Student

What is brand equity and customer equity? Discuss the advantages and disadvantages of each. Also, discuss why the marketers prefer customer equity.

Please provide robust, meaningful, supported responses.

Brand equity is the monetary value and reputation of a brand, its total worth. Brand equity comes with several advantages such as: customer loyalty, great profits, and expansion opportunities. High brand equity is a key quality to generate loyalty. Genuine loyalty often means customers pay more and go out of their way to buy from a company. Often, many customers are willing to pay for a name that they trust or know which can increase profit. Brand equity also allows opportunities for long-term growth. By leveraging the value of a brand, companies can expand into new markets, developing new products to increase revenue. One of the major disadvantages of brand equity is that it requires heavy promotion and advertising investments.

Customer equity is the lifetime value of all of a company’s customers. One major advantage about customer equity is that it incorporates customer loyalty to buy again and again. One disadvantage of customer equity is cost retention. For example, a company has two customers. The first customer is a frequent shopper and shops there regardless of sales and discounts. However, the second shopper only shops at the store when high sales and discounts are offered. This increases cost of retention and over time, can cause the company to lose money by trying to keep customers like shopper number two interested. Marketers prefer customer equity because it draws repeated customers.