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The dynamic effect of customer equity across firm growth: The case of small and medium-sized online retailers

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  • Song, Tae Ho
  • Kim, Sang Yong
  • Kim, Ji Yoon

Abstract

Although several causal studies investigate the relationships between customer equity and firm performance, some debate about whether their positive relationship is valid over long time horizons and across firm/industry environments does exist. This study investigates the dynamic effect of customer equity on firm performance. Using individual-level purchase data for an online retailer, the results show a weak relationship between customer equity and firm profitability, which is not consistent with previous assumptions and beliefs. Additional analysis to resolve this gap shows that in the early stage when a firm's growth rate is relatively high the firm is required to manage many newly enrolled customers. In contrast, in the mature stage when a firm's growth rate is stable and low the firm should retain its customers. Thus, marketing managers need to leverage the drivers of acquisition and retention to continue to grow overall customer equity and firm performance.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:jbrese:v:69:y:2016:i:9:p:3755-3764
    DOI: 10.1016/j.jbusres.2015.12.067
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    3. Ko, Woo Li & Kim, Sang Yong & Lee, Jong-Ho & Song, Tae Ho, 2020. "The effects of strategic alliance emphasis and marketing efficiency on firm value under different technological environments," Journal of Business Research, Elsevier, vol. 120(C), pages 453-461.
    4. Roşca Vlad, 2017. "Stop hitting the woodwork! CRM for better fan-identification in Romanian second division football clubs," Proceedings of the International Conference on Business Excellence, Sciendo, vol. 11(1), pages 711-719, July.
    5. Hong Xu & Yukun Li & Weifen Lin & Hui Wang, 2024. "ESG and customer stability: a perspective based on external and internal supervision and reputation mechanisms," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-14, December.

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