Skip to main content
SpringerLink
Log in

Integrating the customer equity and brand equity approaches to the financial value of marketing

  • Original Article
  • Published:
Journal of Marketing Analytics Aims and scope Submit manuscript

Abstract

There are two approaches to treating marketing expenditures, not as a cost to be expensed, but as an investment in a financial asset. The customer equity (CE) approach views customer relationships as generating future returns and uses customer lifetime value (CLV) models. The brand equity approach (BE) views brands as creating future returns and uses measures of the financial value of brand (FVB). Although some CE research has introduced brands as one driver of CLV, the two approaches diverge in important ways. This paper identifies key differences between them and proposes two ways the CE and BE perspectives could be integrated into a common approach. One way is to distinguish between brand relationships and calculative relationships in building CLV models. Another is to triangulate measures of FVB with CLV measures.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1

Similar content being viewed by others

Notes

  1. It is interesting to conceptualize the dependence of a on acquisition spending and brand awareness. We hypothesize an interaction, where high levels of brand awareness imply a steeper slope for acquisition spending than for low levels of awareness. Likewise, brand measures may enhance the effects of retention spending on r.

References

  • Aaker, J.L. 1997. Dimensions of brand personality. Journal of Marketing Research 34 (3): 347–356.

    Article  Google Scholar 

  • Ajzen, I., and M. Fishbein. 1977. Attitude-behavior relations: A theoretical analysis and review of empirical research. Psychological Bulletin 84 (5): 888–918.

    Article  Google Scholar 

  • Anderson, E.W., and V. Mittal. 2000. Strengthening the satisfaction-profit chain. Journal of Service Research 3 (2): 107–120.

    Article  Google Scholar 

  • Aggarwal, P. 2004. The effects of brand relationship norms on consumer attitudes and behavior. Journal of Consumer Research 31 (1): 87–101.

    Article  Google Scholar 

  • Aggarwal, P., and R.P. Larrick. 2012. When consumers care about being treated fairly: The interaction of relationship norms and fairness norms. Journal of Consumer Psychology 22 (1): 114–127.

    Article  Google Scholar 

  • Aggarwal, P., and A.L. McGill. 2012. When brands seem human, Do humans act like brands? Automatic behavioral priming effects of brand anthropomorphism. Journal of Consumer Research 39 (2): 307–323.

    Article  Google Scholar 

  • Bagozzi, R.P., S. Romani, S. Grappi, and L. Zarantonello. 2021. Psychological underpinnings of brands. Annual Review of Psychology 72 (1): 585–607.

    Article  PubMed  Google Scholar 

  • Ballantyne, D., M. Christopher, and A. Payne. 2003. Relationship marketing: Looking back, looking forward. Marketing Theory 3 (1): 159–166.

    Article  Google Scholar 

  • Bansal, H.S., S.F. Taylor, and Y. St James. 2005. Migrating’ to new service providers: Toward a unifying framework of consumers’ switching behaviors. Journal of the Academy of Marketing Science 33 (1): 96–115.

    Article  Google Scholar 

  • Batra, R., A. Ahuvia, and R.P. Bagozzi. 2012. Brand Love. Journal of Marketing 76 (2): 1–16.

    Article  Google Scholar 

  • Berger, P.D., and N.N. Bechwati. 2001. The allocation of promotion budget to maximize customer equity. Omega 29 (1): 49–61.

    Article  Google Scholar 

  • Berger, P.D., and N.I. Nasr. 1998. Customer lifetime value: Marketing models and applications. Journal of Interactive Marketing 12 (1): 17–30.

    Article  Google Scholar 

  • Blattberg, R.C., and J. Deighton. 1996. Manage marketing by the customer equity test. Harvard Business Review 74 (4): 136–144.

    CAS  PubMed  Google Scholar 

  • Blattberg, R.C., E.C. Malthouse, and S.A. Neslin. 2009. Customer lifetime value: Empirical generalizations and some conceptual questions. Journal of Interactive Marketing 23 (2): 157–168.

    Article  Google Scholar 

  • Bolton, R.N., P.K. Kannan, and M.D. Bramlett. 2000. Implications of loyalty program membership and service experiences for consumer retention and value. Journal of the Academy of Marketing Science 28 (1): 95–101.

