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Customer equity and market value: Two methods, same results?

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  • Silveira, Cleo Schmitt
  • de Oliveira, Marta Olivia Rovedder
  • Luce, Fernando Bins

Abstract

Although researchers have developed a variety of methods to model customer equity (CE), producing simple and robust models is a difficult task. Often, researchers have to compromise simplicity in favor of robustness or completeness. This paper empirically investigates two CE-based methods to compute proxies for market value. The models differ substantially in terms of complexity and the type of information they use, but their result is equivalent. Both models use Gupta et al. (2004) CE approach, and use data from the Brazilian Telecom Industry. The results show that CE, under the simpler, static approach, when added to net equity, is a good proxy for market value and reasonably equivalent to Gupta et al.'s (2004) CE under the dynamic approach. While the dynamic approach requires some technical training and substantive customer information that might not be readily available, the static approach is simpler and easier to compute.

Suggested Citation

  • Silveira, Cleo Schmitt & de Oliveira, Marta Olivia Rovedder & Luce, Fernando Bins, 2012. "Customer equity and market value: Two methods, same results?," Journal of Business Research, Elsevier, vol. 65(12), pages 1752-1758.
    • Handle: RePEc:eee:jbrese:v:65:y:2012:i:12:p:1752-1758
    DOI: 10.1016/j.jbusres.2011.10.034
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    References listed on IDEAS

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    1. Sunil Gupta & Valarie Zeithaml, 2006. "Customer Metrics and Their Impact on Financial Performance," Marketing Science, INFORMS, vol. 25(6), pages 718-739, 11-12.
    2. Villanueva, Julian & Hanssens, Dominique M., 2007. "Customer Equity: Measurement, Management and Research Opportunities," Foundations and Trends(R) in Marketing, now publishers, vol. 1(1), pages 1-95, March.
    3. John D. C. Little, 2004. "Models and Managers: The Concept of a Decision Calculus," Management Science, INFORMS, vol. 50(12_supple), pages 1841-1853, December.
    4. Lukas, Bryan A. & Whitwell, Gregory J. & Doyle, Peter, 2005. "How can a shareholder value approach improve marketing's strategic influence?," Journal of Business Research, Elsevier, vol. 58(4), pages 414-422, April.
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    Cited by:

    1. Mendoza, Xavier & Carneiro, Jorge, 2012. "Introduction to the special issue of best papers Business Association of Latin American Studies 2010," Journal of Business Research, Elsevier, vol. 65(12), pages 1749-1751.
    2. Song, Tae Ho & Kim, Sang Yong & Kim, Ji Yoon, 2016. "The dynamic effect of customer equity across firm growth: The case of small and medium-sized online retailers," Journal of Business Research, Elsevier, vol. 69(9), pages 3755-3764.
    3. 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.
    4. Segarra-Moliner, Jose Ramón & Moliner-Tena, Miguel Ángel, 2016. "Customer equity and CLV in Spanish telecommunication services," Journal of Business Research, Elsevier, vol. 69(10), pages 4694-4705.
    5. 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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