Customer Equity and Loyalty with Cadillac - K.Bit - Business and Marketing

 ‘Customer Loyalty’, a very well heard term when it comes to brands or businesses. But what is ‘Customer Equity’? Putting it straight to facts, Customer Equity is the main goal of Customer/Brand Loyalty and Customer Relationship Management.

Customer Equity is the total combined lifetime value of company’s current and potential customer. Customer Equity can be a performance highlighter of company’s performance better than current sales, as it reflects the future. It is very economical to increase brand loyalty, as loyal customers are almost 5 times cheaper than gaining new customers. Loyal customers spend more. Losing customers can be costly because it results in losing not only current sales, but also losing a lifetime flow of revenues from that customer and many more customers that could’ve been brought by that one customer. This theory is termed as ‘Customer Lifetime Value’.

Starbucks and Lexus

Famous brands such as Starbucks and Lexus measure their customer lifetime values, with Lexus estimating it as $ 600,000 and Starbucks estimating as $ 14000, the value that these companies derive from one loyal customer. As a consumer of products, you do have to look at your value to these companies and how your loyalty is used to their benefits as well.

Cadillac - The Standard Of The World

During the period of 1970-80 Cadillac was defined as “The standard of the world”. It had very loyal customers. Cadillac’s market share in 1976 was 51% and company’s sales as well painted a rosy picture of the company. The customer equity of the company showed the actual picture. Customers of Cadillac were getting older thus customer lifetime value was falling. Cadillac didn’t target its cars towards the growing youth population. It failed to make its car cool for the upcoming generation of buyers. 

The New Cadillac Model

                    

Comparing it to BMW, it had younger customers and thus higher customer lifetime values. In recent times, in an effort to make Cadillac cool again among buyers it has labelled itself “The new standard of the world” with new ads targeting to ‘Dare Greatly’ and ‘Drive the world forward’ in order to compete with companies such as Audi and BMW.

Thus it is necessary to understand the importance of customer equity and customer lifetime values as much as current sales and current market share.

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