    Article  Google Scholar 

  • Borle, S., S.S. Singh, and D.C. Jain. 2008. Customer lifetime value measurement. Management Science 54 (1): 100–112.

    Article  Google Scholar 

  • Bornstein, G. 2018. Entry and profits in an aging economy: The role of consumer inertia. Review of Economic Studies, forthcoming.

  • Brakus, J.J., B.H. Schmitt, and L. Zarantonello. 2009. Brand experience: What is it? How is it measured? Does it affect loyalty? Journal of Marketing 73 (3): 52–68.

    Article  Google Scholar 

  • Calder, B.J. 2010. Writing a brand positioning statement and translating it into brand design. In Kellogg on Marketing, 2nd ed., ed. A. Tybout and B.J. Calder, 92–111. New York: Wiley.

    Google Scholar 

  • Calder, B.J. 2019. Connecting marketing and finance via brand value. In Kellogg on Branding in a Hyper-Connected World, ed. T. Calkins and A. Tybout, 234–246. New York: Wiley.

    Google Scholar 

  • Calder, B.J. 2020. Brands: An integrated marketing, finance, and societal perspective. Foundations and Trends in Marketing 14 (4): 237–316.

    Article  Google Scholar 

  • Calder, B.J., and R. Burnkrant. 1977. Interpersonal influence on consumer behavior: An attribution theory approach. Journal of Consumer Research 4: 29–38.

    Article  Google Scholar 

  • Calder, B.J., M.S. Isaac, and E.C. Malthouse. 2016. How to capture consumer experiences: A context-specific approach to measuring engagement. Journal of Advertising Research 56: 1–14.

    Article  Google Scholar 

  • Carman, J.M. 1970. Correlates of brand loyalty: Some positive results. Journal of Marketing Research 7 (1): 67–76.

    Article  Google Scholar 

  • Chang, T.Z., and S.J. Chen. 1998. Market orientation, service quality and business profitability: A conceptual model and empirical evidence. Journal of Services Marketing 12 (4): 246–264.

    Article  Google Scholar 

  • Chaudhuri, A., and M.B. Holbrook. 2002. Product-class effects on brand commitment and brand outcomes: The role of brand trust and brand affect. Journal of Brand Management 10 (1): 33–58.

    Article  Google Scholar 

  • Edeling, A., S. Srinivasan, and D.M. Hanssens. 2021. The marketing-finance interface: A new integrative review of metrics, methods, and findings and an agenda for future research. International Journal of Research in Marketing 38: 857–876.

    Article  Google Scholar 

  • Eiroz, V., and D. Wilson. 2006. Research in relationship marketing: Antecedents, Traditions and integration. European Journal of Marketing 40 (34): 275–291.

    Article  Google Scholar 

  • Fader, P., and S. Toms. 2018. The Customer Centricity Playbook. Philadelphia: Wharton Digital Press.

    Book  Google Scholar 

  • Fader, P.S., B.G. Hardie, and J. Shang. 2010. Customer-base analysis in a discrete-time noncontractual setting. Marketing Science 29 (6): 1086–1108.

    Article  Google Scholar 

  • Farquhar, P.H. 1989. Managing brand equity. Marketing Research 1 (3): 24–33.

    Google Scholar 

  • Fournier, S. 1998. Consumers and their brands: Developing relationship theory in consumer research. Journal of Consumer Behavior 24: 343–373.

    Google Scholar 

  • Gupta, S., and D.R. Lehmann. 2003. Customers as assets. Journal of Interactive Marketing 17 (1): 9–24.

  • Gupta, S., and D.R. Lehmann. 2006. Customer lifetime value and firm valuation. Journal of Relationship Marketing 5 (2–3): 87–110.

    Article  Google Scholar 

  • Gupta, S., and V. Zeithaml. 2006. Customer metrics and their impact on financial performance. Marketing Science 25 (6): 718–739.

    Article  Google Scholar 

  • Gupta, S., D.R. Lehmann, and J.A. Stuart. 2004. Valuing customers. Journal of Marketing Research 41 (1): 7–18.

    Article  Google Scholar 

  • Gupta, S., D. Hanssens, B. Hardie, W. Kahn, V. Kumar, N. Lin, N. Ravishanker, and S. Sriram. 2006. Modeling customer lifetime value. Journal of Service Research 9: 139–155.

