Customer Equity Drivers and Future Sales
Published 11/1/2008
Author: Verena Vogel, Heiner Evanschitzky, & B. Ramaseshan
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Executive Summary
In the current competitive marketing environment, customer equity, which helps measure the expected future behavior of a firm’s customers, is a key strategic asset. The concept of customer equity brings together customer value management, brand management, and relationship/retention management. It is the basis for a new strategic framework from which firms can build more powerful, customer-centered marketing programs that are financially accountable and measurable. In this study, the authors investigate the performance impacts of the three customer equity drivers—value equity, brand equity, and relationship equity—on customer loyalty intentions and actual customer behavior as reflected by the firm’s future sales. Loyalty intentions and future sales were chosen as performance outcomes because the former reflects favorable attitudes toward the firm, whereas the latter is readily available to managers and is of critical importance to managers. Understanding how to improve performance in these two areas can contribute significantly to customer-focused management decision making. The research used both survey data and real purchase data from customers of a large European do-it-yourself retailer. Because it is important to predict changes in consumer behavior that are really driven by marketing actions and not by consumers habitually buying at the same store as a result of inertia effects, the authors controlled for inertia by also examining prior sales as predictors. The study demonstrates that the three customer equity drivers investigated can significantly predict future sales, even after controlling for current sales. All three customer equity drivers have a significant, positive influence on customer loyalty intentions, and in turn, loyalty intentions have a positive effect on future sales. Among the three drivers, brand equity and value equity were of primary importance in predicting future sales. On the basis of the findings, the authors suggest that it is extremely important for firms to meet the expectation of customers and deliver different aspects of value, including quality service, quality product, price, convenience, and an engaging shopping environment, and to focus on establishing and sustaining brand equity. Furthermore, firms must increase relationship equity by establishing and maintaining sound relationships with customers that will help cement them to the firm. The results of the study suggest that limited marketing budgets should be spent on actions and programs to increase or maintain brand and value equity as the first priority, followed by spending to enhance relationship equity.
Biography
Verena Vogel, PhD, is a consultant at Bayer Business Services GmbH in Leverkusen, Germany. Before joining Bayer, she worked as a research assistant at the Marketing Centrum Muenster, University of Muenster, Germany, and received her PhD in Marketing in 2006. She also was a lecturer at School of Marketing, Curtin University of Technology, Australia. Her research interests include relationship marketing, pricing, consumer behavior, and retailing. Her work has been published in several journals. including Advances in Consumer Research, Journal of Product and Brand Management, and International Journal of Retail & Distribution Management.
Heiner Evanschitzky is Professor of Marketing at the University of Strathclyde, UK. He received his PhD in Marketing from the University of Muenster, Germany, and worked there as an assistant and associate professor. He was visiting scholar at Florida Atlantic University. His research interests include service marketing, retailing, marketing metrics, relationship marketing, and research methods. His work has been published in leading journals, such as Journal of Marketing, Journal of Retailing, Journal of Service Research, Industrial Marketing Management, and Journal of Business Research.
B. Ramaseshan is Professor of Marketing and head of the School of Marketing at Curtin University of Technology, Australia. He was the vice president (International Membership) of the Academy of Marketing Science from 2004 to 2006. His teaching and research interests focus on marketing strategy and relationship marketing. His work has been published in several journals, including Journal of Retailing, Journal of Service Research, and Journal of Business Research. In 2005, Ram was conferred as fellow of the Marketing Institute of Singapore for his contribution to the marketing discipline. He is also a fellow of the Australian Institute of Management. He is currently on the editorial review board of several journals and acted as occasional reviewer for several journals and conference proceedings. Ram has received several national and industry research grants and was the recipient of the Curtin Business School Researcher of the Year Award in 1994 and 1998.
Journal of Marketing, Volume 72, Number 6, November 2008
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