How to measure customer value and its relationship with shareholder value in a business-to-business market

Paper Details

Authors:

DOI: 10.3926/ic.2010.v6n2.p142-161

Journal: Intangible Capital

Year: 2010

Publisher: OmniaScience

Document Type: Article

Open Access: All Open Access; Gold Open Access

Cited by: 1

Abstract

Intangible assets are difficult to measure, but nowadays the value of the shares of firms in the stock exchange market contains a high percentage of intangible capital and customers are one of the main intangible assets that should be evaluated. This paper presents and discusses some tools to measure the value of customers. But first, it is mandatory to define and clarify the relationships among the concepts of Customer Equity (CE), Life Time Value (LTV) and Customer Relationship Management (CRM). LTV is the best financial outcome to measure customer value, so the paper reviews the literature on some mathematical models to calculate LTV. We propose an equation for LTV in order to apply it in a business-to-business market, and an analysis of the influence factors involved in it is made, focusing especially on the link between LTV and shareholder value. Finally, we propose as future lines of research, the relational equity approach as the perfect complement to the customer equity analysis and a way to estimate LTV for actual cases of publicly traded firms using published information.

Keywords

Customer equity; Customer relationship management; Life time value; Shareholder value

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