    Article  Google Scholar 

  • Haskel, J., and S. Westlake. 2018. The Rise of the Intangible Economy. Princeton: Princeton University Press.

    Google Scholar 

  • He, J., and B.J. Calder. 2020. The experimental evaluation of brand strength and brand value. Journal of Business Research 115: 194–202.

    Article  Google Scholar 

  • Henderson, G.R., D. Iacobucci, and B.J. Calder. 1998. Brand diagnostics: Mapping branding effects using consumer associative networks. European Journal of Operational Research 111 (2): 306–327.

    Article  Google Scholar 

  • Hollebeek, L.D., M.S. Glynn, and R.J. Brodie. 2014. Consumer brand engagement in social media: Conceptualization, scale development and validation. Journal of Interactive Marketing 28 (2): 149–165.

    Article  Google Scholar 

  • Jain, D.C., and S.S. Singh. 2002. Customer lifetime value research in marketing: A review and future directions. Journal of Interactive Marketing 16 (2): 34–46.

    Article  Google Scholar 

  • Jones, M.A., D.L. Mothersbaugh, and S.E. Beatty. 2000. Switching barriers and repurchase intentions in services. Journal of Retailing 76 (Summer): 259–274.

    Article  Google Scholar 

  • Keiningham, T.L., C.M. Frennea, L. Aksoy, A. Buoye, and V. Mittal. 2015. A five-component customer commitment model: Implications for repurchase intentions in goods and services industries. Journal of Service Research 18 (4): 433–450.

    Article  Google Scholar 

  • Keiningham, T., L. Aksoy, and F. Cadet. 2017. Operationalizing relative customer value. Journal of Creating Value 3 (2): 1–9.

  • Keller, K.L., B. Sternthal, and A. Tybout. 2002. Three questions you need to ask about your brand. Harvard Business Review 80: 80–86.

    PubMed  Google Scholar 

  • Klein, H.J., T.E. Becker, and J.P. Meyer. 2009. Commitment in Organizations: Accumulated Wisdom and New Directions. New York: Taylor Francis Group.

    Google Scholar 

  • Kumar, V. 2006. CLV: The databased approach. Journal of Relationship Marketing 5 (2/3): 7–35.

    Article  Google Scholar 

  • Kumar, V., and W. Reinartz. 2016. Creating enduring customer value. Journal of Marketing Research 80: 36–68.

    Article  Google Scholar 

  • Kumar, V., and D. Shah. 2009. Expanding the role of marketing: From customer equity to market capitalization. Journal of Marketing 73 (6): 119–136.

    Article  Google Scholar 

  • Kwak, H., M. Puzakova, and J.F. Rocereto. 2015. Better not smile at the price: The differential role of brand anthropomorphizing on perceived price fairness. Journal of Marketing 79 (4): 56–76.

    Article  Google Scholar 

  • Lambert-Pandraud, R., and G. Laurent. 2010. Why do older consumers buy brands? The role of attachment and declining innovativeness. Journal of Marketing 74: 104–121.

    Article  Google Scholar 

  • Lariviere, B., T.L. Keiningham, B. Cooil, L. Aksoy, and E.M. Malthouse. 2014. A longitudinal examination of customer commitment and loyalty. Journal of Service Management 25 (1): 75–100.

    Article  Google Scholar 

  • Leone, R.P., V.R. Fao, K.L. Keller, A.M. Lao, L. McAlister, and R. Srivastava. 2006. Linking brand equity to customer equity. Journal of Service Research 9 (2): 125–138.

    Article  Google Scholar 

  • Low, G.S., and R.A. Fullerton. 1994. Brands, brand management, and the brand manager system: A critical-historical evaluation. Journal of Marketing Research XXXI: 173–190.

    Article  Google Scholar 

  • Luo, A., D.R. Lehmann, and S.A. Neslin. 2015. Co-managing brand equity and customer equity. In Handbook of Research on Customer Equity in Marketing, ed. V. Kumar and D. Shah, 363–381. New York: Elgar.

    Google Scholar 

  • Malthouse, E.C. 2007. Mining for trigger events with survival analysis. Data Mining and Knowledge Discovery 15 (3): 383–402.

