can help a business make trade-offs between customer value, brand equity, and customer relationship management.

As business moves from transactions to relationships, the firm's emphasis moves from products to customers. For this reason, Customer Equity- the total lifetime value of a firm's customers- is becoming the key strategic focus in many leading firms.

Driving Customer Equity provides a new strategic framework that revels the key drivers - Value Equity, Brand Equity, and Relationship Equity- that increase the firm's Customer Equity. This new framework yields important insights that can help any business increase the value of its customer base. Based on a radical new model of customer lifetime value, Driving Customer Equity shows how to build and employ competitive metrics that reveal the firm's competitive standing on Customer Equity and its drivers. Based on those metrics, management can determine which drivers are most important in their industry, and can make efficient strategic tradeoffs between expenditures on those drivers. The Customer Equity framework also makes possible the projected financial return from marketing expenditures. Driving Customer Equity shows how increasing the firm's Value Equity, Brand Equity, and Relationship Equity can be accelerated using the internet. With concrete tools like Customer Pyramid, Driving Customer Equity will revolutionize the way companies manage their customer base and will change the way they think of corporate strategy.