Customer Equity

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Definition: Customer Equity

The customer equity of a firm is defined as the present value of the total revenues that the customer base of the firm will generate in its lifetime. A company with higher equity is valued higher than the one with lower equity. The following three factors drive customer equity:

- Value Equity: This measures how the customer perceives the firm in terms of the product the quality, price and convenience. This is parallel to the concept of “value for money”.

- Brand Equity: This measures how the customer feels about the firm. This includes brand awareness, brand recall and the emotional connect of a customer with the firm.

- Retention Equity: This measures the tendency of a customer to be loyal to the brand. This can be measured by the loyalty programs, its reputation etc.


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