    Article  MathSciNet  Google Scholar 

  • Neslin, S.A., S. Gupta, W. Kamakura, J. Lu, and C.H. Mason. 2006. Defection detection: Measuring and understanding the predictive accuracy of customer churn models. Journal of Marketing Research 43 (2): 204–211.

    Article  Google Scholar 

  • Machavello, R., and A. Morjaria. 2015. The value of relationships: Evidence from a supply shock to Kenyan rose exports. American Economic Review 105 (9): 291–2945.

    Google Scholar 

  • Malthouse, E.C. 2013. Segmentation and Lifetime Value Models Using SAS®. SAS Institute.

    Google Scholar 

  • Matsuoka, K. 2021. A framework for variance analysis of customer equity based on a Markov chain model. Journal of Business Research 129: 57–69.

    Article  Google Scholar 

  • McCarthy, D.M., and P.S. Fader. 2018. Customer-based corporate valuation for publicly traded noncontractual firms. Journal of Marketing Research 55: 617–635.

  • McCarthy, D.M., and P.S. Fader. 2020. How to value a company by analyzing its customers. Harvard Business Review, January-February 98 (1): 51–55.

    Google Scholar 

  • Memarpour, M., E. Hassannayebi, N. Fattahi Miab, and A. Farjad. 2021. Dynamic allocation of promotional budgets based on maximizing customer equity. Operational Research 21 (4): 2365–2389.

    Article  Google Scholar 

  • Meyer, J.P., T.E. Becker, and C. Vandenberghe. 2004. Employee commitment and motivation: A conceptual analysis and integrative model. The Journal of Applied Psychology 89 (6): 991–1007.

    Article  Google Scholar 

  • Mizik, N., and D. Nissim. 2011. Accounting for marketing activities: Implications for marketing research and practice. Marketing Science Institute Report, No. 11-103.

  • Morgan, R.M., and S.D. Hunt. 1994. The commitment-trust theory of relationship marketing. Journal of Marketing 58: 20–38.

    Article  Google Scholar 

  • Möller, K., and A. Halinen. 2000. Relationship marketing theory: Its roots and directions. Journal of Marketing Management 16: 29–54.

    Article  Google Scholar 

  • Park, C.W., A.B. Eisingerich, and J.W. Park. 2013. Attachment–aversion (AA) model of customer–brand relationships. Journal of Consumer Psychology 23 (2): 229–248.

    Article  Google Scholar 

  • Park, C.W., D.J. MacInnis, J. Priester, A.B. Eisingerich, and D. Iacobucci. 2010. Brand attachment and brand attitude strength: Conceptual and empirical differentiation of two critical brand equity drivers. Journal of Marking 74 (6): 1–17.

    Article  Google Scholar 

  • Paugam, L., P. Andre, H. Philippe, and R. Harfouche. 2016. Brand Valuation. New York: Routledge.

    Book  Google Scholar 

  • Petrison, L.A., R.C. Blattberg, and P. Wang. 1993. Database marketing: Past, present, and future. Journal of Direct Marketing 7 (3): 27–43.

    Article  Google Scholar 

  • Pfeifer, P.E., and R.L. Carraway. 2000. Modeling customer relationships as Markov chains. Journal of Interactive Marketing 14 (2): 43–55.

    Article  Google Scholar 

  • Pfeifer, P.E., M.E. Haskins, and R.M. Conroy. 2005. Customer lifetime value, customer profitability, and the treatment of acquisition spending. Journal of Managerial Issues 17: 11–25.

    Google Scholar 

  • Reinartz, W.J., and V. Kumar. 2003. The impact of customer relationship characteristics on profitable lifetime duration. Journal of Marketing 67: 77–79.

    Article  Google Scholar 

  • Romaniuk, J. 2023. Better brand health. Victoria: Oxford University Press.

    Google Scholar 

  • Rust, R.T., K.N. Lemon, and V.A. Zeithaml. 2004a. Return on marketing: Using customer equity to focus marketing strategy. Journal of Marketing 68 (1): 109–127.

    Article  Google Scholar 

  • Rust, R.T., V.A. Zeithaml, and K.N. Lemon. 2004b. Customer-centered brand management. Harvard Business Review 82 (9): 110–118.

    PubMed  Google Scholar 

  • Sinclair, R. 2016. Reporting on brands. In Accountable Marketing: Linking Marketing Actions to Financial Performance, ed. D. Stewart and C. Gugel, 168–181. New York: Routledge.

