The total combined customer lifetime values of all of the company’s customers is known as:

Correct option is A

Customer equity is the total combined customer lifetime values (CLVs) of all the company’s current and potential customers. It reflects the total value a firm derives from its customer base and is a critical metric for assessing the long-term value and sustainability of a business.

While Customer Lifetime Value (CLV) refers to the predicted net profit from an individual customer over the entire future relationship with the firm, Customer Equity aggregates this value across all customers, making it a broader and more strategic metric. It guides marketing strategies by emphasizing long-term relationships and helps companies make informed decisions about customer acquisition, retention, and service investments.

Information Booster:

• Customer Equity = Sum of CLVs of all customers (current + potential).

• It helps in estimating the firm’s future profitability and is considered an intangible asset.

• It is used to determine firm valuation, especially in mergers, acquisitions, or IPOs.

• It focuses on long-term customer relationships rather than short-term profits.

• Customer equity can be increased by improving customer satisfaction, loyalty, and value delivery.

• It has three components:

  • Value Equity: Perceived value based on objective measures.

  • Brand Equity: Perception of brand value and emotional attachment.

  • Relationship Equity: Strength of customer relationships and retention efforts.

Additional Knowledge:

(b) Customer-perceived value
This refers to the customer's evaluation of the difference between all the benefits and all the costs of a market offering relative to those of competing offers. It is subjective and individual-specific, not an aggregate financial value like customer equity.

(c) Customer Lifetime Value (CLV)
CLV is the individual-level metric that predicts how much profit a company will make from a single customer during the entire duration of their relationship. It is a building block of customer equity, but not the total sum.

(d) Customer share
Also known as “share of wallet,” this refers to the portion of the customer’s total spending in a product category that goes to a specific company. It is not a lifetime value metric, but a competitive positioning metric.