What is customer equity? How can a company increase its customer equity?

Expert Solution

Customer equity is the total combined customer lifetime values of all of the company's current and potential customers. As such, it's a measure of the future value of the company's customer base. Clearly, the more loyal the firm's profitable customers, the higher its customer equity. Customer equity may be a better measure of a firm's performance than current sales or market share. Whereas sales and market share reflect the past, customer equity suggests the future. Companies should manage customer equity carefully. They should view customers as assets that must be managed and maximized.

Customer equity, the sum of all customer lifetime values, indicates future value, suggesting loyalty's importance over sales or market share, urging careful management.

Junaid answered 11 months ago

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