Marketing and the Evolution of Customer Equity of Frequently Purchased Brands

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 finding