Measuring customer equity and managing the customer asset: an explanatory study in the Australian hotels

ABSTRACT

Although there are a range of conceptual and theoretical studies about customer equity (CE) measurement and management in the literature, there are few empirical studies where these two concepts are examined together. This paper focuses on the need for a more synthesised approach and addresses calls for more research into this specific area of marketing management. A conceptual framework was developed that synthesises both customer lifetime value and customer relationship management from a customer equity management (CEM) perspective. The framework was used to empirically examine how four CE strategies, together with a firm’s use of the two types of customer data (aggregated and disaggregated), impact on CEM outcomes. Data were collected from 114 hotel managers in Australia and analysed through a decision tree methodology. The results show that hotels are utilising their CE strategies for acquisition purposes more than retention purposes (customer asset management), which overall appears to satisfice more than maximise their hotel’s capacity in achieving effective CE outcomes. The study’s contribution to theory is through empirically testing a framework that combines two discrete theoretical concepts in one study to provide insights to guide future research.

KEYWORDS:

• Customer equity management
• customer asset management
• customer lifetime value
• customer relationship management
• decision trees

Disclosure statement

No potential conflict of interest was reported by the authors.

Glossary of terms used in the study

Advanced Customer Equity: In customer asset management, is the strongest level of CRM the firm has with its customers, along with the highest CLV values attained in those customers.

Baseline Customer Equity: In customer asset management, is the weakest level of CRM the firm has with its customers, along with the lowest CLV measurement values attained in those customers.

Customer Equity Management (CEM): It is viewed as both the measurement of a customer’s equity and the management of that same customer as an asset of the firm.

Customer Equity Outcome: Customer Equity strategies which are converted into tactics by CE manager’s lead to a result or outcome that has positive or negative on the firm’s value (Rust, Lemon & Zeithaml, 2004).

Customer Equity Outcomes achieved: The result of an implemented marketing action by CE manager’s that has a positive impact on the firm’s value, usually expressed in financial terms such as return on investment (ROI), increased sales and market share, profit and/or shareholder value (Rust et al., 2004).

Intermediate Customer Equity: In customer asset management, is the mid-range level of CRM the firm has with its customers, along with the medium CLV values attained in those customers.

Additional information

Notes on contributors

Anthony Carr

Anthony Carr is a Senior Programs Educator in the Division of International and Development, Queensland University of Technology (QUT) in Brisbane, Australia. He holds a PhD in Marketing and Masters of Business Management, both from QUT. His research interests are marketing and management focused specialising in brand equity and customer equity. He has published in several marketing and management texts.

Judy Drennan

Judy Drennan is Director of the Services Innovation Research Program in the QUT Business School at the Queensland University of Technology in Australia. Her qualifications include a PhD from Deakin University, Australia and a Master of Education from the University of Melbourne, Australia. Judy’s research specialisations are in services marketing, social marketing and m-marketing on which she has published over 100 refereed academic papers. Her publications appear in top level journals such as the European Journal of Marketing, Journal of Marketing Management, Journal of Advertising Research and Journal of Business Research.

Lynda Andrews

Lynda Andrews is a Senior Lecturer in Marketing in the QUT Business School at the Queensland University of Technology in Brisbane, Australia. She holds a PhD in consumer behaviour and mobile technologies from the University of Queensland. Her research specialisations are multidisciplinary in areas of consumer behaviour and new technologies, social marketing and health, and consumers in shopping malls. She is published in international journals such as: European Journal of Marketing, International Marketing Review, Journal of Business Research, Journal of Marketing Management, International Journal of Medical Informatics and Journal of Retailing and Consumer Services.