The Positive Research on Customer Equity Measurement for a Multi-brands Firm Based on Principal Components Analysis

This article first presents a conceptual model to explain how to calculate customer lifetime value and measure customer equity for a multi-brands firm using the brand-switching matrix. The change in the firm´s customer equity is the change in its current and future customers´ lifetime values, summed across all customers in the market. Each customer´s lifetime value results from the frequency of category purchases, average quantity of purchase, and brand-switching patterns combined with the firm´s contribution margin. Also we extend the return on marketing model, breaking the assumption that the firm has only one brand (product), and considering the impacts of reputation publicizing and cross-purchase. To demonstrate how the approach can be implemented in a specific firm, using Principal Components Analysis, we take a positive study to customer equity measurement by using data from a daily chemical manufacture firm Q offering three sets of brands (products) under the Chinese circumstance, validating the feasibility and reliability of the extended model