Customer Equity Analyses

Table of Contents

1. Introduction

1.1. Problem Definition

1.2. Study Objectives

1.3. Study Procedure

2. Study Fundamentals

2.1. Customer Equity and Value-Based Management

2.1.1. Shareholder Value

2.1.2. Value-Based Marketing as a Consequence of Value-Based Management

2.1.3. Market-Based Assets as Reference Objects in Value-Based Marketing

2.1.4. Customer Equity as a Management Figure in Value-Based Marketing

2.2. Customer Equity in Dyadic Business Relationships

2.2.1. Customer Value: Customer-Sided Value

2.2.2. Customer Equity: Supplier-Sided Value

2.3. Interim Conclusion

3. Chosen Determinants of Customer Equity

3.1. Monetary Value Potentials

3.1.1. The Earning Potential

3.1.2. The Cross-Selling Potential

3.2. Non-Monetary Value Potentials

3.2.1. The Information Potential

3.2.2. The Reference Potential

3.3. Interim Conclusion

4. Chosen Customer Equity Models

4.1. Unidimensional, Monetary Valuation Models

4.1.1. Turnover Analyses

4.1.2. Customer Contribution Accounting

4.1.3. Customer Lifetime Value Analysis

4.2. Unidimensional, Non-Monetary Valuation Models

4.2.1. The Loyalty Ladder Concept

4.2.2. The NBD/Pareto-Model

4.3. Multidimensional Valuation Models

4.3.1. Scoring Models

4.3.1.1. The RFMR-Method

4.3.1.2. The Customer Valuation Grid

4.3.2. Customer Portfolios

4.3.3. The Holistic CE Model by Cornelsen

4.3.3.1. The Cross-Selling Value

4.3.3.2. The Reference Value

4.3.3.3. The Information Value

4.4. The Customer Equity Network as a Process-Oriented Model

4.4.1. Key Figures and Processes

4.4.2. The Customer Cash Flow

4.4.3. The Discount Rate

4.4.4. The Terminal Value

5. Conclusion and Prospectus

Objectives and Research Scope

This thesis examines the applicability and limitations of various customer equity models within value-based management, aiming to reconcile the conflicting demands of shareholder value and customer-focused market orientation by evaluating customer relationships as strategic investment objects.

• Analysis of the coherence between Customer Equity and Shareholder Value.
• Identification of central value components of customer relationships.
• Evaluation of different methodologies for measuring customer equity.
• Critical assessment of model applicability in a management context.

Excerpt from the Book

Summary of Chapters

1. Introduction: Outlines the tension between shareholder value expectations and customer-oriented management, defining the thesis objective to analyze customer equity as a bridge between these two perspectives.

2. Study Fundamentals: Establishes the theoretical framework by linking shareholder value with customer equity and clarifying the role of market-based assets.

3. Chosen Determinants of Customer Equity: Characterizes monetary and non-monetary value potentials, including earning, cross-selling, information, and reference potentials.

4. Chosen Customer Equity Models: Provides a detailed analysis of unidimensional, multidimensional, and process-oriented models, assessing their mathematical approaches and practical limitations.

5. Conclusion and Prospectus: Summarizes the findings regarding the models' capabilities and suggests that process-oriented networks offer the most promising approach for integrating marketing with corporate financial goals.

Keywords

Customer Equity, Shareholder Value, Value-Based Management, Customer Lifetime Value, Marketing Efficiency, Customer Contribution Margin, Customer Portfolio, RFMR-Method, NBD/Pareto-Model, Market-Based Assets, Customer Retention, Cross-Selling, Reference Potential, Information Potential.

Frequently Asked Questions

What is the core conflict addressed in this research?

The work addresses the conflict between top management's obligation to maximize Shareholder Value and the market-driven requirement to focus on Customer Value for long-term survival.

What is the primary goal of this study?

The objective is to analyze to what extent various Customer Equity models can measure the contribution of marketing to corporate performance and support value-oriented management decisions.

How is "Customer Equity" defined in this context?

Customer Equity is defined as the economic value a supplier attributes to a customer, representing the valuated sum of all current and future customer relationships.

Which scientific methods are analyzed in this thesis?

The thesis evaluates unidimensional models (Turnover Analyses, CLV, Loyalty Ladder), multidimensional models (Scoring, Portfolios, Cornelsen's Holistic Model), and process-oriented models (Customer Equity Network).

What are the two main value potentials for customers?

The work distinguishes between monetary potentials (earnings, cross-selling) and non-monetary potentials (information value, reference/word-of-mouth potential).

How is the "Information Potential" utilized by firms?

It represents the value of strategic information received from customers—such as needs, feedback, or innovation triggers—that helps a supplier optimize their products and processes.

How does the NBD/Pareto-Model help in managing customer relationships?

The NBD/Pareto-model helps determine the "active" status of a customer and predict their lifetime, which assists in deciding when to prune the customer base.

Why is the "Customer Equity Network" considered a process-oriented model?

It is modeled after the Shareholder Value Network, linking transactional and relational processes directly to financial performance indicators and value drivers.