In their efforts to become more customer-focused, companies everywhere find themselves entangled in outmoded systems, metrics, and strategies rooted in their product-centered view of the world. Now, to ease this shift to a customer focus, marketing strategy experts Roland T. Rust, Valarie A. Zeithaml, and Katherine N. Lemon have created a dynamic new model they call "Customer Equity," a strategic framework designed to maximize every firm's most important asset, the total lifetime value of its customer base. The authors' Customer Equity Framework yields powerful insights that will help any business increase the value of its customer base. Rust, Zeithaml, and Lemon introduce the three drivers of customer equity -- Value Equity, Brand Equity, and Retention Equity -- and explain in clear, nontechnical language how managers can base their strategies on one or a combination of these drivers. The authors demonstrate in this breakthrough book how managers can build and employ competitive metrics that reveal their company's Customer Equity relative to their competitors. Based on these metrics, they show how managers can determine which drivers are most important in their industry, how they can make efficient strategic trade-offs between expenditures on these drivers, and how to project a financial return from these expenditures. The final section devotes two chapters to the Customer Pyramid, an approach that segments customers based on their long-term profitability, and an especially important chapter examines the Internet as the ultimate Customer Equity tool. Here the authors show how companies such as Intuit.com, Schwab.com, and Priceline.com have used more than one or all three drivers to increase Customer Equity. In this age of one-to-one marketing, understanding how to drive Customer Equity is central to the success of any firm. In particular, Driving Customer Equity will be essential reading for any marketing manager and, for that matter, any manager concerned with growing the value of the firm's customer base.
Reading Group Guide 1. Why is Customer Equity important to your company? (Chapter 1) 2. Has your company ever suffered from the Profitable Product Death Spiral? What should the company have done differently? (Chapter 2) 3. What is the lifetime value of your average customer? What information would you have to obtain to determine this? (Chapter 3) 4. How does your Value Equity compare to other firms in your market? What specific actions can be done to enhance your Value Equity? (Chapter 5) 5. How does your Brand Equity compare to other firms in your market? What specific actions can be done to enhance your Brand Equity? (Chapter 6) 6. How does your Retention Equity compare to other firms in your market? What specific actions can be done to enhance your Retention Equity? (Chapter 7) 7. Can you currently project the financial impact of an improvement effort? What specific steps would you have to take to do that? (Chapter 9) 8. What percentage of your company's profits is contributed by the most important 20% of customers? If you can't determine this, what kind of database would be required to help you determine this? (Chapter 11) 9. How can you turn your lead customers into iron, or your iron customers into gold, via "customer alchemy"? (Chapter 13) 10. How can you use the internet to build Value Equity, Brand Equity, and Retention Equity? (Chapter 14)
Gary W. Loveman COO, 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 Shoenfeld Senior Vice President, Worldwide Marketing, FedEx Make 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. Findlay CEO, 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 Rosenzweig CEO, PeopleSupport.com Exciting 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 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.
Don Peppers and Martha Rogers Partners, Peppers and Rogers Group Read 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.