Customer Equity In A Network Driven Context - Contributions For Evaluating Customer Equity

Customer Equity Management (CEM) is not only a method to analyze future customers’ behavior but also a segmentation tool for identifying customers that deliver a great value to a company and those that should be eliminated from a company’s customer portfolio. One problem companies in industry are facing nowadays is the heterogeneous customer portfolio structure and the fact, that customer equity (CE) calculation models are referring to a company’s turnover and are not profit oriented. Thus, a customer (that can be an organization, company or an individual) providing the selling company with a big turnover is more or less of greater value than a customer delivering a minor turnover. This may lead to mismanagement and wrong budget decisions. Therefore CE is a key indicator for a company’s Customer Relationship Management (CRM) environment. In this paper, first the customer equity will be explained with its monetary and non-monetary dimensions. Secondly a new and applicable model will be introducd and discussed before starting with solving the problem of a heterogeneous customer portfolio, which is very important for companies dealing with a multilevel key market (e.g. lighting industry). The outcome of this paper is a network based CE calculation model, which is dynamic and can be used for different network structures - not only in an industrial environment.