Amongst the most popular posts on my blog, read 5000 times in its first ten months, are those relating to Customer Equity, particularly CRM: Customer Equity and Company Valuation. And for good reason - as one of the most interesting aspects of Customer Equity is that it is a forward-looking construct, in other words, a key attribute of Customer Equity is uncertainty, the uncertainty in assessing the future cash flows that will be generated by your customers.
Customer Equity measurements becomes more interesting when
Indeed Customer Equity is the subject of an entire driver tree, with the drivers impacting Customer Equity in different ways. It is the realm of strategic marketing to understand how these drivers need to be tweaked in order to maximise Customer Equity over time.
Customer Equity is important because it incorporates so many other measures important to the marketing team and presents it as a point measure, or better, as a probability distribution*. However, one of the most important aspects of Customer Equity is that it can be used to estimate your future marketing ROI, in other words, your future return on marketing. This is because Customer Equity cannot be properly assessed unless you not only truly understand what marketing interventions will be required to drive future value, but also what it will cost to drive those interventions.
In other words, unlike many other marketing measures, Customer Equity is one of the few forward-looking measures in your strategy and measurement arsenal, which places it in a league of its own as far as marketing performance measurement and marketing strategy is concerned!
Customer Equity is such an interesting construct that I am in the process of building a tool that will help demonstrate how customer value is calculated, which in turn will illustrate the huge role of the drivers of customer equity. If you would be interested in a demonstration, the output of which can be used as a driver of your future marketing strategy, please let me know.
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* It is unfortunate that so many marketers tend to be 'scared of the numbers', because while the value may take quite some work to calculate, it is not unduly difficult. However, it does become a lot more interesting when statistical methods are applied to the calculation because then probability theory can be applied, as befitting uncertainty, which is a lot more powerful a management tool than mere point numbers.
Customer Equity measurements becomes more interesting when
- you begin to benchmark Customer Equity within similar companies in the same industry, thereby identifying which companies are the more valuable
- realising that the proper calculation of Customer Equity includes an assessment of the goodwill towards the brand because it depends on insight with respect to the future brand equity of the company to help assess the nature of future purchases
- realising that the proper calculation of customer equity requires insight with respect to the customer's assessment of your customer value proposition, which in turn is impacted by many operations drivers such as customer service.
Indeed Customer Equity is the subject of an entire driver tree, with the drivers impacting Customer Equity in different ways. It is the realm of strategic marketing to understand how these drivers need to be tweaked in order to maximise Customer Equity over time.
Customer Equity is important because it incorporates so many other measures important to the marketing team and presents it as a point measure, or better, as a probability distribution*. However, one of the most important aspects of Customer Equity is that it can be used to estimate your future marketing ROI, in other words, your future return on marketing. This is because Customer Equity cannot be properly assessed unless you not only truly understand what marketing interventions will be required to drive future value, but also what it will cost to drive those interventions.
In other words, unlike many other marketing measures, Customer Equity is one of the few forward-looking measures in your strategy and measurement arsenal, which places it in a league of its own as far as marketing performance measurement and marketing strategy is concerned!
Customer Equity is such an interesting construct that I am in the process of building a tool that will help demonstrate how customer value is calculated, which in turn will illustrate the huge role of the drivers of customer equity. If you would be interested in a demonstration, the output of which can be used as a driver of your future marketing strategy, please let me know.
--- * ---
* It is unfortunate that so many marketers tend to be 'scared of the numbers', because while the value may take quite some work to calculate, it is not unduly difficult. However, it does become a lot more interesting when statistical methods are applied to the calculation because then probability theory can be applied, as befitting uncertainty, which is a lot more powerful a management tool than mere point numbers.
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