Estimating cellphone providers' customer equity

Abstract

This paper provides insights about how customer equity estimates can help businesses monitor the competition as well as aid managers in making their marketing investment decisions, and how companies can employ their marketing investments to maximize current and future yield/returns. The article concerns itself with the current offer of cellphone providers and their main products. The research includes survey data through interviews with 302 cellphone users of Sao Paulo, Brazil. The study uses this data combined with a number of economic assumptions and a financial marketing model to create an insight in customer equity values of cellphone providers in the region. The scenario dated October 2005 is that the estimated customer equity of the service provider Vivo is, respectively, 93 and 91% larger than those of competing providers Claro and TIM. The research underlines that on average the customer equity flowing from the postpaid segment is 3.5 times larger than that of the pre-paid. In addition to these results the study provides the customer lifetime value (CLV) estimates for Claro's, TIM's and Vivo's pre- and post-paid customers and analyzes the retention and loss figures of CLV. Also a discussion follows of the implications that these values will likely have for the companies' marketing strategy. (C) 2008 Elsevier Inc. All rights reserved.