Rust, Lemon & Zeithaml (2001) – driving customer equity: linking customer lifetime value to strategic and marketing decisions

Question 1

What is “Rust, Lemon & Zeithaml (2001) – driving customer equity: linking customer lifetime value to strategic and marketing decisions” about?

Answer 1

Purpose of this paper: show how customer equity can be used to drive marketing
strategy
o First conceptualize and describe three primary drivers of customer equity
 Value equity (objective assessment)
 Brand equity (subjective assessment)
 Relationship equity (stickiness)
 chosen because they correspond distinctively managed elements in modern marketing practice, they cover all typical marketing initiatives, they form basis

Question 2

What are the results of “Rust, Lemon & Zeithaml (2001) – driving customer equity: linking customer lifetime value to strategic and marketing decisions”

Question 3

What are the managerial implicatoins of “Rust, Lemon & Zeithaml (2001) – driving customer equity: linking customer lifetime value to strategic and marketing decisions”?

Answer 3

• Identification and measurement of the key drivers of customer equity
• Identification of a firms competitive strengths and weaknesses
• Projection of financial impact of marketing initiatives
• Key metrics for top management
• Rapid implementation
• Easy implementation

Question 4

What are the findings of “Rust, Lemon & Zeithaml (2001) – driving customer equity: linking customer lifetime value to strategic and marketing decisions”?

Answer 4

• Value equity is more important for b2b companies for which objective performance is more important
• Brand equity is more important for consumer-packaged goods companies and other
  transaction-oriented businesses relationship equity is more important for relationship business
• Many firms already model their customer value, brand equity, and customer relationship management
  o But they do it separately
• Customer equity framework offers a CEO-level view that unifies these three areas in a framework that enables quantitative evaluation of strategic marketing alternatives
   provides the firm a new strategic framework that is customer centric as well as
  competitor-cognizant

Question 5

What is “customer equity”?

Answer 5

sum of the discounted lifetime values of all the firms customers

Question 6

What is the “utilitiy model”?

Answer 6

Utility model: this drives the individual level brand switching matrix
 Utility = inertia + value equity + brand equity + relationship