Driving Customer Equity: How Customer Lifetime Value Is Reshaping Corporate Strategy by Valarie A. Zeithaml & Katherine N Lemon & Roland T Rust

Author:Valarie A. Zeithaml & Katherine N Lemon & Roland T Rust
Language: eng
Format: mobi
Tags: Business
Publisher: Free Press
Published: 2001-02-20T14:00:00+00:00

Return on Distribution

A similar approach can be employed to evaluate the projected financial return from increasing distribution, an issue especially relevant to consumer goods companies. Noting that greater retail penetration results in greater availability, we can calibrate the relationship and fit a regression line, as in figure 9-6. The slope of the regression line tells us the effect, in terms of availability, of increasing distribution penetration. This, in turn, results in greater Value Equity, improved switching probabilities, and higher Customer Equity, using the familiar chain of effects. Taking into account the dollar investment required to attain a particular level of distribution penetration, we can then calculate the projected return on investment, giving us an objective basis by which to evaluate the investment in increasing distribution.

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