Driving Customer Equity : How Customer Lifetime Value is...

Features

• Cover Type: Hard Cover with 304 pages
• Published by: Free Press June 27, 2000
• Written in: English
• ISBN 10 Number: 0684864665
• ISBN 13 Number: 978-0684864662
• Book Dimensions: 9.4 x 6.3 x 1.3 inches
• Weighs: 1.1 pounds

Product Review
Serban Teodoresco VP Operations, DiverseyLever Consulting, Unilever Group An insightful and powerful new model for establishing clear strategic priorities. Faced with fast wealth migration in their industry and customers with more options than ever, companies will need such models if they want to remain competitive. -- Review

Product Review
Gary W. LovemanCOO, Harrah's Entertainment, Inc.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.

David ShoenfeldSenior Vice President, Worldwide Marketing, FedExMake customer equity the focus of your brand management and investment strategies with an eye toward customer lifetime value, and unlock the potential that your customers truly represent.

David K. FindlayCEO, DuPont Flooring Systems, Inc.Driving Customer Equity puts the focus of strategic thinking back on the customer. It provides an intriguing set of frameworks and evaluation processes on which to build business models in tune with today's competitive realities.

Lance RosenzweigCEO, PeopleSupport.comExciting 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.

Serban TeodorescoVP Operations, DiverseyLever Consulting, Unilever GroupAn insightful and powerful new model for establishing clear strategic priorities. Faced with fast wealth migration in their industry and customers with more options than ever, companies will need such models if they want to remain competitive.

Don Peppers and Martha RogersPartners, Peppers and Rogers GroupRead this book before your competitors do. It will help you get a handle on customer value and loyalty as must-know metrics in the new economy.

Reader Reviews
This review is from: Driving Customer Equity: How Customer Lifetime Value Is Reshaping Corporate Strategy (Hardcover) Since the beginning of the industrial revolution, companies have built an organization around their products. In the traditional corporate model, finance, marketing, information systems, and operations focus on the profitability of products rather than customers. In recent years, companies have attempted to become more customer focused but often lack the organizational structure and corporate strategy to succeed in this transformation. In Driving Customer Equity, Roland Rust, Valarie Zeithaml, and Katherine Lemon develop a conceptual framework to help companies reshape their corporate strategy to grow the lifetime value of their customer base, or "customer equity". Although the concepts and strategies in this book could, theoretically, grow customer equity, the lack of real world implementations offered in this book leave the reader unsure of the feasibility to existing firms. Rust, et al., break down the customer equity strategy into four parts: examining the problems with traditional product-oriented strategies, defining the customer equity framework, developing a customer-centered strategy, and managing the customer equity strategy. Each concept within the customer equity strategy is clearly organized and explained. At the end of each chapter the authors provide a table of "key insights" matched to "action steps" for each insight. Throughout the book, these tables provide a high-level roadmap to implementing the customer equity framework. Beginning with two important concepts, the "profitable product death spiral" and the "lifetime value of the customer", the authors build a good case for changing a company's focus from products to customers. The theory's foundation is that companies who remove unprofitable products from the marketplace may lose customers who purchase bundled products and therefore lose long-term profit potential. Rust, et al., argue that companies who focus on the value of the customer over their lifetime may choose to keep unprofitable products to maintain or grow their customer base and increase long-term customer equity. The authors build on this basis by breaking down customer equity into three unique but interdependent areas - value equity, brand equity, and retention equity. Value equity of a company is "when what it offers matches what the customer expects and perceives value to be." The concept of value equity is used as the foundation of the customer's relationship with the firm. Brand equity is defined as the "customer's subjective and intangible assessment of the brand, above and beyond its objectively perceived value." Retention equity is defined as the "customer's tendency to stick with the brand, above and beyond objective and subjective assessments of the brand." While none of these three concepts are new, Rust, et al., redefine these areas in terms of the impact, needs, and perceptions of the individual customer. The action steps at the end of these chapters, such as "Engage in marketing research to understand which definitions of value are relevant to your customers. Tailor offers to focus on different value perception," are mostly common sense. There are no novel gems of wisdom, but instead a woven fabric of simultaneous actions necessary for the customer equity strategy to work. In subsequent chapters, the authors go on to develop a customer-centered strategy that tries to measure customer equity, evaluate the financial impact of different customer equity strategic decisions, and convince upper management that customer-centered strategy will be more profitable to the company. Each section is well written and again provides action steps. However, these steps, such as "Develop a uniform evaluation procedure for all improvement programs for increasing Customer Equity," are often very high-level or require very large investments in time or money. The last few chapters investigate ways to manage customer equity through redefining market segmentation based on the profitability of each customer rather than demographic, geographic, or psychographic approaches. As a result of this new segmentation, the authors show that some customers who are actually a drain on the company's resources should be proactively removed from the customer pool, thus lowering costs. It may seem counter-intuitive to decrease customers, but the authors make a good argument and provide ways to remove the customers gracefully. While the book is well written and clearly explained, there are a few problems with the implementation logistics for existing firms. Examples of successful shifts to customer equity strategy are scare and repetitious. Fed Ex, IBM, and banks are some of few real-world companies that are shown to have implemented parts of the customer equity framework. There is no example of a company who has adopted the entire customer equity strategy. Without at least one leader in this revolution, managers may hesitate to pick up the banner of customer equity. Another complicating issue is the customer equity strategy must be implemented at all levels of the company simultaneously to be effective. Many of the action steps require a significant amount of time, money, and buy-in from upper management, as well as fundamental shifts in organization and company values. For a start-up company, this strategy could be incrementally implemented as the company grows, but for established organizations it is a daunting and most likely impossible task. Rust, Zeithaml, and Lemon have described a very thorough strategy that will most likely become the standard of operation for new companies. The ideas expressed in Driving Customer Equity, taken as a whole, could grow value equity, brand equity, and retention equity. However, without a success story to rally interest, successful implementation for existing firms is out of reach unless the fundamental values of and dedication to the customer equity strategy are embraced by senior management, employees, and shareholders.