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Firm valuation from customer equity: When does it work and when does it fail?

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  • Zhang, Shoutong Thomas

Abstract

Is customer equity a good proxy for a firm's market value? Using data from Netflix over 10years, I provide evidence that a CLV-based customer equity model tracks market capitalization remarkably well under versatile conditions of stable growth, profit volatility, and even a broad market crash. However, if a firm shifts business model through radical innovation, the customer equity model requires recalibration to continue tracking market capitalization.

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  • Zhang, Shoutong Thomas, 2016. "Firm valuation from customer equity: When does it work and when does it fail?," International Journal of Research in Marketing, Elsevier, vol. 33(4), pages 966-970.
    • Handle: RePEc:eee:ijrema:v:33:y:2016:i:4:p:966-970
    DOI: 10.1016/j.ijresmar.2016.03.007
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    References listed on IDEAS

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    1. Yao Zhang & Eric T. Bradlow & Dylan S. Small, 2015. "Predicting Customer Value Using Clumpiness: From RFM to RFMC," Marketing Science, INFORMS, vol. 34(2), pages 195-208, March.
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    4. Elizabeth Demers & Philip Joos, 2007. "IPO Failure Risk," Journal of Accounting Research, Wiley Blackwell, vol. 45(2), pages 333-371, May.
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    Cited by:

    1. Matsuoka, Kohsuke, 2021. "A framework for variance analysis of customer equity based on a Markov chain model," Journal of Business Research, Elsevier, vol. 129(C), pages 57-69.
    2. Adela-Laura POPA & Dinu Vlad SASU & Teodora Mihaela TARCZA, 2021. "Investigating The Importance Of Customer Lifetime Value In Modern Marketing - A Literature Review," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 30(2), pages 410-416, December.
    3. Bendle, Neil Thomas & Wang, Xin (Shane), 2017. "Marketing accounts," International Journal of Research in Marketing, Elsevier, vol. 34(3), pages 604-621.
    4. Kohsuke Matsuoka, 2020. "Exploring the interface between management accounting and marketing: a literature review of customer accounting," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 31(3), pages 157-208, September.

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