Customer equity

Customer equity is the total combined customer lifetime values of all of the company’s customers.

In deciding the value of a company, it is important to know of how much value its customer base is in terms of future revenues. The greater the customer equity (CE), the more future revenue in the lifetime of its clients; this means that a company with a higher customer equity can get more money from its customers on average than another company that is identical in all other characteristics. As a result, a company with higher customer equity is more valuable than one without it. It includes customers' goodwill and extrapolates it over the lifetime of the customers.

The term is a misnomer since the term has nothing to do with the traditional meaning of equity.

There are three drivers to customer equity, all of which refer to three sides of the same thing:

Companies often attempt to gain more customers and increase revenues by improving customer equity. They do this by:

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