What is Customer Equity.

The following extract is from Gaurav Marya’s latest book, ‘It Takes Two To Tango’, published by Entrepreneur India. It is in spirit of sharing his thoughts that he has authored two bestselling titles on subjects dear to his heart and central to his business: Take Charge! Building an Entrepreneurial Mindset and Franchising: The Science of Reproducing Success. This is from his third bestselling book, It Takes Two To Tango. Read on:

It was in 1975 when Robert Blattberg first became aware of the power of viewing the customer like an asset. In the book he co-authored in 2001, he wrote: “The customer is a financial asset that companies and organisations should measure, manage, and maximise just like any other asset.” He saw customer equity as the lifetime value of a customer for an enterprise. He differentiated customer equity from brand equity; as the former helped us focus on how the customer perceives us and is thus willing to invest in us, and the latter draws attention to the product or service we offer.

(In 1991, Robert Blattberg used the concept “customer-equity” in a lecture at the Wharton School. In 1996, the term was first used in an academic paper. In 2001, he co-authored the book; Customer Equity: Building and Managing Relationships and valuable Assets.)

I have always recognised the importance of seeing customers from a long-term perspective. The existence of a customer is a static fact created by a single purchase; when they keep coming back for repeated purchases, they become subscribers. Customers will come back only if the service that they are made to experience is satisfactory. Customer equity built on subscribers who are created by excellent service.

The importance of the concept of customer equity, and subsequently having customers become your subscribers can be seen in how the value of an enterprise increases by the number of subscribers it has, and the ticket value they bring to the organisation.

Vodafone purchased Hutch in 2007 to acquire the customer base the latter had and built up within the high-end segment of the post-paid user. Emerging as the second largest mobile services provider in India, soon after the purchase, enabled them to launch Vodafone Global Enterprise in India, which provided global mobility services to transnational corporations. This instance demonstrates how securing a strong subscriber base enables a business to widen the stream of value offerings that flow to them.

To be Continued…

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