The customer equity paradigm is readily implemented in
relationship businesses where the distinction between a
prospect and an existing customer is unambiguous. That
enables firms in such industries to be customer and
long-term focused in the allocation of their marketing
resources. This is not the case in frequently purchased
product categories, where customers may switch back and
forth between competing brands, and even consume
multiple brands in the same time period. However, by
using stochastic models for purchase quantity and
purchase frequency, we demonstrate that measures of
customer equity may still be obtained in such
categories, using readily available scanner panel data.
We illustrate our approach for the leading national and
private-label brands in two CPG categories and show that
the brands’ sources of customer equity and the impact of
their marketing activities are different. As a result,
the brands’ customer equity levels may be evolving in
different directions that are not readily apparent from
their revenue or market share positions. We discuss the
managerial implications of our findings and offer
several areas for future research. pdf 2012