    Google Scholar 

  • Sinclair, R., and K.L. Keller. 2014. A case for brands as assets: Acquired and internally developed. Journal of Brand Management 21 (4): 286–302.

    Article  Google Scholar 

  • Sinclair, R., and K.L. Keller. 2017. Brand value, accounting standards, and mergers and acquisitions: The moribund effect. Journal of Brand Management 24 (2): 171–192.

    Article  Google Scholar 

  • Shah, D., R.T. Rust, A. Parasuraman, R. Staelin, and G.S. Day. 2006. The path to customer centricity. Journal of Service Research 9: 113–124.

    Article  Google Scholar 

  • Sprott, D., S. Czellar, and E. Spangenberg. 2009. The importance of a general measure of brand engagement on market behavior: Development and validation of a scale. Journal of Marketing Research 46 (1): 92–104.

    Article  Google Scholar 

  • Srinivasan, S., and D.M. Hanssens. 2022. Marketing and firm value. Foundations and Trends in Marketing 17 (2): 58–139.

    Article  Google Scholar 

  • Srivastava, R.K., T.A. Shervani, and L. Fahey. 1998. Market-based assets and shareholder value: A framework for analysis. Journal of Marketing 62 (1): 2–18.

    Article  Google Scholar 

  • Stahl, F., M. Heitmann, D.R. Lehmann, and S.A. Neslin. 2012. The impact of brand equity on customer acquisition, retention, and profit margin. Journal of Marketing 76: 44–63.

    Article  Google Scholar 

  • Swaminathan, V., S. Gupta, K.L. Keller, and D. Lehmann. 2022. Brand actions and financial consequences: A review of key findings and directions for future research. Journal of the Academy of Marketing Science 50: 639–664.

    Article  Google Scholar 

  • Thibaut, J.W., and H.H. Kelley. 1959. The Social Psychology of Groups. New York: Wiley.

    Google Scholar 

  • Wiesel, T., B. Skiera, and J. Villanueva. 2008. Customer equity: An integral part of financial reporting. Journal of Marketing. 72 (3): 1–14.

    Article  Google Scholar 

  • Venkatesan, R., and V. Kumar. 2004. A customer lifetime value framework for customer selection and resource allocation strategy. Journal of Marketing 68 (4): 106–125.

    Article  Google Scholar 

  • Verhoef, P.C., R. Venkatesan, L. McAlister, E.C. Malthouse, M. Krafft, and S. Ganesan. 2010. CRM in data-rich multichannel retailing environments: A review and future research directions. Journal of Interactive Marketing 24 (2): 121–137.

    Article  Google Scholar 

  • Zeithaml, V.A. 2000. Service quality, profitability, and the economic worth of customers: What we know and what we need to learn. Journal of the Academy of Marketing Science 28 (1): 67–85.

    Article  Google Scholar 

  • Zhou, Y., B.J. Calder, E.C. Malthouse, and Y.K. Hessary. 2022. Not all clicks are equal: Detecting engagement with digital content. Journal of Media and Business Studies 19 (2): 90–107.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Kellogg School of Management, Northwestern University, 1509 Asbury, Evanston, IL, 60201, USA

    Bobby J. Calder

  2. Northwestern University, Evanston, IL, USA

    Edward C. Malthouse & Joe Omatoi

Authors
  1. Bobby J. Calder
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Edward C. Malthouse
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Joe Omatoi
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Bobby J. Calder.

Ethics declarations

Conflict of interest

On behalf of all authors, the corresponding author states that there is no conflict of interest.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Springer Nature or its licensor (e.g. a society or other partner) holds exclusive rights to this article under a publishing agreement with the author(s) or other rightsholder(s); author self-archiving of the accepted manuscript version of this article is solely governed by the terms of such publishing agreement and applicable law.

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Calder, B.J., Malthouse, E.C. & Omatoi, J. Integrating the customer equity and brand equity approaches to the financial value of marketing. J Market Anal (2024). https://doi.org/10.1057/s41270-024-00298-y

Download citation

  • Revised:

  • Accepted:

  • Published:

  • DOI: https://doi.org/10.1057/s41270-024-00298-y

Keywords

Search

Navigation