Improving customer equity through value creation and value appropriation

Abstract

<p>Customer equity is increasingly being considered as a market-based asset that can improve financial performance and market valuation of firms. There has been a trend therefore within organizations to design internal processes which can facilitate maximal achievement of customer equity. From a managerial perspective, it is important to know how such processes come together to influence equity perceptions of the firm's customers. Value theory categorizes processes into two components: value creating and value appropriating. In this dissertation, I evaluate how marketing-related VC and VA processes interact in shaping customer equity of a firm. I develop a framework that identifies several VC and VA organizational processes based on the work of Srivastava and his colleagues (1999) and other relevant extant research. I also propose outcomes to measure effectiveness of VC and VA processes. Using data collected from B2B firms in India, I estimate the efficiency of firms in converting VC and VA inputs into VC and VA outcomes. I call these efficiencies as value creation efficiency (VCE) and value appropriation efficiency (VAE). I then test how VCE and VAE work together to affect CE outcomes. The floodlight analysis of interaction effects between VCE and VAE show that the effect of VC processes on value and relationship equity assessment by customers depends on VA processes being moderately efficient. On the other hand, the effect of VC processes on brand equity assessment by customers depends on the presence of high level of VA efficiency. The overall message is that unless a firm is efficient in transforming VA processes into VA outcomes, it may not gain equity benefits from VC processes.</p>